When Should a Business Owner Bring in a Litigation Attorney?

Why timing matters more than the letter

Owners tend to think of a litigator as the person who files the lawsuit, so they call one when the lawsuit becomes unavoidable. By then the facts of the dispute are fixed, and so is much of its value. The contract has been read one way or another in a dozen emails. Someone has deleted a text thread. The claim has been "presented" in a letter that did not state an amount. A payment was accepted that the other side now calls a settlement.

A litigator's job before suit is to prevent those things, and the window for preventing them is short. The question is not whether you will need a litigator if the dispute goes to court. It is whether, by the time it does, there will be anything left to work with.

The triggers

Any one of these is reason enough to call. Two or more means the call is overdue.

• The amount matters to the business. Not a fixed figure, but money whose loss would change a decision: a hire, a lease, a distribution to owners.
• The other side has a lawyer. Once counsel is involved on one side, every communication from the other is being read by someone trained to use it. Parity is the minimum.
• A letter cites a statute or sets a deadline. A reference to the Deceptive Trade Practices Act, a lien statute, a non-compete or a notice-and-cure clause means a procedural clock may be running. A deadline, even one with no legal force, means the other side has a plan.
• You may need, or may face, an injunction. A former employee is using your customer list this week. A partner is about to move company funds. A vendor is about to cut off a service your operation depends on. Injunctions are obtained in days, not months, and only by someone who has done it before.
• The claim involves fraud, fiduciary duty, trade secrets or a non-compete. In these cases early words and early document handling carry unusual weight, and the remedies can include disgorgement, fee awards and punitive damages.
• A partner, investor or key employee is on the other side. These disputes are rarely about the first issue raised. They are the opening move in a fight over control or value.
• Insurance may be involved. Policies have notice deadlines and often give the carrier the right to control the defense. A litigator reads the policy against the claim before the deadline passes.
• You have already written once and been ignored. A second owner's letter carries less weight than the first. A lawyer's letter resets the conversation.

What early involvement buys

The specific things that are cheap to do now and expensive or impossible later:

Evidence preserved. Texas law requires a party to preserve relevant evidence once it knows or reasonably should know there is a substantial chance a claim will be filed, as the Supreme Court of Texas confirmed in Brookshire Brothers v. Aldridge in 2014. A litigator issues the hold instruction, identifies the systems and people it covers, and stops the deletion that otherwise happens in the normal course. Evidence lost before the hold is a problem for the rest of the case.

No damaging admissions. Texas Rule of Evidence 408 protects offers of compromise and statements made in compromise negotiations only against use to prove the validity or amount of the claim. It does not protect a factual admission in an angry email or a phone call. A litigator decides who talks to the other side, in what form, and about what.

The claim presented correctly. Under Texas Civil Practice and Remedies Code § 38.002, attorney's fees on a contract, services or sworn account claim are recoverable only if the claimant was represented by an attorney, the claim was presented, and the just amount was not tendered within 30 days. A letter that presents the claim properly starts that clock; a vague one may not.

Deadlines mapped. Limitations under Civil Practice and Remedies Code chapter 16, which gives four years for most contract and debt claims under § 16.004 and two years for some others under § 16.003, statutory notice periods, contractual cure periods and insurance notice conditions are all identified and calendared.

The forum chosen rather than accepted. Where a contract allows a choice of court, or where there is a question whether a dispute belongs in arbitration, the party that moves first often decides. A litigator can tell you whether that matters in your dispute.

Example

Suppose a Plano staffing company learns that its operations director has resigned and joined a competitor, and that three clients have moved with her within a month. The owner's first instinct is to call the director, then the clients, then to write a long email to the competitor's CEO explaining what the director's non-compete says. Had he called a litigator first, the sequence would have been different: a hold on the director's mailbox and laptop before IT reimaged it, a forensic look at what she downloaded in her last two weeks, a review of whether the non-compete is enforceable as written, and a short letter to the competitor and the director from counsel that preserves the injunction option without conceding anything. Instead, the laptop was wiped on schedule, the clients heard the owner's version first and were put off by it, and the email to the CEO contained a paragraph about the non-compete's geographic scope that the director's lawyer now quotes back. The claim may still be good. It is worth less than it was.

Signs you have waited too long

• Devices or accounts of the people involved have already been wiped, reassigned or closed.
• You have exchanged more than two or three substantive letters or long emails with the other side on your own.
• You have accepted a partial payment, signed anything, or agreed to anything in writing since the dispute began.
• A deadline in a statute or the contract has passed, or you are not sure whether one has.
• The other side has filed, or has told you a filing is prepared.

None of these ends the case. Each makes it harder, and each is the kind of problem a litigator would rather hear about today than discover in discovery.

When you do not need a litigator yet

Some disputes are better handled, at first, by the owner: a slow-paying but solvent customer, a vendor error that a phone call will fix, a disagreement with a counterpart you trust and expect to keep working with. The limits of handling it yourself, and the signs that you have reached them, are covered in whether to negotiate directly before hiring a lawyer. Even in those cases, a short review by a litigator before you send anything in writing costs little and removes the most common mistakes.

It also helps to be clear about which kind of lawyer the situation calls for. Your company's business attorney knows the deal; a litigator knows the fight. The difference, and when you need both, is covered in whether you need a commercial litigation attorney or a business attorney.

What the first meeting produces

A litigator reviewing a dispute early should give you four things: an assessment of the claim or the exposure, including the weak points; a list of what to preserve and who to tell; a view on the next move, whether letter, negotiation, tolling agreement or filing; and an explanation of how fees would work at each stage. The fee arrangements available for business disputes are explained in how litigation fees are structured, and what to bring to that meeting in preparing for your first meeting with a litigator.

Tina Wysk works with Dallas business owners at the earliest stage of disputes, often before any letter has been sent, as part of her pre-litigation practice.