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Dispute Handling and Litigation


Fabian Ajogwu

Fabian Ajogwu prepared this technical note as the basis for class discussion rather than to illustrate either effective or
ineffective handling of an administrative situation.
Copyright © 2007, Lagos Business School. This case was developed from Public Sources. Identities of case
personalities have been disguised. No part of this publication may be reproduced, stored in a retrieval system, used in
a spreadsheet, or transmitted in any form or by any means – electronic, mechanical, photocopying, recording, or
otherwise – without the written permission of Lagos Business School.

Dispute Handling and Litigation Management

Disputes are bound to arise in business relationships and commercial transactions. The
concept of a free-market economy presents opportunities for clashes of interests and
disputes in the pursuit of economic gains. These disputes can be resolved amicably
through alternative dispute resolution methods or by civil action in a law court
(litigation). Managing disputes is an essential area of decision making for managers.
How a commercial dispute is resolved could affect an organization’s profit, growth,
reputation, etc.
Litigation by its very nature is a cause for anxiety in those concerned with it whether
as lawyers or as parties. This is primarily because of the uncertainties on the outcome
of litigation. In addition to the general uncertainty on the outcome are worries on the
cost of protracted litigation, the consequences of a judgment against the party, the
reliability of witnesses, etc. A good example is the US vs. Microsoft – The Antitrust Case.
Judge Learned Hand told a group of New York Lawyers that “as a citizen he would
fear litigation beyond anything but sickness and death”. According to Constance E.
Bagley, “every hour spent in a windowless room being deposed is an hour the
manager is not spending executing the business plan”1. According to Jay Walker,
founder of Priceline.com, “It’s not a matter of who wins. It’s a matter of who loses

Role of the In-house Lawyer

Most big companies employ in-house lawyers to cater for their legal services needs.
However, preparing for litigation or preventing it is one area of practice that only
quite a few in-house lawyers have the experience and skills to deal with. Does dispute
handling mean simply assigning a matter to the Legal Department when the dispute
has already arisen? If a problem arises, can the company be said to have done all it can
to prevent the dispute or manage it where it has arisen?
By the very nature of the service a lawyer provides, it is imperative that if he is to
provide good service, he is to be acquainted will all the facts of a case. Infact, there is a
saying that “there are two kinds of people never to lie to - one is your lawyer, and the
other is your doctor”. The reason behind this saying is that if they are misguided by
facts, they may provide a “solution” that is not well founded, or one that creates a new
set of problems.
It is therefore necessary to involve your lawyers when considering how best to
structure arrangements in order to give effect to the true intentions of the parties, and
also prevent against litigation. Most issues from the very beginning are potential
sources of dispute and perhaps litigation. When however, a dispute arises, there

1 Winning Legally, C. Bagley, Cambridge MA, Harvard Business School Press, 2005
2 Jay Walker interview with C. Bagley, Boston Massachusetts, 2003
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should be collective action between the managers and the in-house lawyer in deciding
on a strategy for the dispute resolution.
Since the in-house lawyer is the starting point in this context, it follows that whatever
he prepares will be what is relied upon in the event of litigation. Transactional errors,
or improper documentation or perfection of agreements could create problems leading
to litigation or even complicate litigation. The responsibility of the in-house lawyer
continues even after the matter is assigned to an outside lawyer who takes over the
case. In a nutshell, the in-house lawyer has a responsibility to oversee the legal
interests of the firm from start through litigation.
Whilst looking at the role of the in-house lawyer in litigation, we must look at other
transactions they handle such as contract documentation, security of credits, purchase
orders, contracts of service and contracts for service. The problem is that in-house
lawyers hardly formulate clear strategies for handling cases other than treating each
case on an ad-hoc basis and most times ending up in litigation. The result is that the
firms waste a lot of time and resources pursuing or defending cases that they ought
not to in the first place.
The lack of a well-formulated litigation strategy extends even to the outside lawyer,
and can make even the big law firms blunder the cases they handle for such
companies. The consequence is that many cases coming up before the courts are bad
cases, with pointless or unsustainable claims or defenses. The cost profile of such
companies shoots up, and they wonder why they are paying so much and getting so
little in return. Reebok Rules3 states: “Hire lawyers, and not law firms!”

Attitudes to Litigation
The average business minded person believes (and often rightly so), that litigation
could turn out a waste of time and a bad business move. With a legal system fraught
with delays, litigation does not seem to take into consideration the time value of
money in cases of monetary claims whether as debts or as damages. In most cases, the
litigating firm writes off the claims in its books as bad debts or claims, leaving the
matter with the lawyer with fingers crossed in expectations.
A Company with a good litigation management strategy would be able to sift its good
cases from the bad ones. It would be able to determine the merits of a cause of action
not just in terms of possible success, but also on the basis of its commercial and
strategic importance to the firm. My advice: Hire a business minded litigation lawyer, who
knows when (and when not to), how (and how not to) compromise in the greater business
interest of the client, and not to always go on an ego trip. Managers should never rush into
litigation as a way out. Prior to filing a law suit, managers should consider and
evaluate the following: -
 Is there a likelihood of recovery, and if so will the amount be enough to
justify the time and resources of litigation?
 If judgement is obtained, will the Defendant be able to pay the
judgement debt?
 Is there a likelihood of the Defendant bringing a counter-claim against
the Claimant?
 Will the litigation bring adverse publicity of ill will among customers,
employees, suppliers, financiers, etc?

