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Making the First Move: Declaratory Judgment Actions

Most people think of lawsuits as straightforward things. One person or company thinks they were wronged by another, and then they sue the alleged wrongdoer. However, real lawsuits are often messier than that. Defendants may have their own grievances with plaintiffs, and they may bring counterclaims or multiple defendants may bring claims against each other.

Another variant of this can occur when a person has not yet been sued believes that they may become the defendant in the lawsuit. Often this happens in disputes of intellectual property or other business matters when a company receives a cease and desist letter. If that happens, then federal law allows the putative defendant to bring a declaratory judgment action. Essentially, declaratory judgments are lawsuits that allow people who are worried about being sued to trigger an adjudication on their own, rather than waiting with the possibility of suit hanging over their heads.

The Declaratory Judgment Standard

To understand declaratory judgments, it is important to understand one of the biggest limits on the powers of federal courts. Federal court rulings have the force of law, but courts are constitutionally limited to ruling on “actual cases or controversies.” This means that they cannot issue advisory opinions about whether something would or would not be legal or which parties would win in a hypothetical case.

Declaratory judgment actions do not change that. They do not allow courts to step into attenuated controversies that may or may not arise. Instead, they simply allow would-be defendants to start the legal process rather than waiting to be sued. In order to qualify for a declaratory judgment, it must still meet the basic requirements for a lawsuit, a concrete dispute between interested parties that the court can solve with some sort of specific relief. Generally, this means that there must be some affirmative act by the other party that makes the potential defendant think they may become the target of a lawsuit in the near future.

Benefits of a Declaratory Judgment

However, just because a person can qualify for a default judgment does not explain why someone would want to. There are several benefits. First, it provides certainty. Waiting for a lawsuit to fall can be nerve-wracking, and it may force people to tie up funds to defend a suit that may not materialize. Beyond that, filing a declaratory judgment can provide procedural advantages. It allows defendants to choose the court that the lawsuit will take place in, which can provide them with more favorable law. It also allows defendants to make the first move in managing the case. This can let them set the tone of the dispute in ways that are usually reserved for plaintiffs, and they can also take the lead on matters like discovery. While these benefits do not always outweigh the risk of provoking a lawsuit that may never arise, often it can be worth taking the chance for an upper hand.

It can be difficult to know what to do when your company receives a cease and desist letter, but there are options. If you would like to learn more about these options, contact a Florida business litigation attorney today. Our attorneys at Pike & Lustig, LLP are prepared to assist you immediately.

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