Business Law 13th Edition by Frank Cross, Kenneth Clarkson, Roger LeRoy Miller

Exercise 11

In the United States, businesses use the courts far more than anyone else. Most civil court cases involve a business suing another business for breach of contract or fraud, for instance. Additionally, when one company fails to pay another company for products or services, the unpaid company will often turn to the court system. If that firm does not have ready access to the courts, its financial stability can be put at risk.
Court Budgets Have Been Reduced
According to the National Center for State Courts, since 2008 forty-two state legislatures have reduced funding for their state courts. California's courts have experienced the steepest cuts-$844 million from their annual budget since 2011. Recently, the Alabama legislature cut its court funding by almost 9 percent. As a result, the state's chief justice ordered courthouses to close on Fridays. The number of weeks that jury trials are available to civil litigants in Alabama has been reduced by 50 percent.
Intellectual Property Cases Take Longer to Resolve
Today, the value of a company's intellectual property, such as its copyrights and patents, often exceeds the value of its physical property. Not surprisingly, disputes over intellectual property have grown in number and importance. As a result of the court budget cuts, these disputes also take longer to resolve. In California, for example, a typical patent lawsuit used to last twelve months. Today, that same lawsuit might take three to five years.
Investors are reluctant to invest in a company that is the object of a patent or copyright lawsuit because they fear that if the company loses, it may lose the rights to its most valuable product. Consequently, when litigation drags on for years, some companies may suffer because investors abandon them even though the companies are otherwise healthy.
Other Types of Litigation Take Longer, Too
Other types of lawsuits are also taking longer to conclude. Now attorneys must tell businesses to consider not only the cost of bringing a lawsuit, but also the length of time involved. The longer the litigation lasts, the larger the legal bills and the greater the drain on company employees' time. Roy Weinstein, managing director of Micronomics in California, argues that the economic impact of court delays on businesses is substantial. During the years that a lawsuit can take, some businesses find that they cannot expand or hire new employees, and they are reluctant to spend on additional marketing and advertising.
In fact, it is not unusual for a company to win its case but end up going out of business. As a result of putting its business on hold for years, the company becomes insolvent.
Some Meritorious Cases Are Never Filed
Facing long delays in litigation with potential negative effects on their companies, business managers are becoming reluctant to bring lawsuits, even when their cases clearly have merit. In Alabama, for instance, the number of civil cases filed has dropped by more than a third in the last few years. Judge J. Scott Vowell of Jefferson County attributes this decline to delays and higher court costs.
Managerial Implications
Before bringing a lawsuit, a manager must now take into account the possibility of long delays before the case is resolved. A cost-benefit analysis for undertaking litigation must include the delays in the calculations. Managers can no longer just stand on principle because they know that they are right and that they will win a lawsuit. They have to look at the bigger picture, which includes substantial court delays.
Business Questions
In response to budget cuts, many states have increased their filing fees. Is this fair? Why or why not?