Even the most robust business plan does not prevent legal disputes from impacting your company. If they do arise, it’s important to know how you can protect yourself and your business.
In our third episode of our #CommercialCollectionsCorner webinar series, shareholder David Wolfe breaks down key elements of commercial litigation and steps needed to ensure a successful outcome. Having worked with our firm for more than 25 years, David possesses a deep understanding of commercial litigation and works closely with clients to develop comprehensive recovery strategies.
Watch the full webinar to hear David answer creditors’ top questions about commercial litigation. Here are some of the insights he shared during the episode!
Q: Are there alternatives to litigation?
There are alternatives for those who prefer to avoid lengthy litigation. The most common method is arbitration, where a neutral party hears both sides of the claim and decides the outcome, which can be binding or non-binding.
Another type of resolution is mediation, where a neutral mediator facilitates discussions and negotiations without making a final decision or providing legal advice.
Q: What information do I need to support my claim?
The early stage of the commercial collections process involves a thorough review of documentation needed to support a claim. The types of documentation needed depend on the nature of your claim and the jurisdiction. Creditors must provide our firm with documents that establish the debtor’s liability. These documents may include a promissory note, demand note, guaranty paperwork, etc. You should also have the debtor’s location or address.
If this is related to a business loan or deal, you should also provide any loan documentation, security agreements, guarantees, loan modification agreements, forbearance agreements, etc. Providing these types of documents, if available, affects your ability to recover on the loan.
Remember, not every jurisdiction requires the same pleading requirements. For example, in Michigan, notice-pleading is the standard, but in Florida, we must plead the ultimate facts of the case in order to prevail.
Q: What other information is helpful to know when developing a recovery strategy?
In addition to documentation, it is important to share any insights or information related to these issues:
- Factual issues: Provide any important information or issues that may impact your attorney’s ability to pursue the claim. This may include defenses of identity theft or other fraudulent activity.
- Threat of violence: If a defendant threatens or has threatened violence in the past, it’s critical to inform your attorney of this communication because it may inform how your attorney proceeds with the claim.
- Contract remedies: Many contracts include a venue jurisdiction clause that dictates the state in which you must file the claim.
- Arbitration clauses: Some contracts contain a mandatory arbitration provision stating that any claims must be arbitrated. Knowing about this clause ahead of time allows our team to determine if it makes sense to file the complaint in state court or arbitrate it. Arbitration can be more expensive but it’s often faster, so it can be cost-effective if you’re working with an attorney that’s experienced in the process.
Q: Once the attorney has all documentation, what occurs next?
As soon as the file is set up with our office, the next action is to prepare the complaint. During this phase, your attorney establishes your claim with a clear statement of the grounds for the court’s jurisdiction and submits a request for relief. If there is a breach of contract, the preparation involves showing the existence of a valid contract in addition to the defendant’s breach of that contract and associated damages.
Q: Why is proper service such a critical aspect of commercial litigation?
After gathering information and preparing your claim, service is one of the most important next steps. It kicks off the official legal process and allows a lawsuit to commence. If it is not done properly, the entire matter may grind to a halt because the court cannot act.
The rules governing service of the process vary by jurisdiction, and the method of service is dependent on the type of defendant (individual or corporation) and location of the defendant (in-state or out-of-state). Personal service is often the preferred method of service, and some jurisdictions even require a diligent attempt at personal service before turning to other methods. However, the COVID-19 pandemic did create some changes, including a heavier reliance on substituted service by certified mail.
In the business realm, commercial litigation is continually evolving and growing in complexity. Consequently, it is crucial for businesses to adopt a proactive stance towards managing commercial litigation. This involves instituting comprehensive risk management and compliance strategies, alongside obtaining expert legal counsel.
To get all your commercial litigation questions answered, watch David’s full episode today. If you have more questions or would like to speak with David, feel free to contact him at any time.
This blog is not a solicitation for business and is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.
