Angry enough at a vendor or supplier to sue? Think about what it will cost in time and money

Some time ago I was having breakfast with a CIO of a large oil and gas producer based in Calgary. He was having great difficulty with his outsourcing partner; most of his infrastructure service provision was outsourced. “I think I can nail them on breach of contract.” he told me, “So I think I will serve them notice and stop paying their invoices. If they sue, then we’ll see them in court!”

I think my facial cringe was noticeable; he asked, “What’s the matter?” “Well,” I replied, “I’ve been an expert witness twice for outsourcing deals that have gone sour. Let me give you a glimpse of what you’re in for.”

In the beginning

At the outset of the litigation process, your outsourcer will file a statement of claim against you for your failure to pay. 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. No doubt this research has involved internal staff time for interviews and sourcing documentation. Filing of this Statement will trigger you (that is, your external council) to file a Statement of Defense or a counter claim, which may seek damages on your behalf.

Just the facts,  ma’am

Now the fun really begins as the lawyers start to dig more deeply into the facts supporting their clients’ cases. They will source more detailed documentation and interview personnel who were involved in the relationship. I personally participated in a two-hour interview between a senior professional from a large, international outsourcing firm and three lawyers, all external counsel. Talk is cheap until you hire lawyers.

At this point, the lawyers develop lists of documentation they want from the other side: contracts and amendments, status reports, invoices, emails, minutes of meetings, individual notes — the list is endless. Each document page will receive a unique number and will no doubt be poured over by legions of lawyers. Also, both 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.

Emails, in particular, are interesting as most people write them without any consideration of their potentially appearing as court evidence. Some that I have reviewed, often written in jest have been quite damaging (lawyers have no sense of humour).

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 certified stenographer and may be audio and video recorded 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.

The meter is running

Unless you’ve settled out of court at this point (not a bad idea), it is now time for binding arbitration or the trial. This period is all consuming (emotionally and financially), with legal teams and witnesses working around the clock for the next day’s proceedings. I’ll never forget working with a senior partner from a San Francisco based firm, which specialized in these actions, who once said, ‘Well team, we have presented our case; tomorrow they start to present theirs, and we cross examine. I love to cross examine!’

Following delivery of a verdict, there could be appeals, which keep the 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 executives, 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 and energy eroded by the processes involved. Most executives recognize the tangible costs, but fail to recognize the intangible costs- the productivity loss and emotional drain.

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 let’s think twice about this,” I told the CIO. “Usually there are other ways to sort things out.”

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