In the face of possible litigation, counsel’s decision whether to invoke an arbitration or mediation clause typically involves a complex consideration of cost, timing, fairness, contractual obligations, impact on the desired outcome, the ability to prevail against the other party, and reputational effects on business and consumers. Counsel often consider how customers, investors, and potential business partners may react to public information. However, businesses too often overlook another factor in deciding to opt for alternative dispute resolution (ADR) or court.
Drawing any attention to legal conflicts can be bad for business, but there is an aspect to this obvious point that is often overlooked when deciding whether to pursue litigation: unwanted regulatory attention. Businesses should be mindful that government investigations can begin in many ways; one of the easiest triggers is the contents of a newspaper article. Even a brief, public allusion to a potential claim, much less any mention of an internal investigation or audit, may raise enough law enforcement interest to spark an informal investigation that could turn into something much bigger. It is important to be mindful of this consequence before engaging in any saber-rattling.