Business Parties Can Reduce Their Reliance on Courts By Mediating Before Litigating
Paul Simon, CEO and Founder of Business Mediation Network
If parties to business disputes want to reduce the cost and burdens imposed by the court system, here is a suggestion: try mediating before litigating.
Business people dislike the legal fees, intrusive pre-trial discovery and disruption of business operations that come with every lawsuit. Public officials and business groups have proposed a number of court reform proposals to lower the burdens of litigation on businesses.
However, the easiest solution is for business parties to avoid the courts whenever possible.
Millions Of Reasons To Mediate1st®
It is estimated that as many as 80% of the disputes submitted to mediation are settled. Using a neutral mediator to facilitate negotiations, the parties can often reach a voluntary mediated settlement after a one-day mediation conference thus avoiding lawsuit preparation, pre-trial motions and disclosing large amounts of sensitive information, including the ever expanding area of electronic discovery, all of which can account for up to 90% of litigation costs.
Taken as a whole, business litigation costs are enormous. The annual revenues of America’s civil “litigation industry” (including attorney’s fees, filing costs, discovery services and expert fees among others) are estimated at over $250 billion. More than 15 million civil lawsuits are filed in the United States each year. Over 60% of these are classified as “contract” cases. These include disputes with suppliers, customers, employees, partners, lenders, etc. – the types of cases that usually involve companies and business interests. In contrast, personal injury cases comprise only 6% of civil cases filed.
61% of Civil Suits are Contract Claims
Just looking at the number of cases filed, the total number of “contract” lawsuits is 10 times higher than the total number of “tort” (personal injury) cases. However, business cases rarely go to trial. Although they last an average of three years nationwide, virtually all business-related cases settle or are dismissed without trial. According to one study of contract cases, only about 1/10th of 1% (1 in every 1000) of those filed actually go to trial. Of the cases that go to trial, about two-thirds are tort cases. Business parties that find themselves at a trial are often defendants in personal injury cases.
In One Year, Business Parties Contribute $75 Million To Illinois Courts
The somewhat surprising conclusion is that business parties are significant supporters of a civil litigation system that they rarely use fully and that often operates to their detriment. For example, consider that there were over 425,000 civil cases filed in Illinois in 2016. Applying the national percentages, close to 262,000 of those cases likely involved “contract” claims. If the court filing fees are around $150 for each party, it is fair to say that business parties in Illinois lawsuits contribute around $75 million to the court system. This amount represents roughly one-third of the salaries and operating expenses for the court clerk’s offices throughout the state.
What if 10% of the existing Illinois contract cases were settled through mediation and never filed? Because these cases were highly unlikely to go to trial anyway, the most significant effect on the courts should be to reduce the demand on the clerks’ offices who would have to process roughly 26,000 fewer cases. Assuming a corresponding reduction in operating expenses, the state and county governments who fund the majority of court budgets could save millions of dollars annually.
The effect on businesses would be positive and immediate. Not only would Illinois business parties save about $7.5 million in filing fees, they would resolve their conflict quickly and inexpensively. Clearly there are times when lawsuits are unavoidable. However, many business lawsuits cause expense and disruption out of proportion to the underlying claims. Indeed, parties to smaller business lawsuits easily can spend more on fees and costs than the amount in dispute.
4 Out of 5 Mediations Successful
If nearly all business cases settle anyway and if 4 out of 5 contract disputes can be settled by using a mediator, pre-litigation mediation should be the first choice to resolve business conflict. By including a Mediate1st® clause in every contract, business parties can save substantial time and money and reduce the need for large clerical staffs to handle filings for cases that likely will never go to trial.
Business people need to recognize that litigation is nearly always a poor way to resolve business disputes. Mediation is a far more business-like alternative.
Paul Simon is the CEO and founder of Business Mediation Network, a company that trains and provides experienced business people to serve as mediators of business-related disputes. For a sample pre-litigation mediation contract clause, visit www.Mediate1st.com.