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Tuesday, January 19, 2021

Making a federal case of it: What businesses can expect in federal lawsuits

How do businesses resolve disputes? One option is to seek a federal court’s assistance. A business may file a lawsuit in federal court or find itself defending against such a lawsuit. Either way, what can businesses expect? Here is some structural and strategic information.

What business disputes can be heard in federal court? Where are federal courts located?

A federal court can hear cases such as the following: (1) disputes involving questions of federal law; and (2) disputes between citizens of different states involving a claim for damages of at least $75,000.

Federal courts are located in every state. In Texas, federal trial courts convene in Fort Worth, Dallas and 26 other cities. The federal appellate court covering Texas (the Fifth U.S. Circuit Court of Appeals) is based in New Orleans. The next — and highest — federal appellate court is the U.S. Supreme Court in Washington, D.C.

Why choose federal court?

Businesses resolve disputes in federal court for reasons such as quality, manageability and relatively favorable law.

First, the quality of federal courts tends to be high. Federal judges are selected through a competitive process involving presidential nomination, FBI background checks, and U.S. Senate confirmation. They have life tenure, which facilitates impartiality. Federal judges have law school graduates on staff and other resources to assist them.

Second, some businesses find federal lawsuits to be more manageable than state court lawsuits. Federal trial judges tend to handle fewer cases at a time, allowing them to focus more on particular cases and potentially be more responsive to urgent matters. Federal trial judges also are more likely to make decisions resolving entire cases without the need for trials, which enhances efficiency.

Third, a business may decide to sue in federal court because federal law is more favorable. Accordingly, businesses should compare the federal and state law applicable to any dispute.

Besides federal lawsuits, other dispute resolution options include ongoing negotiation, state lawsuits, mediation and arbitration. Some combination of these options may be helpful.

What are business goals in a federal lawsuit?

In a federal lawsuit, a business aims to resolve a dispute cost-effectively and as quickly as possible. The parties may leverage the lawsuit’s existence to negotiate a settlement before a judge’s decision, but they must comply with court rules and deadlines in the meantime.

Collaboration between a business client and its legal counsel is key. The client contributes its business knowledge and information about its goals. The lawyer contributes knowledge about the law, court practices, dispute resolution options and strategy.

What happens in a federal lawsuit?

There are five main stages in a federal lawsuit: pleadings, discovery, motions, trial and appeal. The rules and strategy involved are complex, and different steps may be beneficial in particular disputes. Here is some general information.

The first stage involves pleadings. Goals include determining whether the dispute is properly in the federal court and identifying the parties’ claims. This stage begins when a party files a complaint and other papers to start the lawsuit. The defending party (or parties) may ask the judge to dismiss the lawsuit. If the judge decides not to dismiss it, the defending party may file an answer — admitting or denying each statement in the complaint and raising any counterclaims and defenses.

The second stage involves discovery. A goal is to provide the parties with the information needed to assess strengths and weaknesses of their claims and defenses. Discovery may begin soon after the lawsuit begins and last until trial. The parties gather factual information from each other and from third parties. Methods include requesting documents, taking depositions, requesting answers to written questions and conducting inspections.

The third stage involves motions. A goal is to persuade the judge to make favorable decisions that change the direction and momentum of the lawsuit, or end it altogether. Parties may file motions throughout the lawsuit. Examples include motions to dismiss the lawsuit, motions to compel discovery, motions for summary judgment and motions to exclude certain evidence.

The fourth stage involves trial. Goals include providing the judge with information required for the trial to begin and presenting evidence to the judge and/or jury. Before trial, the judge requires the parties to present their trial plans for approval, and he or she may try to facilitate settlement. The judge leads the trial, and the judge or a jury makes decisions about certain factual issues. The judge may issue a decision intended to end the dispute. The prevailing party may then seek to collect money or otherwise obtain its award. The non-prevailing party may ask the judge to change its decision or order a new trial. If the judge denies such requests, then the decision may be final.

The fifth stage involves appeal. A goal is to persuade a federal appellate court to change a trial judge’s decision or order reconsideration. Parties may appeal final decisions, as well as certain decisions made while a lawsuit is ongoing. The appellate court may allow the parties to present an oral argument, or it may consider only written submissions. The appellate court may issue a decision, which a prevailing party may then seek to enforce. In many cases, the appellate court’s decision is the final one in the dispute because the U.S. Supreme Court has discretion not to hear certain appeals.

With most federal lawsuits ending before trial, businesses can benefit from this dispute resolution option even without a trial. Therefore, businesses that understand what to expect in a federal lawsuit are better-positioned to make appropriate decisions and move forward.

Teresa Schiller is a business and employment lawyer at Beard Kultgen Brophy Bostwick & Dickson PLLC in Dallas and Waco. She formerly worked for a federal trial judge and a federal appellate judge. She can be reached at schiller@thetexasfirm.com.

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