The Five Key Times to Consider Negotiations in Commercial Litigation

Of course, if you’re involved in a commercial dispute then you’re probably always thinking about ways to exit the process favourably.

But, when it comes to the litigation process, there are some prime occasions when negotiations are more likely to succeed.

In this article, we’ll describe when they are and why they tend to be excellent times to reach out to the other party with an olive branch of some kind.

Before Court Proceedings

Whether you’re the plaintiff or the defendant, there is usually a time before Court proceedings start when:

1. You know what’s going on; and
2. You could avoid the Court proceedings.

Most disputes, in fact, never turn into Court proceedings at all. Usually one party capitulates or a negotiated outcome is reached before anyone pays their lawyers a dollar.

Unfortunately, the parties also tend to be a little more fired up at this point. Both believe themselves to be in the right, and that is often the driving force behind both refusing to negotiate and deciding to sue.

However, if you can make yourself aware at this early stage of the potential downside of litigation costs, you might find that you can actually reach a more commercially beneficial resolution before anything is filed in a Court.

After Pleadings are Closed

The pleadings are each party’s opportunity to set out what they say and why.

Once they are “closed”, everyone pretty much has a good idea of everyone else’s case (if they didn’t already).

A few things typically happen at this point:

1. The lawyers will give their clients estimates for the next steps if they haven’t already;
2. The parties will begin preparing for disclosure;
3. Clients will start asking their lawyers questions like:
   1. How long will this take?
   2. How much might this cost? and
   3. What are my chances of winning?

With those three factors in the mix, this is often a good time to consider attempting a negotiation through correspondence. Sometimes mediation might be useful here, but without disclosure having been finished, it might also be a bit early in some cases.

But with a slightly more informed position, an understanding of everyone’s case, and a better appreciation for the legal costs and opportunity cost to your business of the matter continuing, here can be a good time to consider negotiations.

After Disclosure is Completed

Disclosure is when each party becomes aware of what documents the other party has.

They can test the strong and soft points of the opposing cases and gain a better appreciation for what can be proven or not through documents.

This is a great time to negotiate because:

1. Basically all of each party’s positions and documents are now in full view;
2. Your lawyers should be able to give you a decent idea of prospects, unless your case rests heavily on expert reports; and
3. The costs are about to ramp up significantly in trial preparation and expert reports.

Once Expert Reports are Exchanged

If a matter requires expert reports, then the window after they are exchanged is a good time for negotiation.

Essentially this is for the same reasons as we set out above in the “after disclosure” section.

There are a few distinguishing features though to consider if you’re waiting until this point:

1. Expert reports are incredibly costly. Sometimes a party having committed to those expert report costs might make them less likely to negotiate if they are now “past the turning point” financially.
2. On the positive side, both parties will know how difficult or easy it was to get the expert report, whether their pleadings now require amendment, and whether their case has more holes in it than they thought previously.

The 11^th Hour

Surprisingly, many matters still resolve just before the commencement of a trial.

It’s often at this point that parties are analysing their evidence, refining witness statements and spending considerable sums of money locking their cases down.

This is usually also the time when we have gone through witness preparation, including a greater understanding of how cross-examination works in a trial (hint: it’s not that fun).

With that comes a greater realisation about the sheer number of things that might go wrong.

That, in turn, means that even the most intransigent litigants might have a moment of doubt about their own cases and be more inclined to settle their matters rather than go all-in on the trial process.

But In Short… Always Look for Opportunities

These are the key times where negotiations might be more likely to arise.

That said, everyone in litigation should be on the lookout for a negotiation opportunity throughout the process.

If you’re trying to extract yourself from litigation and having trouble, don’t hesitate to reach out for help.