Management memo: “See you in court !”

“If this vendor continues to behave this way, we’ll see them in court!” How I cringe when I hear a CIO utter these words. As an expert witness in litigation involving IT contract disputes, I know how exhausting and costly (in real dollars and opportunity costs) a litigious situation can be.

Let’s examine the process that is followed if a dispute goes to binding arbitration or to court. We shall start by assuming that, following the issuing of a demand letter to fix the perceived problem, both parties have followed the escalation process found in most Agreements. At the outset of the litigation process, one party files a Statement of Claim against another. For this, external counsel is engaged, as most organizations do not have experienced IT litigation lawyers on staff. Countless hours are spent by these lawyers researching the client’s case, and then crafting and filing the Statement of Claim in court. No doubt this research has involved internal staff time for interviews and sourcing documentation. Filing of this Statement usually triggers the other side to file a Statement of Defense or a counter claim, also seeking damages.

Just the facts, mam

Now the fun really begins as the lawyers start to dig more deeply into the facts supporting their client’s case. They will source more detailed documentation and interview personnel who were involved in the relationship. Recently, I was talking to a client who had just returned from a two-hour interview with the organization’s lawyers and found that three lawyers were involved, all external counsel. Talk is cheap until you hire a lawyer!

At this point, the lawyers develop lists of documentation they want from the other side: status reports, emails, minutes of meetings, individual notes — the list is endless. Each document page will receive unique numbers and will no doubt be poured over by legions of lawyers. Also, legal firms may start looking outside for expert witnesses. They, in turn, will soon receive crates of documentation to review and may also want to interview client personnel for further understanding.

Next are examinations for discoveries, which can be an emotionally wrenching experience for those staff members being grilled for the first time. This process involves lawyers interviewing (under oath) personnel from the other side. These interviews are recorded by a court stenographer and may be audio and videotaped with at least one lawyer from each side present. In parallel with these activities, legal documents are being filed along with expert opinions which, of course, are rebutted in writing by the other side. Some documents may include sworn affidavits from senior managers substantiating certain facts.

The meter is running

Unless the parties have settled out of court, it is now time for binding arbitration or the trial. This period is all consuming, with legal teams and witnesses working around the clock for the next day’s proceedings. Following delivery of a verdict, there could be appeals or additional requests by an arbitrator which keep the legal fee meters turning. In cases I have been personally involved with, it has made so much sense for the parties to settle out of court; but egos get in the way, and the lawyers continue to rub their hands with glee!

There are enormous sums of money involved in fees for lawyers, their administrative assistants, reproduction costs, expert witnesses, accommodations and meals, court fees, etc. (not to mention the damages if you lose). Equally as staggering, however, are the opportunity costs consumed with internal managers and professionals involved in interviews and depositions, coupled with the loss of focus on the business as people become absorbed with the emotion that legal situations can spawn. I sometimes shake my head in disbelief as I watch an organization become immersed by a litigious situation and the countless staff hours eaten away by the processes involved.

Let’s not forget one additional item: no matter how iron clad you think your case is, going to court is still a crap shoot even if you feel the odds are on your side. So think twice before you say “We’ll see you in court”. Usually there are other ways to sort things out.

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–Graham J. McFarlane, P.Eng., ISP, FCMC is a consultant who has worked with IT management, both in Canada and internationally, since 1978, focusing on improving IT effectiveness. Prior to this, he spent ten years with IBM Canada.

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