It goes without saying that costs associated with litigation can really add up. For some small businesses, even if they are in the right, a lawsuit can literally put them out of business. Having represented clients on both sides of the litigation table, what comes across loud and clear is that many of these lawsuits could have been avoided — or the financial impact reduced — with proper legal counsel.
That’s right. Hiring an attorney may be your best bet to avoiding a lawsuit long before a dispute arises.
I know what you’re saying. A lawyer recommending you hire an attorney for routine business transactions and practices is a little self-serving, especially nowadays in this difficult economy when businesses are trying to keep costs down. The reality is having an attorney review a contract, a purchase and sale agreement, a lease or any other legal document before it is signed can drastically reduce the likelihood of a lawsuit down the road.
Remember, there’s no such thing as a “standard” agreement. An attorney works to make the agreement as favorable as possible to the client in the event a dispute does arise.
Here are some of the things an attorney can do to help businesses avoid litigation or at least enhance a client’s position if a dispute should arise:
Get it in writing – The days of verbal and handshake agreements are over. By putting it in writing, with the assistance of an attorney, you leave nothing to recall should the other party decide to take legal action.
Contract provisions – When entering an agreement, consider whether you want to include clauses awarding attorney fees to the prevailing party, requiring that disputes be resolved by mandatory arbitration, or providing for the forum where the litigation must be filed. An attorney fees clause incentivizes each party to make sure they have a strong position before they decide to litigate a dispute. Arbitration can reduce the costs of the litigation substantially. If a dispute must be resolved where you are located, rather than in the state or the country where the other party is located, the savings can be enormous.
Perform background checks – This may seem like an extreme measure when hiring a prospective employees or exploring a business opportunity with a potential business partner or partners. Yet due diligence before you enter a work relationship or partnership can reveal any potential red flags.
Employee handbook – Have a thorough and well-drafted employee handbook – even if you employ as few as five people. If your company has an intranet, put a copy of the employee handbook there in addition to making hard copies. By simply putting in writing your company’s rules and expectations you can help defend your company against claims by a disgruntled employee.
Trademark search – Before you open your doors, have an attorney do a trademark search on your company name. You can’t become a household name if your business name is copyrighted by somebody else. A quick check by an attorney can ensure that your business name is yours and yours alone.
To sue or not to sue – Before you decide to take legal action against another party, consult an attorney so you can realistically assess the likely recovery versus the estimated costs of the litigation to make sure the action will be cost-effective. Sometimes the price of victory is far more costly than letting a matter go.
Listen, listen, listen – Whether it’s your customers, tenants, employees or whomever it is who has a complaint about your business or service, it’s imperative to listen. It’s amazing how many lawsuits have started just because the business owner did not respond or even acknowledge a complaint. And listening is something every business owner can do without the benefit of retaining counsel.
Negotiate a settlement – Just because a lawsuit has been filed by you or against you, doesn’t mean you can’t negotiate a settlement. Attorneys settle 90 percent or more of the disputes they handle for clients. In an appropriate case, with the assistance of their attorneys, the parties retain an experienced mediator to try to facilitate settlement. In my experience, mediation is successful at least 75 percent of the time.
Lawyers can help you avoid some disputes that might otherwise arise in the future. Even when they cannot, however, they can help strengthen your position should a dispute arise and guide you through the process so that the dispute is handled in the most cost effective manner possible.
Mark S. Furman, Esq,. chairs the litigation department at Tarlow, Breed, Hart & Rodgers, PC. He can be reached at email@example.com.
This article appeared in the November 1, 2008 issue of IndUS Business Journal.