What to Do Before I Sue: A Thoughtful Approach to Resolving Commercial Disputes

ASA members call us from time-to-time about commercial transaction issues.  They may tell us that a part is not good.  They may complain that someone did not pay for a part.

We appreciate knowing about these issues because it helps us recognize industry trends that reflect opportunities for ASA to help the industry improve.  For example, in response to concerns about non-payment by non-US customers we increased our education about Ex-Im Bank receivables insurance as a mechanism for mitigating this risk.  When calls reveal a pattern of fraud, we’ve been able to share that pattern with the FAA and/or Justice Department, which makes it easier for them to address the issue and protect safety.

We also appreciate the opportunity to assist our members.  When there is an airworthiness issue we share advice and where necessary we share FAA contact information.  When there appears to be a criminal issue we share appropriate law enforcement contacts.  And sometimes looking at the transaction in a different way reveals a solution that satisfies all of the parties

But occasionally I am asked to make recommendations about litigation.  I’ve been asked questions from time to time about how to balance the pros and cons of suing.  My opinion in this area is based not just on my trade association experience, but also on 25 years of experience as an industry lawyer who has been involved in both trial-level and appellate-level litigation.  The advice in this article is intended for those who feel that they have been wronged in a commercial transaction (defending an accusation brought against you represents a different analysis).

Protect the Innocent to Protect Your Relationships

I often recommend that you begin by examining what you need to do to mitigate your situation. Mitigation can help you but it can also help your innocent business partners.

For example, if you have a customer that is also an innocent victim of the transaction, then it can be a good idea to make sure that your customer is satisfied so that you do not lose a customer because of a business partner’s fault. Losing a customer in addition to being disadvantaged by the transaction imposes a double penalty on you.

And consider the possibility that your business partner may not be as “guilty” as you think.  Gather all of the facts before you decide on a course of action in order to make an educated decision about how to handle the issue.

Don’t Sweat the Petty Stuff (and Don’t Pet the Sweaty Stuff)

I also implore my friends to examine the cost-benefit relationship in the transaction.  How much would it cost to walk away from the issue, rather than suing?  And how much will it cost to obtain the remedy you want?  You should consider the value of your time as well as the value of the assets involved.  If you will invest more to fix the situation than you would recoup, then it might not be a worthwhile investment of your time and energy.

Make sure you know what remedy you are actually seeking before you pursue a particular course of action. Are you seeking financial remuneration? Seeking to protect your reputation? Fighting on principle alone?  Knowing what you want to achieve can influence the remedial path you follow.

There are often many options available in a transaction-gone-wrong.  Reporting, resolution, and suing are just three options – your actual fact pattern may suggest other options as well.


If there is a safety issue then you can report the party to the FAA.  You can also report a party who engages in fraud or misrepresentation for selling articles using misleading information in violation of 14 C.F.R. Part 3.  One of the defenses to such a claim is airworthiness (of the article) so the FAA would need to find that the article was not airworthy as represented.

Aircraft parts fraud is a very serious offense.  It has its own statue: 18 U.S.C. § 38.  So the US Justice Department can become interested in any issue that threatens public safety.

One advantage to reporting your issue to the government and letting the government handle it is that your costs are minimal.  However, government lawyers are often overwhelmed with work, though, so there may be some cost on your end if you want them to be successful.  One good way to help them being successful is if you assemble data to support their efforts.  Asking your aviation lawyer to draft a white paper explaining the relevant peculiarities of aviation law and practice can help keep the government on the right track and can make it easier for them to bring the case efficiently.

Two problems with reporting to the government and expecting them to handle the case are (1) you do not have any control over the outcome because it is the government’s case and (2) a successful outcome for the government does not return your money; any fines go into the government coffers (a government victory may contribute favorably to the liability determination in your subsequent lawsuit to recover, but the government fines may also leave nothing to pay your subsequent judgment).

Other Resolution Options

You should examine whether your loss is something covered by an existing insurance policy.  In such a case, your rights typically are subrogated to the insurance company, meaning that the insurance company may have the right to pursue your rights in order to seek their own reimbursement.  Subrogation standards can vary based on the jurisdiction and the language of the insurance contract/policy, so it is important to work with an attorney to understand how your rights are affected if you accept a settlement under an insurance policy.

You should also examine whether mediation or arbitration is an option.  Do your standard terms and conditions include an arbitration clause?  Is the other party willing to consider alternative dispute resolution on a voluntary basis?  I have been involved in alternative dispute resolution both as an attorney and as a non-binding arbitrator.  I find that if the parties are both willing to engage in the process as a mechanism to settle the dispute, then there is a real chance at successful resolution.  But if one or both parties are not serious about the process then the process may be less likely to lead to resolution.

Lawsuit as a Last Resort

Unfortunately, it can the case that your business partner is unresponsive, or is otherwise unwilling to provide redress to your grievances.  The business partner might have good faith belief that it is not at fault.  The business partner might simply have a difficult personality.  In such a case, you may have no reasonable way to recover other than suing the business partner; but this doesn’t mean you have to sue (you can always move on).  You should weigh the decision carefully.

Before bringing a lawsuit you ought to consider these questions:

  1. Do you have a clear right to recovery (if you sue then are you likely to win)?
  2. Does the other party have legitimate counterclaims (it is rather disappointing to sue for $200,000, only to face a $1,000,000 counterclaim)?
  3. Is there another alternative available, like mediation or arbitration (including mandatory alternative dispute resolution required by a contract) and is it something that could yield a successful outcome?
  4. Is the other party the sort who will settle or who will make you go all the way through a lengthy litigation?
  5. Usually you need to pay your own attorneys’ fees:
    1. Will the attorneys fees be more than the potential recovery?
    2. Is there a fee shifting statute or clause in a contract that can permit you to recover your attorneys fees if you are successful?
  6. Where do I need to sue?  Can I sue in my home state or must I sue elsewhere?
  7. What is the timing on the suit?  Have I gone beyond the statute of limitations?
  8. Is the value of the case enough to justify my considerable investment (in terms of sleepless nights and worrying, and time spent supporting the lawyers with information, in addition to the legal fees)?
  9. What are your real goals?  Is there some specific settlement position that you would be willing to adopt to make the litigation go away?  Are you litigating over the principle?  I find that some principled litigants start questioning their own principles when the attorneys’ bills start to arrive; so consider how much you are willing to invest in your principles.
  10. If you win then does the other side have the resources to satisfy the judgment?  It is a hollow victory to win the lawsuit and then find that there are no assets to satisfy the judgment.

There is no magic combination of answers that will lead you down one path or the other; but answering these questions can hep you focus on what is important to you, and whether a lawsuit might be something to consider.  It is often the case that an experienced attorney can help you review the known facts in light of these questions, and can provide useful guidance on the weight that each of these questions might reflect in an analysis.  It is better to hire an attorney for the very limited purposes of analyzing whether a lawsuit is a reasonable option, than it is to jump into litigation with both feet and then find out that it was not the best course of action.


About Jason Dickstein
Mr. Dickstein is the President of the Washington Aviation Group, a Washington, DC-based aviation law firm. He represents several aviation trade associations, including the Aviation Suppliers Association, the Aircraft Electronics Association, the Air Carrier Purchasing Conference, and the Modification and Replacement Parts Association. He also represents private clients drawn from the spectrum of the aviation industry.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: