As a former chief justice of the Supreme Court noted, in litigation even a win “is often drained of much of its value because of the time lapse, the expense, and the emotional stress inescapable in the litigation process.”[1]
Indeed, when you add up the costs, legal fees, use of staff resources, and the inherent risk of litigation, it is a wonder that anyone chooses to file suit. Yet, ask any person who owns a business and they will tell you that despite these costs, many people are all too happy to bring a lawsuit.
How do you prevent your company from being sued? Nothing will prevent all lawsuits. Still, there are ways to lessen the risk of litigation and help protect your company if you do get sued. Here are five steps that anyone can take to do just that.
First, do some initial research. When entering into a business relationship, look into your potential partner. What is their financial health? Do they have a tendency to litigate their disputes? Avoiding entering into business deals with litigious companies can save you a whole lot of money down the road.
Second, be particular in the language that you use. From wills to contracts, clearly stated terms that lay out the rights and responsibilities of the parties can do much to avoid disputes, while ambiguous terms can breed costly and protracted litigation. It is tempting to use form contracts that you have used before, but every deal has its unique factors. Terms that are clear in one situation might be ambiguous in another. Having an attorney review a contract to ensure that the parties’ intentions are carried out by the language in their agreement can prevent conflict in the future.
Third, be proactive in prevention. As Benjamin Franklin said, “An ounce of prevention is worth a pound of cure.” Invest in practices and procedures that help your company avoid conflicts with clients, customers, employees, etc. For example, in the employment context you could put together an employee handbook that explains anti-discrimination policies or develop a well-defined complaint policy and procedure for employees that have grievances. Establishing these practices can take considerable time and resources, but it will help prevent litigation in the future and provide you valuable evidence in the event litigation occurs despite your best efforts.
Fourth, when disputes arise, don’t rush to the courthouse door. Conflict is inevitable. Litigation usually isn’t. Even when someone has a disagreement with your company, often the dispute can be resolved short of a lawsuit. Make sure to keep the lines of communication open. Often litigation occurs because one party stops responding to the other. Pre-litigation exchanges of information may facilitate an early resolution. The fact is that if you can view a dispute from your adversary’s perspective you can often find a solution that accommodates both parties’ interest.
Fifth, learn from yourself. In those cases where you haven’t been able to avoid litigation, make sure you take time after it is all over to determine how to avoid similar claims in the future. Of perhaps more importance, review those incidents where you were able to resolve a dispute short of litigation and determine lessons that can be learned.
Following these five steps is no guarantee that your company won’t be involved in litigation. But putting these five steps into action is a great way to get started in minimizing your risk. For more detailed ideas for your specific company, feel free to give us a call at our Wooster office at (330) 264-4444.
[1]Burger, Isn’t There a Better Way?, 68 A.B.A. J. 274 (1982).