Before retiring at night to sleep, most people make sure all of their doors are locked. It may not prevent a break in, but there’s no sense in inviting one either. Avoiding litigation works much the same way. Most companies get sued because they failed to secure access points for litigation and make it too inviting. After 24 years of defending companies against lawsuits, I've been labeled as “the last attorney you’ll ever want to meet” at Greensfelder, Hemker & Gale, P.C. in Belleville. Here’s how to avoid my services.
There are countless reasons why companies get sued; but, in all cases, litigation generally found them because they skipped a critical step in evaluating opportunity, sizing up risk, managing employees or signing contracts. Let’s look at contracts first.
Most successful construction companies are not only good builders, but they are great at cultivating relationships. They want to achieve trusted advisor status with their clients to get repeat business. But even among trusted client relationships, you have to document all changes to the original scope of work. Most construction contracts specifically state that no changes can be made unless both parties agree in writing to the change. Lawsuits are invited when one party finds itself taking on the risk of an added cost increase for no good reason. Remember, the one fundamental truth following the Great Recession is that companies are intensely watching the bottom line. So, whether you are a first-time service provider or a long-standing trusted advisor, you simply have to document everything in a deal that changes. It can be just an email that states, “This is to confirm that you have changed XX and it will cost an additional $XX.”
Misplaced trust also leads companies to blindly accept a risk they don’t fully evaluate before agreeing to the deal. This also has become a major issue since the recession as companies fear losing long-time customers, who are still large purchasers, but weighed down with debt. If a customer buys $1 million annually from your company, but never catches up on a long-standing debt of $400,000, fear of losing the customer creates an illogical assumption of risk that blows up when the customer goes bankrupt. No matter how good the customer is, ongoing long-term debt is a sign of trouble. You have to ask yourself what your business could do with the money owed, instead of being a lender for bad clients!
Managing disgruntled or under-performing employees is also critical to avoiding lawsuits. More and more retaliatory discharge/bad faith claims are filed because companies don’t perform adequate exit interviews or take the time to have employees sign forms stating the reason for the parting of ways. Was the person fired or did the person quit? It can make a substantial difference in suits filed against the company by the ex-employee.
Documenting also applies to instances when customers claim they are injured at your business. It needs to be more than just “customer slipped and fell.” Ask how they are and whether they need medical attention. Note their response and write down their mobility after the incident and any other factors that might be relevant in a review of the incident later. Keep and maintain any documents created, along with any video of the area of the incident. Destruction of any documents, tapes or tampering with the site of the fall to eliminate evidence can in and of itself create the grounds for a lawsuit against your company.
Not all employees fully appreciate the consequences of today’s politically correct environment, and law tends to be at the forefront of cultural blending and acceptance. Employees who have not been exposed to different races and cultures can unwittingly thrust the company into a lawsuit by making an unwarranted comment on the way someone looks or dresses or that person’s ethnicity. Companies must make sure employees know what is inappropriate by posting guidelines and even conducting meetings to clearly explain the rules. Employees should be trained and required to document their knowledge of inappropriate behavior. While it may not save the day, a jury will consider such actions when assessing damages.
Finally, there is the penny wise and pound foolish mindset. Most recently, this has been encountered with budding entrepreneurs who may have a great vision, but fail on its execution because they didn’t want to incur a legal fee by consulting with their attorney. They put extraordinary energy into developing an idea and researching the competition, but fail to consider the business location, lease provisions and franchise contracts that are every bit as important if the venture is to succeed. Look at it this way. A 10-minute conversation with a lawyer early in a new deal or enterprise, versus the staggering cost of litigation, only makes good sense. Even well-established companies make this mistake. If you have a good quarterback attorney, who works with you on a regular basis and knows your business, that initial call sometimes won’t cost a thing and just be part of mutual desire to make sure your business is successful.
Most companies succeed because they are diligent in meeting their customers’ needs. Sometimes, though, that success can lead to complacency in locking all of the doors to keep litigation out of business. Litigation will find you and exploit any opening you give it. Lock all the doors and you’ll sleep better at night.
DON SCHOEMAKER is an officer in the litigation practice group of the law firm of Greensfelder, Hemker & Gale, P.C. in Belleville. He represents clients in a broad range of litigated matters, including hospitals, physicians, attorneys and accountants. He concentrates his representation to defendants in employment, product liability, complex litigation and personal injury matters.