By Shannon Raye Martinez
If you have been involved in business as an owner, entrepreneur or employee, you may have heard stories from others about their experiences with lawyers and how they conduct their business based on what lawyers told them. Or, you have gotten advice from a lawyer on one case, and thought what is true in one case should apply to everything. Unfortunately, that is not the case. Oregon has some unique rules that greatly affect how lawsuits are handled. This article provides examples of some common misconceptions and unique rules in Oregon that greatly affect how a business litigation case is handled.
Misconception #1: Arbitration is always better than going to trial.
Arbitration is usually preferred over a trial for three main reasons. First, usually arbitration is quicker, less formal, and therefore less costly. Second, arbitration allows you to have a person decide your case who has a lot of experience in that particular area of law. Third, you can avoid a jury trial.
In reality, however, you need to consider the circumstances and facts relating to the contract to decide whether you should have an arbitration provision, and what the arbitration provision should say. The language used in the arbitration clause will dictate how the arbitration is conducted, and greatly affect whether the arbitration process will provide a more beneficial and cheaper result than trial.
Arbitration is not always quicker, cheaper and less formal. The price of arbitration will depend on the arbitration service used and the type of case. For example, the American Arbitration Association charges a fee to file the arbitration which fluctuates depending on the amount of the claim. If the amount at issue in the case is $100,000, the filing fee is $1,850. If you were to file the same claim in state court, the filing fee would be $531. Also, in some cases, the amount of attorney fees spent to prepare for arbitration is the same as those to prepare for trial.
In state court, judges are usually assigned to cases at random. It is common that the judge may not have background or experience in the law that applies to your case. If you use an arbitration service, there may be arbitrators available that have an expertise in a specific area. However, this type of expertise usually comes with a higher fee, and is not always necessary. A specialized arbitrator is usually only necessary in complex cases or certain specialized industries. In addition, if the other side disagrees with you on the appointment of the arbitrator, it is likely that you will instead have a panel of three arbitrators – one chosen by you, one chosen by the other side, and a neutral arbitrator chosen at random. It is important to consider these issues and clearly set forth what procedure you would like in your contract.
Lastly, it is true that you avoid a jury trial if you have an arbitration provision, and jury trials are certainly more expensive than arbitration or a trial decided by a judge. However, you can reach the same result by having a provision in your agreement waiving each party’s right to a trial by jury. So, this should not dictate whether you have an arbitration clause. Whether arbitration is preferred over trial will likely depend on the type of contract, the issues involved, and the amount of potential liability.
Misconception #2: If I sue to collect a debt owed to my business, the other side pays my attorney fees right?
Not always. In Oregon, to recover attorney fees for any claim for breach of a contract or collection of a debt, you must have a right to the attorney fees. This right may come from a specific Oregon law, or an attorney fee provision in a contract. There is no law in Oregon allowing you to recover your attorney fees for common business debt or a breach of a contract. In order to recover your attorney fees, you must have a provision in a written agreement with the opposing party that allows you to recover your fees from the opposing party. Also, attorney fees in Oregon are reciprocal, meaning if there is a right to recover fees, the prevailing party will get their attorney fees paid by the losing party. So, if there is the ability to recover attorney fees for the winning party, this often greatly affects how the case is litigated, and whether you can reach a settlement.
Misconception #3: If I get sued, I won’t need to produce confidential business documents to the other side.
There is no general rule protecting all internal corporate documents or business records that may be considered confidential, such as minutes of shareholder meetings or information relating to your customers. In order for the opposing party to obtain documents from you, the documents must be relevant. If they are relevant, the judge will then look to whether they are confidential and proprietary. The judge has discretion in this regard, and will weigh how important the documents are to the case, and the risk imposed to your business if they are disclosed. Even if the documents are considered confidential or proprietary to your business, it is likely that the judge will require that the documents be produced, but they must be protected from disclosure by the other side. The opposing party who receives the documents is typically required to keep them confidential and only disclose them to those designated by the court, which is often the party to the case, his or her attorneys and their experts. In addition, depending on the confidential nature of the documents, the opposing party may be required to file the documents “under seal” if they are filed with the court, meaning that the documents will not be part of the public record, and the judge may be the only party besides the attorneys that are allowed to see the documents.
Misconception #4: If I get a judgment against someone, I have won the lawsuit and the lawsuit is over.
Yes, usually you are right to think that you have “won” the case if you have a judgment. However, the victory may be short lived. If you have a judgment, this means that the trial court found in your favor or the other party did not appear and you received your judgment “by default” and without litigating the case. However, in Oregon, the losing party may appeal that judgment within thirty days of the judgment. If appealed, and the opposing party wins on appeal, the judgment may be set aside or voided, or the appellate court may decide to send the case back down to the trial court to start over and conduct a new trial.
Unfortunately, too often people become familiar with the rules explained above after a bad experience in a lawsuit. As a business owner, it is important to consider these issues when you are preparing your contracts and creating internal policies to better position yourself if you are sued, or it is necessary for you to file a lawsuit.