Let's sue those jerks!

How many times have you thought that? How many times have you actually followed though on your plan? Probably never. Litigation just costs too much.

According to a recent study by Prof. Marc Galanter of the University of Wisonsin-Madison, fewer than 2 percent of civil (non-criminal) lawsuits actually make it all the way through trial. That means the litigation process is ultimately not about suing people - it's really an extremely expensive negotiation strategy.

If more than 98 percent of cases filed are settled before the end of a trial, then shouldn't we be focusing more on negotiation than litigation? I think so, and most attorneys, even litigators, concur. But there are some times when the only thing you can do is file a suit. Sometimes litigation is the only way to make the other side understand you're serious.

I don't make a living suing people. In fact, I try very hard to never end up in court. But earlier this year a client was backed into a corner and the only thing we could do was come out swinging. My client had been hugely and publicly successful with the launch of a product. Another company in the market niche felt they had been treated unfairly and hoped to make a grab at my client's success.

We tried to be nice. But the other folks wouldn't go away and finally sent a demand letter for $50,000 with a threat of filing a federal lawsuit in another state. Since we were not going to pay them anything, much less their demand, and since it would cost a bunch of money to defend a suit out of state, we decided to go on the offensive and file a suit in Colorado for a declaratory judgment. A declaratory judgment is asking a judge to say you've done nothing wrong.

It didn't take long after the filing - and all the resulting national PR for the case - for the two sides to resolve the situation, and no, it didn't involve my client writing a check. Litigation was just a piece of the eventually successful negotiation strategy.

Right strategy?

So, how do you know if this strategy is right for you?

First, litigation should be one of the last things you consider. Litigation requires significant resources and for many businesses, especially small businesses, the legal fees and court costs may add up to more than the benefit of winning. Don't forget the opportunity cost of the lost time on both sides, and the life-energy-sucking nature of the process. Even if you never plan to go all the way to court, it can quickly become a no-win situation.

Accordingly, you should use every negotiation strategy you know before resorting to litigation. I highly recommend the book "Getting to Yes" by Roger Fisher, William L. Ury and Bruce Patton, which is hands-down the best problem-solving and negotiations book available. But even the best negotiations sometimes fall short of the goal.

Cost of litigating

What are we really looking at if it comes to litigation?

If the disputed amount is $7,500 or less, then you can use small claims court and handle the work yourself. You can find all the forms and instructions by doing an Internet search on "small claims Colorado." Lawyers are not allowed in this process, so you have to decide how much of your own time and energy you're going to invest to go after the case.

Moving up from there, the investment is going to depend on the preferences and policies of the lawyer you're working with. One of my mentors told me to never take a litigation case for less than a $20,000 retainer. I ignored him and got burned.

So be prepared to invest in your case, because few lawyers take business litigation on contingency, and then only on cases where you'd be better off paying hourly or flat fees. Most cases in the United States require each side to pay their own legal fees, and depending on the complexity of your case, you should probably budget $5,000+ to file the lawsuit.

That's just to get started and the transaction costs are going to rack up faster than the gas bill for my '99 Suburban.

If you're looking at a dispute worth at least $50K, then litigation starts to make sense as a negotiation strategy. Short of that, however, think hard before getting into a fight you might not be able to sustain.

Let's sue those jerks!

Well, maybe not. Maybe we should invite them over for a beer in the Rose Garden and see if we can settle the issue like grownups.

Kevin E. Houchin is an author and attorney in Fort Collins specializing in helping people reach their potential through creative business. Contact him at houchinlaw.com.