Ten Ways to Get Ahead of Business Lawsuits

by Douglas J. Good

Nothing can drain dollars out of a business – not to mention time and focus – like a juicy business litigation.  What with the host of discovery issues, particularly regarding electronic documents (think of all those emails, internal and external), and overcrowded court dockets, it is increasingly difficult to confine a business lawsuit to any reasonable financial and time limit.

In the fray of battle it is easy to forget that pursuing the lawsuit to a final legal ‘victory’, may not achieve a business ‘victory’ at all.  To avoid litigation, or, where it is unavoidable, to minimize expense, risk and delay, I offer my ‘Top Ten’ tips.

1. Get it in writing.  Sure, it’s true that when you shake hands with someone, your word is your bond.  The problem?  When the dispute arises, there are two different versions about what words were agreed upon.  At least if the deal is on paper there’s a fair chance neither side can change it.

2. A penny saved…isn’t.  So you’ve decided to follow Rule # 1.  Excellent!  But you think your deal is so routine that you can go through a couple of contracts you’ve seen before and cut-and-paste together a “real” lawyer’s contract.  If you’re ever tempted to take this route, speak to my wife first.  She’ll tell you about every time she had to call the plumber to redo one of my simple do-it-yourself plumbing projects.

3. Check your emotions and ego at the door.  By definition, business litigation is about business.  There is a direct correlation between the degree that you personalize the litigation and its cost:  It is a sad irony that clients will often complain about legal fees after directing their attorneys to spend hours and hours of time pursuing issues of relatively little economic value to them.  You can’t take ego-gratification to the bank.  But its pursuit can take you to the cleaners.

4. Don’t keep secrets from your lawyer.  You feel that if certain unfavorable information you have comes out, it will hurt your case.  So you don’t tell your lawyer.  The problem is that often your adversary knows that information . . . and he has told his lawyer.     The worst thing is for your lawyer to be the only one in the dark.  For certain it will increase your legal expenses.

5. Have a document retention/destruction policy . . . and follow it.  Part of a lawsuit is the discovery process.  An appropriate document retention/destruction policy can save you hours of time in discovery and thousands of dollars in attorney’s fees.  Speak to your accountant and attorney to find out what documents you must save, and for how long, and which documents you should save.  And don’t forget electronic documents, particularly emails.  Put your policy in writing, explain it to your employees, and follow it religiously.

6. Don’t hit that delete button.  In reviewing documents regarding your lawsuit, you might find one or two – paper or electronic – that you wish had been written differently, or not at all.  Resist the temptation to destroy or delete.  It’s called spoliation of evidence, and it’s playing an ever-bigger role in litigation (ask Martha Stewart).  Increasingly, computer experts tout their abilities to search hard drives and recover deleted files, or to trace file alterations.  A finding of ‘spoliation’ may be fatal to your case.  One thing is sure: trying to explain your way out of a claim that you destroyed paper or computer documents will add considerably to the cost of litigation.

7. Don’t talk to your adversary.  You’ve just been served with legal papers.  You’re sure that you can save the expense of hiring a lawyer by picking up the phone and explaining things to your adversary.  Don’t do it!  True, the odds are overwhelming that your business litigation will be settled.  And you can, and should, have a very active role in the settlement process.  But, once litigation is started, don’t communicate with the other side!  A lawyer-controlled settlement dialogue will best assure that you can speak freely, and that nothing you say will be used against you in court if the case does not settle.

8. Consider mediation.  While not right for every case, mediation empowers parties to resolve their own dispute, instead of having the court impose a resolution.  Mediation often works well in commercial cases, where the parties have already done business together.  If both sides are seasoned businesspeople, and have lawyers who understand the process, mediation can be a pathway to a true ‘win/win’ resolution.

9. Be realistic about attorneys’ fees.  Under the so-called ‘American rule’ both parties to a lawsuit bear their own legal expenses.  Maybe you’ve heard the terms ‘sanctions’ or ‘frivolous lawsuits’ – terms that refer to rules where one side can be ordered to pay the other’s attorneys’ fees.  Cases such as these are few and far between.  And if you’re unsuccessful in a ‘sanctions’ application, you’ve just added to your legal fee burden.  Think twice before telling your lawyer to try to recover his fees by seeking sanctions for a frivolous action.  If you still want to go ahead, think three times.

10. Find an attorney you can trust.  A trustworthy attorney will be honest with you about the merits of your case, and what is involved.  But no honest attorney will be able to tell you how much a particular lawsuit will cost (unless she’ll charge fixed fee) or how long it will last – those matters are largely beyond your attorney’s control.  A trustworthy attorney will work with you to achieve your goals within certain budgetary constraints.  So, find a competent, reputable attorney you can trust – and then trust your attorney.