How to Avoid Litigation
The following are some of the strategies I recommend to avoid needless litigation (and most litigation is needless).
1. Memorialize agreements in writing.
This one should go without saying. I have fought many lawsuits that could have been avoided, or made less costly, had the parties taken a moment to memorialize their agreement in writing. There is a reason why a contract requires a “meeting of the minds.” Often, the very act of putting your agreement down on paper can reveal that you had different understandings as to the terms of the agreement. While not ideal, it can be as simple as memorializing an oral agreement with a quick email confirming your conversation. A great amount of litigation is initiated because either (1) the parties truly had different understandings as to the terms of the agreement or (2) one party seeks to take advantage of the fact that there was no written agreement. And even if, under scenario 2, you prevail and successfully defend against their claims, you’re going to spend a significant amount of money doing so. If you have an airtight contract, especially one with a prevailing party attorney’s fee clause, you make it much less likely that they’ll even find an attorney willing to take their case.
2. Conduct research on people or companies before doing business with them.
All too often, I find ourselves representing a client involved in a legal dispute that would have been foreseeable (and preventable) had the client done its due diligence before getting into bed with a bad-actor. I define the term bad-actor loosely to mean persons or companies that lack integrity, honesty, professionalism, or competence. These types of people will not only do harm to you and your business, but they will likely also do harm to other parties with whom you do business, exposing you to liability from third parties.
Our advice prior to entering into an agreement to work with someone in any significant capacity (employee, independent contractor, partner, or any other business associate upon whom you will rely):
Take your time;
Ask around and request multiple references;
Have multiple frank conversations with them in different settings;
Run multiple Google and social media searches; and
Run a litigation search to determine if they’ve been a party to any previous lawsuit.
The best indicator of future behavior is past behavior, especially when it comes down to the manner in which one conducts business. I’ve handled numerous fraud and embezzlement cases. Our clients were seldom the first person defrauded by the defendant. There was almost always a history of bad acts. A little research goes a long way to preventing unnecessary litigation, and the possible damage to our company.
3. Invest in legal advice.
While it’s true that I have a vested interest in telling you to hire an attorney, that doesn’t make it any less true. The majority of litigation in which our clients have been involved has dealt, in some respect, with the interpretation of a contract. More often than not, litigation could have been avoided or narrowed in scope had the contract been drafted or reviewed by an attorney.
Legal advice can be expensive. But cost is relative. You may invest $500, $1,000, $2,000, or more to have an attorney draft or review your contract and, in doing so, end up avoiding a $100,000 lawsuit. Additionally, when something goes wrong—and it will at some point—you will have a relationship with an attorney who will likely be willing to help you on short notice.
4. Use attorney-client privilege.
Any correspondence you send on a day-to-day basis is discoverable. Ask a first year attorney at a big law firm what “document review” entails. These days, a significant portion of “doc” review is reading thousands of emails written by people who sincerely believed they would never be seen again. The stories of embarrassing and damaging emails could fill novels.
In the event that you or your company end up in a dispute, all of your emails and other written correspondence are subject to review by the other side, with very few exceptions. The most powerful exception is attorney-client privilege. If you have a potential dispute brewing, from the moment you recognize it as such, you should include your attorney on your correspondence and label it “attorney-client privilege,” thus putting it out of reach of the other side in the event that litigation ensues.
5. Keep contemporaneous writings.
Evidence rules, as well as judges and juries, favor contemporaneous writings over oral testimony recalled months or years later. Thus, after any event that might someday give rise to a dispute, write down your summary of the details of the event on the same day or in the same week. Date the document and store it for a rainy day.
6. Obtain insurance, it’s a great backstop.
Let’s face it, bad things happen to good people. You might do everything right and still get sued. If you’re in business long enough, you will make mistakes. If that mistake lands you in a courtroom, the litigation expenses alone could bankrupt your company, and that’s before the case is won or lost.
I recommend using an insurance broker who can explain to you the different types of policies available to you, the different policy limits, and can point you in the direction of reputable insurer.
If you have further questions Get in Touch! Find out more helpful information on my Resources Blog.
