What Is the Difference Between Business Litigation vs. Commercial Litigation?
Understanding the complexity of business litigation
on September 15, 2022
Updated on January 9, 2023
No matter how big, running a business is complicated. Many legal issues can come up, from the internal operations and leadership of the business to the business’s relationship with other companies and customers.
Because of this complexity, business litigation encompasses many areas of law.
“There’s a wide range of things that come within business litigation, including disputes between companies, between consumers and companies, and between employees and companies that might not come within employment litigation,” says Georgia business litigation attorney Benjamin I. Fink.
This article will explain some common issues in business litigation and when it’s a good idea to speak with an experienced business litigation lawyer about your case.
Is There a Difference Between Commercial Litigation and Business Litigation?
“Business litigation” and “commercial litigation” are often used interchangeably. They are both types of civil litigation involving businesses, and business litigation lawyers may handle issues in both areas.
Despite the similarity, there are some differences between them.
In general, business litigation involves legal issues that are more internal to the business and its operations. Examples of business litigation issues incude:
- Employment law disputes
- Compliance with federal and state regulations
- Shareholder disputes
Commercial litigation focuses more on a business’s transactions or relationships with other companies or customers. Issues include:
- Contract disputes
- Issues in the sale of goods
An experienced business litigation attorney will understand the state and federal laws that apply to your legal dispute and whether it’s technically a business or commercial litigation issue.
What Are Some of the Most Common Types of Business Litigation?
Business litigation law touches on many different areas of law and includes “a very wide range of litigation involving businesses,” says Fink.
Some of the most common types of business litigation issues include:
- Breach of contract. When two parties have a contract with one another, and one of the parties fails to perform their part of the deal, that party is in breach of the contract. Contracts can be for many things. For example, two companies could enter into a contract for one of the companies to purchase a certain amount of the other company’s merchandise. If the company that agreed to buy the merchandise fails to follow through, it’s in breach of the contract. The company that suffers from the breach can sue to enforce the contract or get compensated.
- Breach of fiduciary duty. A fiduciary duty is when a person has an obligation to act in the best interests of another person. For example, in a corporation, the board of directors has a fiduciary duty to act in the best financial interests of the company’s shareholders. A breach of fiduciary duty can arise when a board member has a conflict of interest or engages in self-dealing.
- Partnership disputes. If the individuals who started or run a business disagree about how to operate the company going forward, this can lead to legal issues. Partnership disputes may go beyond disagreements and involve the misappropriation of funds. Legal action or alternative dispute resolution may be needed depending on the issue.
- Intellectual property disputes. Companies can have many types of intellectual property rights. For example, a company’s trade secrets are information the company protects because it gives the company an economic advantage. Trade secrets include formulas, recipes, or manufacturing designs and processes. Business litigation lawyers can help secure a company’s intellectual property rights from infringement or violation.
- Non-compete and unfair competition issues. Non-compete agreements are a type of contract between an employer and employee. They aim to prevent employees from taking confidential information or training from the employer and using it against them as a competitor.
- Class actions. Class action lawsuits often arise in the context of personal injury or product liability claims—for example, when a company’s defective product causes harm to users of the product.
- Fraud. Fraud is intentionally misrepresenting or withholding facts from another party to get an unfair benefit. Fraud can arise in many business-related contexts, including the sale of goods and business transactions.
- Business torts. A business tort is a wrongful action that someone takes against a business that causes the business financial harm. A major business tort is called tortious interference. This is when a third party intentionally interferes with a company’s current or prospective contracts or business relationships to cause the company economic harm.
- Employment law issues. Employment issues can include anything from wage and hour disputes to wrongful termination to discrimination claims.
- Insurance coverage issues. If a business and insurance company dispute the range of coverage, or one party claims there is a breach or insurance fraud, litigation may be involved.
Alternatives to a Lawsuit and the Difference Between Arbitration and Litigation
Depending on the legal issue, business lawsuits may be filed in state court or federal court.
If the business dispute involves a smaller amount of money, a business owner may pursue legal action in small claims court. The amount of money a small claims court handles depends on the state.
In Georgia, for example, the limit is $15,000. Many other states have lower monetary limits (typically under $10,000), while a few have higher ones.
The benefit of filing in small claims court is that it tends to be less expensive and time-consuming than pursuing a lawsuit in regular court. If the legal issues involved in the dispute are relatively simple, business owners may be able to handle the matter on their own, without an attorney.
However, legal issues in business litigation are rarely so simple. Even though it may be possible to settle matters without an attorney, it’s wise to seek an attorney’s advice before taking any action. As a business owner, you want to avoid making legal mistakes that will negatively impact your business. Getting legal help upfront often avoids having to clean up legal messes in the future.
So, speaking with a lawyer is often essential for ensuring the best outcome regardless of the strategy you take. Additionally, your state may have laws requiring businesses to have representation in legal matters.
Alternative dispute resolution (ADR) is another way to resolve business disputes that doesn’t involve going to court. As Fink says, “there are also alternatives [to a lawsuit]—arbitration being the most common, [as well as] as mediation, in which parties try to resolve the issue rather than litigate it.”
In other words, arbitration is an alternative to litigation in which parties talk through their dispute and try to reach a settlement without the formal process of a lawsuit. A third party, such as a professional arbitrator or retired judge, will facilitate the process and help the parties arrive at a settlement. Arbitration and other forms of ADR can be less expensive and time-consuming than litigation. An experienced attorney will be able to help you assess if ADR is a good option for your case.
Questions for a Business Litigation Attorney
If you are a business owner considering legal action, consider speaking with an experienced business litigation lawyer about your situation.
Even if you end up not going to court, getting insight from a legal professional will ensure you take the best course of action for your business.
Many business litigation attorneys provide free consultations, allowing you to get legal advice and decide if the attorney or law firm meets your needs.
To get the most out of a consultation, ask informed questions such as:
- What are your attorney’s fees and billing options?
- What are my legal options?
- What are the steps in the business litigation process?
- Are there statutes of limitations for business litigation?
- How likely am I to resolve the issue before going to court?
Once you have met with a lawyer and gotten your questions answered, you can begin an attorney-client relationship.
Look for a business litigation attorney in the Super Lawyers directory for help with your business-related legal issues.