What to expect in a New York Small Business Lawsuit

Once you’ve made the decision to sue someone (a decision that shouldn’t be made lightly) or  worse, you’ve been sued, you may wonder what lies ahead in your typical New York Small Business lawsuit?

First the Bottom Line

Litigation is expensive. It can interrupt your business. Unless it is arbitration (which this post does not deal with), it puts your dirty laundry out there for everyone to see, all papers are public and can easily be found online in New York’s efiling system.  It takes a long time. Courts are overwhelmed. In the not too distant past (in the 1950’s), some cases took ten or even fifteen years to litigate. That situation has greatly improved, but some matters are still taking four or five years to reach a conclusion.

How it Begins

In most cases, a lawsuit gets started with legal papers detailing the person suing (plaintiff), the person being sued (defendant), the facts that – allegedly – give the plaintiff a right to something from the defendant and a demand for money or other remedies from the defendant. The whole thing is called a complaint.

Complaints can be surprisingly short, as long as they state everything that is necessary to support plaintiff’s claim and the remedy being asked for (more often than not the demand is for money).

Obviously the legal papers have to be submitted to some courthouse. In New York City alone there are many courts to chose from. In New York City, Civil Courts have authority for cases up to $25,000 and the Supreme Courts for claims higher than that. If your defendant lives in New York County (aka Manhattan), you would file your lawsuit in Supreme Court in New York County, 60 Centre Street.
Filing a lawsuit currently costs $210, which fee buys you an index number and puts the case on the court records. Many cases can now be filed electronically with New York’s efiling system.  Even non lawyers can use the efiling system to start a lawsuit.

Still, even after filing, there is one more important step to get the lawsuit started. Someone has to bring a copy of the legal papers filed with the court to the defendant, i.e. the defendant must be “served.” The plaintiff cannot do this personally and most lawyers don’t bother doing it themselves, so there is a whole industry of “process servers” who are in the business of serving legal papers all day long.

After the complaint has been served, the defendant gets time to answer. Usually 30 days.
If the answer contains a counterclaim, plaintiff has to answer and file that answer with the court and serve it on the plaintiff.
After the initial papers have been filed, not much may be happening for some time.

Getting before a Judge

Without actually requesting it, you will not see a judge or get the court to do anything. A lawsuit can be sitting there for years until one party requests “judicial intervention” via a Request for Judicial Intervention form, or RJI.

Conferences, Conferences and more Conferences

Once the case gets rolling because somebody requested a judicial intervention, there will be many conferences. A preliminary conference, compliance and/or status conferences and finally pre trial conferences. In most cases, you as the client, will not have to appear for conferences.  The lawyers will usually not even meet with the actual judge, but with the judge’s clerk or court attorney.  The purpose of a conference is to set dates for the completion of tasks related to the litigation, to settle discovery issues and in general move the case along to trial.

Motions

Throughout the case, either party may make a motion. A motion is an application for an order by the judge. You want the judge to do something in your case. There is a motion to dismiss which is a motion to determine that the complaint is not sufficient to make a legal case and should be dismissed; in other words, even if everything the plaintiff says in the complaint is true, there is just not enough to grant the case based on the legal theory offered by the plaintiff.

Then there is a motion to compel discovery, if the other side has failed to produce papers or witnesses you requested.

A motion for summary judgment argues that no fact issues exist requiring a trial, and the case can be decided on the court’s legal determination alone.

Argument and Hearings

Motions often result in an oral argument before the judge, at which the attorneys discuss the applicable law and relevant case decisions with the judge. Sometimes a motion may result in a hearing, which is a sort of mini-trial with witness testimony.

Discovery

Plaintiff and defendant can ask the respective other party for discovery. Discovery is the process of finding out facts from the other side before the actual trial. The law gives you several ways to conduct this fact finding process; interrogatories, depositions and document requests.

There are interrogatories, in which you send written questions to the other side they are required to answer.

In a deposition, a witness under oath is questioned by the attorney for the other side, and everything is transcribed by a court reporter. No judge is present at a deposition; it is usually held in the lawyer’s office; a deposition serves the purpose of allowing a party to pin down the other party’s account of events. Under certain circumstances, the transcript can then be introduced at trial, for example if a witness does not appear, or contradicts her prior testimony.

A document request asks the other party for all documents relating to the case.  If the requesting party can argue that certain documents are relevant to the case, the opposing party has to produce such documents.  Documents include electronic records of any kind and all other material that can possibly be produced.

Discovery can be very expensive, especially in large cases where teams of temporary lawyers use specialized computer software to review millions of documents.  In smaller cases, parties may still exchange scanned documents in the form of PDF’s and forego the complex software.  But even smaller cases can quickly involve a large number of documents.

Settlement Negotiations/Mediation

At any time while a lawsuit is going on, the parties may engage in settlement negotiations, or the judge might refer the parties to mediation, also known as “alternative dispute resolution” .

Most cases eventually settle before trial. Depending on the strength of the case, settlements may be for approximately half to two thirds the amount demanded in the complaint. The compromise solution allows the defendant to pay less than he would if a judgment went against him at trial. The plaintiff discounts his demand in exchange for certainty and closure, saves the legal fees he would have spent in continuing to trial, and forecloses the possibility of a loss. Experienced lawyers know that sometimes even a strong case can be lost, due to an unsympathetic judge or jurors and other factors which can intervene even though the lawyer and client have done a thorough job. A lawyer assuring his client that a victory is certain is typically inexperienced or not being honest with the client. If there is a settlement, parties file notice of discontinuance, ending the case.

Trial

Not many lawsuits end in a trial. Most get settled before trial or determined by above mentioned motion to dismiss or motion for summary judgment.

A trial may either be before a jury or before the judge (a “bench” trial). A complicated thought process is involved in deciding which to request. Depending on the underlying facts, many cases can be tried before a judge in one to three days. Jury trials usually take longer, so a jury trial of that same case might take a week or longer, due to the time it takes to select the jury, and make opening and closing statements to them, among other factors. In general, lawyers demand juries when they want to play to sympathy or emotion, and pick judge trials when they want to save money and a case involves a fairly straightforward and emotionless legal determination, or, to the contrary, is so technical that a judge will likely understand it better.

At a trial, each party presents live testimony and witness testimony, and has the chance to object to the other’s submissions and to cross-examine witnesses. At the end, the controversy is submitted for decision to the “trier of fact”, judge or jury. A verdict or decision results in a judgment for or against the plaintiff.

A common misconception is that, when you win a judgment, the other side immediately reaches for its checkbook. Though this may sometimes happen, in other cases, it is necessary to collect a judgment, by seeking the losing side’s bank accounts and assets. So sometimes, the case is not over just because you won at trial.

Attorneys’ Fees

As opposed to the European system, in America every party bears its own legal fees. This leads to the necessity of some careful planning, honest billing, and significant communication between lawyer and client, to make sure that the attorney fees do not exceed a certain percentage of the damages likely to be recovered. As a rule of thumb, a client should pocket two thirds or more of the recovery. In the field of personal injury and medical malpractice cases, attorneys may work for a contingency, pocketing a portion of any recovery from the defendant. In commercial cases, attorneys almost always work for an hourly rate. If care is not taken or there is not good communication between lawyer and client, legal fees on a small or medium size claim can be so great as to cause the client to regret the effort—especially if the case is lost, or collection of a judgment is difficult. For this reason, every lawsuit should, before the complaint is filed, start with a full and frank discussion between attorney and client about what it will all cost, balanced against the likelihood of victory.

There are a few exceptions to this general rule. You may be suing on a contract which includes a clause which says that the winning party will recover its fees. Sometimes, rarely, an opposing party or its lawyer may behave so badly that the court is willing to award you your attorney’s fees for this misbehavior. Courts have significant discretion, and sometimes seem reluctant to exercise it, so the decision to start a lawsuit should not be made based on the assumption you will get your fees back.

Lawyers who win most of their cases do not do so only because of their courtroom brilliance. A good track record begins with an ability to spot good cases, and decline those which do not have a significant chance of being winners. An honorable and truthful attorney will not be too quick to take your money unless she thinks the odds are good she can win your case. The more discussion you have with your lawyer about fees and the strength of your case, the smoother the experience will be.

 

About Imke Ratschko


Imke Ratschko is a New York Attorney helping small businesses, business owners and entrepreneurs with all things "Small Business Law," such as litigation, contracts, business owner disputes, shareholder and operating agreements, sale or purchase of a business, investors, and starting a business. You can reach her at 212.253.1027 or by email.