Protect yourself

Simple tactics can make litigation less likely, or at least less painful

Lawsuits may be an inevitable, albeit bothersome, part of doing business these days. But while larger companies and corporations may be able to weather the litigation process with a minimum of disruption, small and midsized firms are often devastated by a single lawsuit.

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In addition to potential damages and court costs, a lawsuit forces a business to redirect resources that would otherwise be focused on its core operations. A lawsuit can also mean a loss of goodwill for the business and increased stress levels for all of the concerned parties.

But, according to area attorneys, there are ways a business can lessen its chances of being sued. Many of these tactics can also make litigation a lot less painful if the matter winds up in court.

“There is no way, in the 1990s, you are not going to get sued,´ said Loveland attorney Roger Clark. “A lot of lawsuits are filed, I feel, because people feel frustrated.”

Clark said reducing this feeling of frustration that surrounds a business dispute is a good way to keep it from developing into a legal problem.

Attorney Stan Matsunaka agreed, saying businesses that are committed to providing good customer service go a long way toward avoiding costly lawsuits.

“A lot of these things get avoided when people are service-oriented,” he said.

Methods of reducing frustration are as simple as using a little diplomacy with customers or vendors or as complex as developing a good record-keeping system and company handbook.

Common courtesy and polite language can do a lot to solve a business problem. Customers are a lot less likely to feel like suing if a business owner is polite and willing to work toward finding a solution, Clark said. Common sense is another under-used way to avoid problems. For example, it is a lot easier to avoid a sexual-harrassment suit if the business owner can keep things like off-color jokes out of the workplace.

Establishing a firm set of policies governing business operations is also a good idea. There is a lot less likelihood of problems developing if everyone — employee and customer alike — knows what the rules are.

Along these lines, both Clark and Matsunaka said that developing a good record-keeping system is vital. Copies of orders, payments, agreements and correspondence can be used to avoid future misunderstandings and establishes a permanent record of business activities.

“Develop a paper trail,” Matsunaka said.

Written agreements are also important for avoiding suits, as they outline specific provisions for conditions of the work to be done, payment, etc. They can also be drawn up to include ways for settling disputes should they arise.

The two attorneys said that when a person is starting a business, or purchasing an existing one, taking the time to meet with an attorney, and learning a little bit about the law, can go a long way toward the success of the venture.

“If you are going to start a business,” Matsunaka said, “you are going to want to know all you can about it.”

Attorneys can help a potential business owner with specific local, state and federal laws governing things such as employment, taxation and the environment. They can also help with industry-specific questions about copyright and trademarks and what type of business organization would be best for the operation. Armed with this information, they said, a business owner is less likely to get into trouble.

Regulatory agencies such as the Department of Health or the Small Business Administration, and organizations such as the Service Corps of Retired Executives, are good resources for business owners. There are also hundreds of self-help legal guides and sites on the Internet where business owners can get information about the law.

Clark recommends that businesses conduct regular risk audits. These assessments can cover everything from physical layout of the business to a review of practices and procedures, and can alert the business owner to potential problems. Having sufficient insurance and maintaining a solid financial footing are two other ways to avoid litigation.

But what happens if a legal problem develops? Both Clark and Matsunaka said honesty, especially with the attorney, is the best policy.

“Litigation is stressful,” Matsunaka said. “It can be a lot less stressful if you have all of the information.”

In addition to having the written records and documents, giving the whole story to an attorney, both the pros and cons, is critical to the attorney’s ability to represent his client.

“You may be a little embarassed,” Matsunaka said, “but they still need to know what is going on.”

Matsunaka said that if a lawsuit is filed, the business owner needs to look at it from an economic standpoint. While there may be personal pride and ego involved in the matter, very often it is economics that will dictate whether the suit goes on to court.

A victory at the courthouse may become pyrhic in the marketplace if the amount of the judgment is less than what it cost to bring the matter to trial. Matsunaka said that in many cases, he will urge his clients to settle the matter out of court even though they would win at trial.

Clark agreed, saying he often urges his clients to pursue alternative methods of resolving a dispute such as arbitration or mediation.

“It’s not a bad process,” he said.

These methods, which use a third, nonjudicial party, are often faster than traditional litigation, less expensive for both parties, and more likely to develop a solution that both parties can live with because they had a hand in creating the settlement.

Often, provisions for these alternative methods are included in business agreements.

Armed with these tactics, the two attorneys said that a business owner can avoid most of the pitfalls that lead to a lengthy and expensive lawsuit.