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Try to Compromise Before You Sue

A lawsuit should be your last resort. Before you sue, talk with your opponent and try to negotiate a mutually beneficial compromise.

Litigation should be a last resort. In addition to devouring time, money and energy, lawsuits -- even the small claims variety -- tend to polarize disagreements into win-all/lose-all propositions where mutually beneficial compromise is difficult.

Before filing a lawsuit, it almost always makes sense to look for a solution out of court. This is particularly true in situations where the other party is someone you'll have to deal with in the future. Typically, this would include a neighbor, a former friend, a relative or a good customer. For example, an orthodontist who depends on referrals for most new customers will want to think twice before suing a patient who has refused to pay a bill in a situation where the patient is genuinely upset (whether rightly or wrongly) about the services she has received. Even if the orthodontist wins in court, he is likely to turn the former patient into a vocal enemy -- one who may literally badmouth him from one end of town to the other.

Start by attempting to negotiate a compromise with the other party. Before you reach for pen and paper, try to negotiate directly with the person, preferably in person or, if need be, by phone.

To arrive at a compromise offer, consider how much it's worth to you to eliminate the time and aggravation of going to court. One good approach is to put a dollar value on an hour of your time and then multiply by the number of hours you estimate going to court will take. Also, based on the facts of your case, take into consideration the chances that you might lose, or get less than you ask for. For example, in a recent study of 996 small claims cases that actually went to trial, only 32% resulted in the plaintiff receiving 100% of the amount claimed; 22% resulted in the plaintiff getting between 50% and 100% of the amount claimed; 20% resulted in the plaintiff getting less than half; and in 26% of the cases, the plaintiff got nothing at all. ("Small Claims and Traffic Courts," by John Goerdt (National Center for State Courts).) It's important to know that any offer of compromise, made either orally or in writing, does not legally bind you to sue for that amount if the compromise is not accepted. Thus, you could make an oral or written demand for $20,000, then offer to compromise for $15,000 and, if your compromise offer is turned down, still sue for $20,000.

Sign a written agreement pronto. If you talk things out with your opponent, write down your agreement as soon as possible. Oral settlement agreements, especially between people who have small confidence in one another, are often not worth the breath used to express them. And writing down an agreement gives each party a chance to see if they really have arrived at a complete understanding.

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