Is it possible to try a $100,000 business case to a jury without bankrupting yourself and your client?

AuthorMatthews, Joseph M.

One hundred thousand dollars sounds like a lot of money. To almost any small business, it is probably more than an entire year's profit and easily could be the difference between solvency and insolvency for the business. Even if the business is capable of surviving a $100,000 hit, or at least carrying it for a couple of years until a dispute can be resolved through legal process, the end result of the journey through the dispute resolution system must be able to produce an economically reasonable outcome, not just an outcome that meets some judicial notions of fair play.[1]

The civil justice system must provide dispute resolution that meets acceptable standards of due process and equal protection. However, it also must do so at a reasonable cost. If it too often fails to provide all three--due process, equal protection, and cost effectiveness--public confidence in the system will diminish. While the civil justice system cannot be expected to provide due process, equal protection, and cost effectiveness all the time, it must provide them most of the time. Most important, it must be capable of providing all three most of the time.

In most major cities, the civil justice system (particularly trial by jury) is in danger of failing to meet its obligation to provide due process and equal protection for the resolution of small business disputes in a reasonably cost-efficient manner most of the time. The reasons are varied and come from all three segments of the system: 1) the lawyers; 2) the court; and 3) the litigants.

The math is simple but the economics are devastating. A review of the time and expense of litigating a simple business case resembles this:

1) Initial client interview and correspondence regarding fee agreement: 3-5 hrs

2) Preliminary research and draft complaint: 5-10 hrs

3) Draft preliminary discovery requests: 3-5 hrs

4) Interview friendly witnesses and review documents: 5 hrs

5) Motion to dismiss (research, draft, and attend hearing): 5-15 hrs

6) Review answer/counterclaim; research, and prepare reply to affirmative defenses: 1-3 hrs

7) Prepare for and conduct 10 depositions (5 hrs each): 50 hrs

8) Motion for summary judgment: 10-20 hrs

9) Trial preparation: 10-20 hrs

10) Trial (3 days x 10 hrs per day): 30 hrs

$225 per hr x 163 hrs = $36,675

If costs are held to $5,000, the total is just over $40,000, or 40 percent of the $100,000 in controversy. (The similarity to the standard contingent fee in tort cases is purely intentional.) If opposing counsel does not concede the case and files the inevitable counterclaim, or if t demands of a trial practice require some other lawyer in the firm to be available in the case of a problem or to help with the trial, the numbers will quickly double. If an expert is involved, the costs are often uncontrollable. These fees and costs will be incurred monthly during the life of the lawsuit, which probably will average about two years, from initial client interview to termination of the case.

In most medium to large cities, it has become economically impossible to handle a $100,000 commercial lawsuit, whether between individuals, small businesses, or large business enterprises. In many communities, even small businesses have begun to hire lawyers to serve as in-house counsel to handle as much legal work as possible, including many small to medium size lawsuits. Alternative dispute resolution methods, including mandatory and binding arbitration, have become essential components of many business strategies for survival.

This article is not about tort reform or the phony "litigation explosion." It is not intended to take any "sides" between segments or special interests within our society. It also is not about negative public perception of the justice system based largely on increased media exposure of disputes, civil or criminal, that would break most any system of justice. It is not even about the apparently poor public perception of lawyers brought about by that same media and the advent of lawyer advertising.

This article will provide some critical analysis of the way in which litigants view the system. It is based on the experiences of a board-certified civil trial lawyer entering his 20th year of private practice in Miami, where he has tried a lot of cases (mostly business-related but others as well) in state and federal courts and in arbitration proceedings before the American Arbitration Association and the Securities Industry captive tribunals.

The independent trial bar has managed, largely through the contingent fee, to give individuals greater and more equal access to the courthouse in the field of tort law, where insurance provides relatively greater assurance for the collectibility of judgments and serious counterclaims are rare. Most state trial courts have developed fairly efficient systems for the trial of tort cases. This article will attempt to suggest some methods by which the bench and the trial bar can try to keep the courthouse doors open for small- and medium-sized business disputes.

The Role of the Private Bar--Ten Commandments

The following are some basic principles that might provide a more cost-efficient commercial trial practice that also is designed to serve the needs of the business community:

1) Organize Efficiently--The Business Trial Firm of the Future

In most cities with populations over 250,000, the "Business Trial...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT