A couple of recent articles in the Metropolitan Corporate Counsel highlight the effect that the cost of conducting discovery in complex civil litigation has on settling such cases. It used to be that an attorney could file a lawsuit on behalf of client and serve it on the defendants along with interrogatories, requests for production of documents, and maybe a notice of deposition or two. With notice pleading, the plaintiff did not have to be certain of who was responsible for the loss that prompted the lawsuit, or even how exactly it happened. They would figure that out after reviewing defendants’ records and statements.
Not anymore. Most corporate defendants’ records and statements are now maintained in electronic documents and communications. Accessing such records often requires large investments of time and money in technology and technically savvy personnel. So the cost of conducting litigation, and e-discovery,has grown enormously for both plaintiffs and defendants. The courts’ response has been to require more fact pleading and to restrict pretrial discovery by imposing prerequisites such as “meet and confer” conferences to discuss the costs and plan the course of discovery. Attorneys who normally represent defendants in civil cases complain that this increases the cost of litigation and prompts settlements just to avoid legal costs, even where there is no or minimal liability. Attorneys who normally represent plaintiffs complain that fact pleading and limits on discovery deter economically impaired plaintiffs from pursuing actions, unless the damages are great enough and liability is clear enough even without knowing defendants’ internal statements and documents. These considerations apply equally to corporations and individuals. Corporations can be defendants (e.g., securities, products liability, and employment discrimination cases), and they can be plaintiffs (e.g., intellectual property, real estate, and breach of fiduciary duty cases). Likewise, individuals can be plaintiffs (e.g., personal injury, breach of contract, and consumer claims) as well as defendants (e.g., embezzlement and fraud schemes, civil RICO actions, breach of non-compete agreements). Regardless of which side of the fence you sit on, a dispute is going to cost money to resolve.
It takes investigation and preparation in order to negotiate just as it does to litigate. The question is whether you need a judge or jury to help you resolve the dispute, or can you do it informally? Some people are afraid to negotiate because they think it indicates weakness. But that is true only if they have not investigated or prepared their claim or defense adequately. So the question of whether to litigate or negotiate a settlement should not depend on the cost of discovery. If you need a court’s help to get the information necessary to an adequate evaluation of your case, then go to court. If not, a negotiated settlement is almost always preferable.
Knowledge is power, and knowledge may cost money. But, as the saying goes, if you think education is expensive, try ignorance.