By Mark S. Furman, Esq.
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
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
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 firstname.lastname@example.org.
This article appeared in the November 1, 2008 issue of IndUS Business Journal.