Then I will sue...

A lawsuit can cost far more than you imagine, in money, time and energy. That is why I worry when an entrepreneur says: I will just bloody well sue. It sounds like a quick way to get justice. My own experience has taught me that it can be a very long and expensive road.

I am visiting Denmark here in April 2010 and have just spent time with a friend who co-owns a business. Our conversation prompted me to raise the subject.

My friend has a problem with his partners

As my friend told it, his partners had forgotten to pay various bills and withdrawn money they should not have withdrawn to rescue some of their other businesses. It was a load of crap, and in the worst case he could end up saddled with debt.

That is obviously not much fun. We talked about what the hell you do in that situation. He was considering suing, which brought us to what a decision like that can actually entail.

I am not a legal expert and am not going to start advising people on the law. These are my thoughts based on things I have been through myself. Nor can I explain every step of a lawsuit precisely. But I know it is not as simple as calling a lawyer and waiting for the money.

A lawsuit is not a quick order for justice

I think many people imagine this: I have been wronged. I call a lawyer. Before long, I get justice and compensation. The other side pays the legal costs, and once the lawyer has had a little, I have my money back.

If that is how you are thinking, stop for a moment. In my experience, reality does not necessarily work that way.

Even before a case begins, the lawyer needs to understand what happened. You must explain the story, find documentation and supporting papers, and answer questions. Hours and hours can go into assembling everything before the lawyer can even assess whether there is anything worth pursuing.

And that time costs money too. In my calculation in the video, I mention DKK 15,000 to 25,000, which can quickly be spent before a case has even begun. Those are the amounts and the experience I am discussing here in 2010. Even if the assessment concludes there is no case, the work has still been done.

The lawyer is running a business too

Remember that a lawyer is also running a business. I am not saying most lawyers would pursue a case they do not believe in. On the contrary, I think very few would be that rotten. But you still need to remember that they make money from the work too.

If the assessment is that there is a case, more questions follow. Then you need to find even more evidence and information. That takes time and is a hassle for you too.

After that, there may be a lot of correspondence between the parties and their lawyers. I am not sure of all the legal terms or the sequence, but I have experienced how much back and forth there can be before anything is settled. Along the way, a settlement may be reached, or the case may turn out differently from what you imagined.

I mention two or three years as a length of time a case can easily take. That is not a timetable you can plan your business around. My point is that it can become a long period of uncertainty.

You can lose even if you feel you are right

You can be completely convinced you are right and still end up losing. Perhaps you have misunderstood something. Perhaps there are aspects of the case you had not considered. Perhaps the other side’s lawyer is better at presenting the case than your own.

Then you are left with your own bill and risk further costs. In the video, I discuss how, in my view, the total can end up at DKK 200,000, 300,000 or 400,000. That is my warning about the scale, not a quote for the cost of a particular case.

And even if you win, not all your expenses will necessarily be covered. I use the example of spending DKK 300,000 on your lawyer while being awarded a much smaller amount towards costs. So you can win your case and still be left with a large bill.

Then the money also has to be recoverable from the other side. What if they have no money, or the company you sued has gone bankrupt? That is also part of the financial question you should consider.

The uncertainty can affect the whole business

It is not just the money that can break you. Having a case like that hanging over your head for years can also be psychologically tough.

I also think about what a pending case can do to a business. A potential buyer may hesitate because nobody knows how it will end. A bank may be less willing to lend when an unresolved risk is hanging over the company. That can make the foundations of the business uncertain while you wait.

That is why my advice to my friend was: for heaven’s sake, try everything you can to avoid ending up in a lawsuit. Swallow your pride and see whether you can reach a settlement before it goes that far.

Of course, you should not put up with everything. But before making big declarations about suing, think carefully about what you want to achieve and what it could cost. Perhaps it is financially wiser to let something go and start something new. Perhaps you can swallow a bitter pill or two, even if the desire for revenge is strong.

I do not have a legal solution to every dispute. I have an experience I want to pass on: think very, very carefully before making a lawsuit your next big undertaking.

Best, Martin

Location:Rosenvænget,Stenløse,Denmark