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Why do companies file lawsuits if most disputes don’t go to trial?

On Behalf of | Jan 12, 2024 | Business Litigation

Businesses can become embroiled in legal conflicts for many different reasons. A former worker might violate a restrictive covenant in their employment contract by disclosing private business information or starting a competing business. A vendor or service provider might fail to fulfill a contract.

Companies can turn to the civil courts when the actions of another business or an individual harm the company in some manner. However, a review of civil filings shows that only a tiny minority of cases actually go to trial.

Why do businesses litigate conflicts if most lawsuits don’t lead to a hearing in front of a civil judge?

They want to push the other party to act

Simply sending a strongly-worded letter to a party in breach of a contract can occasionally resolve disputes. Sadly, those who have intentionally avoided their obligations to a business or overtly violated a pre-existing contract may simply ignore a letter about their inappropriate conduct like they ignored the contract initially.

The decision to file a lawsuit signals to the other party that the plaintiff intends to pursue the matter as far as is necessary to properly resolve the issue. The total losses possible increase if the matter actually goes to trial. Those in breach of contract or otherwise engaged in misconduct affecting a business are often more likely to cease certain actions or agree to sit down for mediation with the possibility of litigation looming large over the discussion.

Settling is better than ignoring pressing concerns

Approximately 3% of business lawsuits go on to trial in any given year. The other cases either settle out of court or face dismissal due to a variety of different factors. While settling often involves making some compromises, reaching a settlement with a party in breach of contract is often a more favorable outcome than simply giving up on enforcing an agreement or pursuing damages for the misconduct of another party.

Litigation can also serve as an important reminder to other parties about the importance of fulfilling contractual obligations, as they know that the business may take legal action to enforce its contract if necessary. Settling is often actually a better outcome overall as it keeps the matter out of the public eye for the most part and can reduce the amount of resources the business must invest in resolving the conflict.

Understanding what usually happens when a business must file a lawsuit can help executives and others contemplating legal action choose the best pathways forward given their circumstances.