When issues come up, most of our international clients believe filing a lawsuit is the only answer. Unfortunately, the United States litigation process is often complicated and expensive – there will be an exchange of information and documents, the taking of depositions, and probably some motion practice along the way – and most likely, it will be at least a year or two before you get your “day in court.” Sometimes litigation can be the only answer that makes sense, but we typically let our clients know there are other options out there that can be much more cost-efficient and effective in achieving mutual goals. Here’s a breakdown of the alternatives:
A demand letter is essentially a formal notice that you will initiate some legal action unless the dispute is resolved informally beforehand. Demand letters come in all shapes and sizes, and they can be very effective because (1) it will lay out what gives rise to your legal claim or claims, (2) it will serve as a “final notice” that they better pay attention to, and (3) usually, the last thing people want to receive in the mail or in their inbox is a letter from an attorney. It’s very commonplace for people or companies to bury their head in the sand and hope the problem goes away when they’re dealing with a foreign person or company, so a demand letter from a U.S. attorney typically makes a big difference.
Another available option is mediation, which is a non-binding form of dispute resolution that can be a good fit for many types of disputes. Mediation is a negotiation between the parties that is moderated by a mediator. Typically, the parties will select a mediator and provide that mediator with submissions that outline their claims and defenses, prior settlement negotiations (if any), and attach key documents, such as contracts or operating agreements. Mediation can be a powerful tool because: (1) it brings the parties together for the sole purpose of trying to resolve the dispute, (2) the mediator will help facilitate the discussion by encouraging meaningful and productive dialogue, and (3) the mediator, a neutral third-party with no decision-making authority, will also provide his or her honest opinion as to how strong the parties’ respective claims are, which is great perspective to consider given that mediators are typically retired or very experienced judges or attorneys.
I like to loosely define arbitration as a private court case – the parties will agree on one or more neutral third-parties, or arbitrators, to decide their dispute after receiving evidence and hearing arguments. Compared to traditional court cases, arbitration is much more relaxed and has more flexible rules, making it easier to streamline the entire process. For example, I’ve commonly seen agreements to limit the number of depositions per side or set an overall shorter or expedited timeline to complete discovery. Ultimately, this does lead to a faster and more cost-efficient process.
Sometimes, the best answer for some companies is a court-appointed receiver. These receivers are neutral third-parties that will take over a business’s operations while it’s involved in legal proceedings. A receiver’s sole purpose is to preserve and protect the business during this period – and, if you take care to ensure that your receiver understands your business, they can typically handle everything while the issues are worked through.
In most cases, if you find yourself in a dispute, the above options likely can and should be considered as alternatives or additions to running to the court. And of course, the options often can and should be tailored to fit your specific circumstances.