Eight Tips to Avoid Litigation

Topics: Small Business

Summary: A lawsuit can be costly for a business in monetary, reputational and emotional terms. Learn ways to avert these costs by being prepared and patient. Shannon Lamb, Staff Counsel for AmTrust, shares her eight tips to avoid litigation and preventing a trip to her office.

Eight Tips to Avoid Litigation

Written by Shannon Lamb, Staff Counsel for AmTrust

Litigation is expensive. It can impact your business’s bottom line, your reputation and your emotional well-being. Bringing and defending lawsuits can cost tens of thousands of dollars even before the case goes to trial. A case can take time, sometimes several years, to work its way through the courts, and delays could impact you and your business.

There is also no guarantee that filing or defending a lawsuit will be successful – or that it will be successful to the extent that you believe it should be. In a best-case scenario, I give my clients an 80% chance of success. This accounts for situations where the judge doesn’t believe you or your witness, or the other side has a more convincing case.

Eight Ways to Avoid Litigation

No assurance can prevent litigation, but there are ways to help avoid problems and promote an effective resolution when a dispute does arise. If litigation is necessary, being prepared will help you be in a much stronger position.

Here are eight easy ways you, your company, or your boardroom can avoid hanging out with me:

Be Nice

Businesses thrive or fail based on their reputation. It is crucial for business owners always to be courteous and honest with employees, customers, competitors and their community. If there is a disagreement, be straightforward about your business practices, products or procedures. Acting with integrity and honesty will go a long way to ensure that your business prospers and that you avoid conflicts.

Also, if you disagree with someone else, be polite about it. If you want to be heard, don’t confuse being aggressive, threatening or abrasive with being assertive.

Gather and Organize all the Information – The Good, the Bad and the Ugly

Facts take time to develop. Often, the understanding of the facts changes with time and additional information. Therefore, it is critical to gather, organize and review documents, photographs, contact information and anything else you might need to support your position when you have a disagreement.

Make it a point of obtaining documents that are easily accessible to you, such as police reports, copies of signed documents and some meeting minutes. It is easier to organize these documents and information at the time they are received. Have a place to keep all of your contracts, insurance policies and employee handbooks. Additionally, keeping contemporaneous documentation when there are problems lends credibility and lessens any counter-arguments that actions were taken without justification or in bad faith.

Be Prepared

Having a solid foundation that implements sound employment practices will likely prepare you for any issues that can arise. Act with integrity, honesty and transparency at all times. Don’t ignore or allow a problem to fester. Always make sure to address an issue head-on.

Bolster your protection by ensuring your employees are properly equipped to do their jobs by explaining job expectations and walking new hires through the employee handbook. Employees should be trained to spot and communicate problems in a way that is consistent with avoiding conflicts and then resolving the issue, if necessary. Employee training should be conducted on an annual basis, at the very minimum. Make sure you follow the applicable labor and employment laws.

Work with the Right People

Invest in the best team upfront and work with the right people. Be thoughtful and thorough when hiring by making sure new hires have the requisite skills, good attitude, good work history, good reputation, and that they fit within the company culture. Be selective with whom you choose to do business. Cultivate long-term relationships. The more you get to know your vendors and partners, problems are less likely to arise and issues can be quickly and calmly resolved.

Enter Into the Right Agreements

Contracts should be designed for the purpose you intend to use them for, and you must make sure you understand and follow all the provisions of your written agreement.

Don’t use cobbled-together contracts as they probably don’t address the specific problem and could only compound it. Also, don’t use old forms or agreements that contain outdated laws or rubberstamp another’s agreement. The contract needs to have explicit language with precise wording. Questions about what a contract means can produce misunderstandings, and ambiguous terms can be costly.

It is critical to get agreements in writing as handshake agreements rarely work well. Without a written contract, it is much easier to argue about what the parties intended when they entered into the agreement. A contract will let you know what each party’s rights and responsibilities are when trouble does arise. Consider consulting with an attorney and building protection into your contracts, including risk-shifting, indemnity provisions, arbitration provisions and attorneys’ fees provisions (if appropriate). Once a contract is written, make sure to read and understand the conditions before signing. Ensure that all parties sign the document and that you comply with its terms.

Proper Insurance Coverage

Make sure that your small business insurance policies will cover and protect you and your company adequately. Work with a collaborative agent who understands your business and potential areas of liability. If you do have a claim, be sure to report it to your insurance company as soon as possible. Early reporting may help resolve your claim quickly and avoid lengthy legal entanglements that can cost you time, money and possibly your reputation.

Write a Letter

Many disputes can be resolved by writing or responding to a letter. Politely but firmly state the basis of your claim, referencing your provided documentation. Propose your solution to the dispute, and give a firm deadline to respond. If appropriate, send your letter via certified mail. If your dispute is technical or overly legal, consider having an attorney review your letter before you send it. Always consult with an attorney before taking a legal position that may be harmful to you later on.

Don’t Give Up

Don’t give up if it takes time to resolve a problem. If the deadline proposed in your letter has come and gone, be patient. Consider following up via telephone with the recipient of your letter to make sure that he/she received it. If so, ask when you should expect a response.

If you are unable to contact the recipient by phone, send a follow-up letter referencing your earlier correspondence and again request a response. Keep track of your efforts to contact the recipient of your correspondence and what, if anything, was discussed/decided.

Keep in mind, while it is important to be patient, it is also vital to observe all filing deadlines for a lawsuit. Failure to timely file a lawsuit will prevent you from maintaining a claim, even if the reason you waited was to attempt to resolve the dispute.

Remember, there is no magic ingredient that can eliminate the threat of litigation, but you can help avoid potential problems and promote an effective resolution when a dispute does arise. Being organized, proactive and preventing issues from occurring can help solve conflicts before they reach the possibility of a lawsuit.

Shannon has successfully represented her clients through all phases of litigation during her 20 years of practice. She has litigated cases in state court, federal court, family court, bankruptcy court, criminal court, small claims court, administrative tribunals, Workers’ Compensation court, probate court and in Queens, New York.

This material is for informational purposes only and is not legal or business advice. Neither AmTrust Financial Services, Inc. nor any of its subsidiaries or affiliates represents or warrants that the information contained herein is appropriate or suitable for any specific business or legal purpose. Readers seeking resolution of specific questions should consult their business and/or legal advisors. Coverages may vary by location. Contact your local RSM for more information.

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