When Filing a Commercial Lawsuit, Beware of the Counterclaim

I was reminded this past week that when you engage legal counsel to file a lawsuit, always beware of the possible counterclaim.

A client needs to tell his attorney everything about a potential litigation matter, including whether the opponent may have their own claims against the client. Years ago, I brought in a new client to the large law firm where I was an associate attorney. The new client wanted to file a modest claim against his former employer for unpaid compensation to which he felt entitled.

We met with the new client and went over ALL the related facts and circumstances in substantial detail. It is essential that your attorney know EVERYTHING associated with your situation if he or she is to advise you and possibly represent you in court if you chose to proceed by filing a complaint.

During the client meetings we learned that the client was operating a new business in violation of his non-competition agreement with his former employer.  Further, this the noncompetition agreement appeared to be enforceable.

So, what did we do?

Do not bring claims if asserting them will result in a much larger counterclaim against your client.

We advised the client to forget about his modest claim for unpaid compensation.  If we had gone ahead and filed it, the former employer would have become aware of the client's new business and would have filed a counterclaim seeking to shut down this business.

In essence, we chose to let the sleeping dog lie by not asserting the claim.  As far as I know, the former employer remained none the wiser as our new client proceeded to build his new business with no interference from his former employer.

Commercial litigation is a tricky business, and it is always important to consider all issues when deciding whether to pursue a claim.   One particularly important issue to consider is whether filing a complaint over a small matter will trigger a much larger counterclaim in response.