Originally from Alternatives to the High Cost of Litigation

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Louis M. Brown–the father of preventive law, stated “It usually costs less to avoid getting into trouble than to pay for getting out of trouble.” Louis M. Brown, Manual of Preventive Law (Prentice Hall, 1st ed. 1950).

There is good news and bad news when it comes to disputes. The good news is that it’s rare for disputes to actually go to trial. Iva Bozovic and Gillian Hadfield’s research shows contracting professionals report “it is common knowledge that litigation is almost always an empty threat; outside of bet-the-company type settings, it costs too much in legal fees and reputational damage, it takes too long and/or it is too unpredictable.” Iva Bozovic, Gillian Hadfield, “Scaffolding: Using Formal Contracts to Build Informal Relations in Support of Innovation” (Feb. 27, 2015). USC CLASS Research Paper No. C12-3; USC Law Legal Studies Paper No. 12-6 (available at https://bit.ly/3zPVy1F).

Now for the bad news. Even though you might never end up in court, managing disputes is costly and time-consuming. Our experience working with companies has taught us that individuals and organizations often get sucked into a negative tit-for-tat cycle of conflict escalation that takes a toll on all involved. Costs include lost profits and other damages, third-party costs for lawyers, accountants and claims consultants, and losses in stock price or other valuations.