3Barry Nagler, “Reebok Rules” for Litigation Management”, International Business Lawyer
September 1999

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 Is there still a relationship with the Defendant that is worthy of being

After a careful analysis of the issues above, a company may decide it unwise to sue if
the circumstances will mean that greater value is lost by suing the Defendant. A
structured approach to case or dispute management by a firm through its managers
and in-house lawyer can yield very positive results in allowing an organized and
tactical approach to litigation management that creates value for the firm and the
society. There should be not rigidity in approach. The decision by a firm to go into
litigation should be a business one founded on good analysis and overall strategy of
the company.
It is advisable to treat litigation processes with the importance and urgency they
demand. A defendant receiving a writ of summons or other court processes should not
treat them with levity. The defendant should respond to the suit, and immediately put
in place a litigation strategy. The strategy should produce a plan that should be
followed step by step. The defendant should gather the facts and analyse the strengths
and weaknesses of their case. Was there some wrong doing, negligence, breach of
promise, etc on the part of the defendant? Is there a legal or factual defence available?
Has there been an attempt at a negotiated settlement? Management should address
these points before proceeding to litigation. It may be that other forms of dispute
resolution are contractually in place, such as arbitration or mediation. In that case,
parties may want to explore arbitration or mediation as the case may be.
It is not every case that can and will be settled even though it is advisable to explore
the settlement options as early in the case as possible. The following types of case
present challenges of settlement: -
 Cases that entail legal interpretation of a statute or contract

 Cases that appear lucrative to the Plaintiff, if he wins, and no great harm to

the plaintiff if he / she loses.

 Cases where one side has acted so unreasonably or negligently that

settlement is almost impossible.

A good litigation strategy will recognize the importance of compromise and
settlements in dispute resolution. There are many alternative dispute resolution
[ADRs] that the law upholds and which are designed to make for business sense in
dispute resolutions. In doing so companies must formulate good litigation
management strategies that would optimize dispute resolution.

Alternative Dispute Resolution [ADR]

The inefficiencies of litigation call for alternative ways of resolving disputes especially
in commercial transactions. The aim of ADR is to resolve commercial disputes in a
time and resource saving manner. Such methods include mediation, amicable
settlement (in an ideal win-win manner), arbitration and conciliation. The Arbitration
and Conciliation Act, Cap. 19, Laws of the Federation of Nigeria 1990 provides the
legal framework “for the fair and efficient settlement of commercial disputes”. It
provides an alternative to tedious litigation where the parties provide for arbitration in
their contract. A clause stating that “any disputes arising out of the agreement
between the parties will be referred to arbitration in accordance with the Act” will
suffice to create the groundwork for reference to arbitration.

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Arbitration is a constituted panel or person who decides the rights and liabilities of the
parties in a dispute, and makes a decision called an award for that purpose. He is like
an expedient judge. The safeguard is that such a clause agreeing to refer disputes to
arbitration is irrevocable unless the parties so agree or by leave of court.4. The court
will therefore be obliged at the application of one of the parties to stay any
proceedings before it in order to refer the matter to arbitration. (S.4) Also, the court
will be unwilling to set aside an arbitration award unless in special circumstances such
as where the arbitrator has not conducted himself properly or where the scope of the
award is more than submitted to the arbitration tribunal.
Parties may also agree in writing that any dispute may be settled by conciliation. A
conciliation is where an independent person (the conciliator) tries to assist the parties
in an impartial way to reach a settlement of the dispute. This is also provided for by
the Act. These rules apply also to International Commercial transactions, which are
guided by the Act, which makes applicable the Convention on the Recognition and
Enforcement of Arbitral Awards (New York Convention) to any arbitration award
made in Nigeria or in any contracting state arising out of international commercial
arbitration. My advice: ADRs should be adopted in commercial disputes, for their
time saving nature & benefits.

A firm must recognize the crucial decisions it places in the hands of its in-house
lawyer, who must in turn be aware of the vital role he has to play in litigation
management. A good litigation management strategy will save time and resources for
a Firm, and help it align its dispute resolution approach with the business realities of
the day.
In managing litigation, Alternative Dispute Resolution methods [ADRs] such as
Arbitration and Conciliation should be resorted to so as to minimize time and
resources spent on resolving the dispute and therefore accord more with business
reality. They support the time value of money more than litigation. In handling a
litigation-bound matter, an in-house counsel and indeed the company must adopt a
case approach and articulate the overall objective of the firm in that particular case,
and where possible make a plan B for the flip side of the uncertainty.
Where litigation is to be undertaken or defended, the external lawyer should be made
to submit a brief of his legal and strategic overall plan for the case identifying the
company’s objectives and giving a sequence for the steps to be taken. This would
enable the company to analyze the full implications of the case, and be in a good
position to give clear instructions to the lawyer. The company should establish
yardstick for evaluating the performance of external counsel in cases. The
appointment of external counsel must always be based on clearly stated objective
criteria. It must be remembered that “every legal dispute (in commercial cases)5 is a
business problem requiring a business solution”.6

4 See Section 2 of the Arbitration and Conciliation Act, Laws of Nigeria 1990
5 Emphasis mine.
6 Winning Legally, C. Bagley, Cambridge MA, Harvard Business School Press, 2005.