When a business is served with a lawsuit, the company and its legal counsel should undertake a prompt risk-management assessment of the potential exposure and estimated defense costs.
Litigation can prove to be expensive, even where the defendant’s defenses are strong, because a civil case may span several years before reaching a final judicial adjudication (including all appeals). In addition to legal counsel’s charges, the company may incur fees for expert witnesses, private investigators, stenographers and constables.
There will be “opportunity costs” to the company, given that employees will be diverted from their work responsibilities to attend depositions and compile information that must be produced to the other side (often including retrieval of electronically stored information). While the case awaits a trial, pre-judgment interest will accrue on the plaintiff’s claim, adding to the company’s potential exposure. Plus, in certain cases such as those brought under civil rights and consumer protection statutes, a plaintiff who prevails in court will have a right to petition for the recovery of reasonable attorney’s fees.
Unless there is a compelling principle requiring the company to defend a case to a final judicial determination, business managers will often seek counsel’s advice on the best means to achieve a practical resolution. Settlement discussions and mediation efforts are preferred methods to achieve closure, especially if the result includes a confidentiality clause regarding the amount paid to a plaintiff. When faced with obstacles hindering a privately negotiated settlement, there is an often underutilized strategic option under Rule 68 of the Federal Rules of Civil Procedure and both the R.I. Superior Court and District Court Rules of Civil Procedure – an offer to have a judgment entered in court against the defendant.