I have been a business, real estate and employment litigation attorney in Arizona for over 27 years. Based on my extensive trial experience, I can tell you that it is almost always a poor idea to ignore a threat of litigation or demand for payment. I am not suggesting that you always need to consult with an attorney. In fact, if that matter in dispute is not important it will not set a precedent that may hurt you going forward or involves an insignificant amount of money, you may not need to consult with an attorney. Regardless of whether or not you speak with an attorney you should quickly thoroughly analyze the strengths and weaknesses of your position as well as the potential damages and counterclaims that may exist. My view is typically that you should always consider asserting a counterclaim since “the best defense is a good offense.”

People understandably do not want to spend money consulting with an attorney unless it is absolutely necessary. I would suggest that a short initial consultation with an attorney may save you a considerable amount of money and headaches going forward. During an initial meeting with your attorney you can discuss, among other things:

1. How to avoid creating bad evidence that will later hurt you in court proceedings.

2. The law the judge or jury will use in deciding your case.

3. Who the key witnesses are and what the key evidence will be.

4. The risks and potential damages.

5. Your potential counterclaim(s).

6. The cost and length of time involved if the matter is not settled.

7. The collectability of any award you may obtain against your opponent.

8. Potential claims against individuals as opposed to corporate entities since claims against individuals provide considerable leverage.

One thing that you should do early on is get your opponent to thoroughly state his position in writing. It is a good idea to get your opponent’s position in writing before he has an opportunity to consult with an attorney who will be much more careful in crafting a ghost-written letter for his client. A lot of times your opponent will make reckless admissions or statements in a position statement prepared before they consult with an attorney.

After you get your opponent to state their position in writing — hopefully getting helpful concessions — you may want to consider interviewing key employees and witnesses and getting written statements from them. You should also consider tape-recording telephone conversations with your Arizona-based opponent recognizing, of course, that you may be creating both good and bad evidence by doing so.

After you have thoroughly analyzed the issues, potential damages and cost of litigation you should consider reaching a resolution before you spend a lot of money on the dispute. If you decide to make some type of settlement proposal you should put yourself in a position to deal directly with the decision-maker of your opponent if possible. Also, you should try to make your proposal before your opponent files a lawsuit since a lot of times after a lawsuit has been filed, the opposing party is not in a mind set to discuss settlement because, for a short period of time, they believe they have you on the ropes and will view any settlement proposal made after the lawsuit has been filed as a sign of weakness on your part. If you make a written offer to settle a contract dispute and that offer is rejected, and thereafter at trial your opponent is awarded less then you previously offered to settle the case for, then your opponent will have to pay your attorneys’ fees and costs. For this reason, it is often a good strategy to make a written settlement offer early on in contract disputes.

You should never ignore a threat of litigation. Ignoring the threat and filing the demand letter you received threatening litigation in the “worry drawer” in your desk will almost always result in you spending a lot more time, energy and money than if you had followed some of the steps outlined in this article.

• Brian Foster is a 20-year Ahwatukee resident and senior partner at Snell & Wilmer L.L.P. in Phoenix. Reach him at (602) 382-6242 or bfoster@swlaw.com.

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