Former Law Office of Vincent DiCarlo

As of September 1, 2008,Vincent DiCarlo
is no longer engaged in the private practice of law.
This site is no longer maintained, may no longer be accurate,
and is provided for historical purposes.  See disclaimer below.


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How to Reduce the High Cost of Litigation

Litigation is bloodless war played by rules--expensive, exhausting, and generally out of control.  It should be avoided whenever possible.  However, there are several things that you can do to reduce the expense of unavoidable litigation.  Based upon my experience, I believe that the following techniques can richly repay the time that you take to learn and apply them.

A. Consider Using Customized Arbitration Clauses.

A contractual arbitration clause is one of the most powerful ways that a business has to try to control its exposure to costly and dangerous lawsuits. Arbitration, mediation, and other methods of resolving conflicts outside of court are sometimes collectively referred to as alternative dispute resolution, or "ADR."

By the careful use of an arbitration or other ADR clause in its contracts, a business can dramatically affect how disputes with its employees, customers, vendors, and others with whom it does business are resolved, discourage claims from being brought, and limit its exposure to large damage awards. On the other hand, an arbitration clause that is carelessly drafted or slanted in favor of the other party to an agreement can be a serious disadvantage in the event of a dispute.

When parties agree to arbitration, they make a binding determination that some or all of their disputes will be resolved outside of court by one or more persons called arbitrators, rather than in court by a judge or jury. In recent years, courts have allowed the contracting parties broad discretion to make up any rules they wish concerning who will hear the dispute and what rules will govern the outcome.

Arbitration clauses can specify simplified procedures both before and trial. For example, they can limit or eliminate the depositions, interrogatories, document requests, and pretrial motions that are responsible for much of the sometimes crushing expense of litigation. The procedures at the arbitration hearing, which takes the place of a trial in court, can be simpler and less time consuming than those for a jury trial. Arbitration clauses can also set short mandatory schedules for resolution of a problem before both the problem and the business involved in it become ancient history.

In addition to reducing litigation expenses and speeding the resolution of disputes, arbitration clauses can discourage or prevent claims from being made in the first place. For example, a contract can provide that claims that are not brought by certain deadlines are barred altogether. Such provisions, which create shortened statutes of limitations for the parties, will be enforced by the courts if they are found to be reasonable. Other provisions can require that, before making a demand for arbitration, the claimant must first try in good faith to negotiate a resolution either with or without the help of a trained mediator.

Provisions that require the party demanding the arbitration to advance the arbitrator's fees, which can be substantial, can deter groundless claims. So can provisions requiring the loser to pay the winner's attorneys' fees.

Arbitration clauses, and other contract clauses, can limit the type of damages or other relief that may be sought by a claimant. For example, the courts often uphold agreements that prevent the parties from seeking punitive damages, specific performance, or injunctive relief. A contract can also attempt to limit any award to actual economic out of pocket damages, thereby reducing or preventing exposure to claims for lost profits, pain and suffering, mental distress, and consequential or special damages. These kinds of limitations on damages not only reduce the amount of potential awards, they discourage potential claimants, and their lawyers, from making claims in the first place.

There are limits to what you can put in an arbitration clause and have it enforced, and those limits may depend on the type of contract.  For example, in California and some other jurisdictions, predispute provisions for arbitration of disputes with employees have some limitations in scope and are more strictly scrutinized than other agreements to arbitrate.

There are a wide variety of organizations and individuals that, for a fee, administer arbitrations. Some of them, like the American Arbitration Association, have procedural rules for dealing with issues that may not be covered in the contract.

Arbitration provisions can incorporate these rules into a contract, and vary any of them that the parties wish. If no rules are specified in the contract, California law supplies rules that will apply by default.

Because of the power and flexibility of arbitration clauses, failing to include one in a contract or choosing one poorly can actually determine whether a business will survive a major dispute. As a result, no business should ever sign a contract or enter into a significant transaction or relationship without first considering what kind of arbitration clause or agreement could reduce its exposure in the event of a later lawsuit.

B. The Three Most Common Litigation Boondoggles and How to Avoid Them.

If you are trying to control the cost of litigation, it is helpful to distinguish between strategies for reduction of costs and boondoggles. Strategies involve choices requiring thought and the weighing of risks against savings. Therefore, after considering them, you may decide that the a particular economy is not worth the increased risk. Boondoggles are work that usually has insignificant value compared to the expense. You always want to avoid them.

The three most common litigation boondoggles are wasteful staffing practices, the digesting of deposition transcripts, and the failure to attempt to settle.

C. How to Help Your Lawyer Reduce His Fees. D. Conclusion.

No matter what you do, being a litigant is never going to be much more fun than root canal, much cheaper than a yacht, or much more reassuring than heavy air turbulence.  However, those who fail to follow the advice above are likely to find that it is even more expensive than it needs to be.

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DISCLAIMER: I have entered government service and, as of September 1, 2008, am no longer engaged in the private practice of law.  Therefore, this site is no longer being maintained,  may not be accurate, and should not be relied upon.  It is not now and was not ever intended as legal advice.  It is being provided for historical purposes, and for the benefit of those lawyers who are capable of independently verifying the information and judging the opinions in it, and then reaching their own conclusions.  You are strongly advised to consult qualified legal counsel before adopting any of the ideas or suggestions in this material, which may or may not be applicable in your jurisdiction or to your specific situation, and may no longer be accurate or prudent in any case.  The opinions and statements at this site were solely my own.  They were not and are not those of, nor were they nor are they made on behalf of, any agency of government or anyone else.

Copyright © 1998-2008 Vincent DiCarlo