Five Tips To Reducing The Risk Of Litigation

Litigation can have a devastating effect on a company’s productivity and profitability. 

Between attorney and expert witness fees, as well as court costs, even simple disputes can quickly cost a staggering amount of money.  Aside from the financial costs, litigation is extremely time consuming for company leaders and employees, draining time and energy away from remunerative business activities.  Taking time to meet with company lawyers to explain the facts leading to a dispute, evaluate options and plan litigation strategy is only the beginning. 

Once a lawsuit is filed, months and even years of depositions, hearings, investigation, document review and management are followed by a stressful trial and verdict and potential appeal which in limited cases can even reach the United States Supreme Court.

Aside from the financial and productivity costs, the final verdict could be crippling to a company depending on what is at stake, not the least of which can be its reputation. 

For those reasons, Mark A. Romance and Steven Naclerio of Florida law firm Richman Greer suggest taking active steps to reduce or avoid litigation altogether should be part of every company’s business strategy.  Here are five tips that can help:

• Know your customer.  If you are embarking on a new business relationship, do your due diligence and find out as much about your potential partner as you can. An attorney in your jurisdiction can find out if your proposed business partner has been actively involved in past litigation.  When the person has filed several lawsuits and is litigious by nature, this should be a waving red flag in doing business with him or her. People in the trade can provide helpful information as to prior dealings with your proposed new business partner. It is usually easier to perform your research and due diligence at the beginning and get into a good relationship than attempt to extricate yourself from a poor one that includes possible litigation.
• Exceptional service.  Happy customers, vendors and business partners don’t sue companies.  Where a customer or business partner has the ability to contact a company and resolve an issue, litigation rarely occurs especially if the company has provided first-rate goods or services in the past. Companies that actively communicate with customers, vendors and business partners to address issues are less likely to find themselves in litigation.  This means having trained customer service personnel available to quickly help customers and vendors resolve issues.  Sales representatives should know their customers and vendors and develop relationships with them to set expectations properly and to avoid disputes before they happen.  If a customer or a vendor knows they are being heard, they are more likely to resolve an issue and less likely to hire a lawyer. When a customer or a vendor has a dispute, ignoring the problem or delaying it rarely avoids litigation.   Address the issue head-on before it escalates.
• Proper contract documents.  Many businesses cut corners trying to save costs or relationships by not having proper business relationship documents prepared especially for important transactions.  Inadequate, vague or incomplete documentation often leads to uncertainty and ultimately to litigation.  Take the time to have a lawyer properly prepare your contracts and purchase and sale documents before you enter into the client relationship and tailor them for each situation.  Spending a little money to have an attorney draft an agreement up front can save tens of thousands of dollars in litigation costs if a dispute arises.  Make sure that the terms are complete and clear and that they limit your legal liability.  Then, when you send a contract document to a customer or a vendor, make sure that it is accepted and keep copies of signed agreements and related materials in your company records.  A great document is of no use when a dispute arises if you cannot locate your customer’s assent to the terms.  Having a clear, written agreement is key to avoiding litigation because all parties know what to expect from the relationship and what happens if something goes wrong.It is the uncertainty that usually drives litigation.    
• Have a document retention policy. Make sure your employees know what documents they need to keep for regulatory as well as potential litigation purposes.  These documents may be useful if a dispute arises.  Emails which explain what your customer’s intentions were and how he or she appreciated your service will be useless for the trial attorneys if they have not been properly retained. On the other hand, documents should be discarded if they comply with your internally written policy.
• Picking the right attorney.  When a dispute arises, having the right attorney can be the difference between a quick resolution and expensive, bet-the-company litigation.  An experienced attorney will first help you determine what your goals are and will design a strategy to meet your goals without resorting to litigation.  Your attorney should be able to evaluate the merits of your position in the dispute, advise you of both your strengths and weaknesses, and approach the other party to the dispute in a way that demonstrates a willingness to resolve the dispute without litigation, but to also show the ability to successfully litigate the issue if necessary.  The delicate combination is key to resolving a case without protracted litigation.
• Litigation can be expensive, time consuming and draining on your time and profits.  Appropriate steps should be taken to avoid disputes such as due diligence, focusing resources on exceptional customer relations and ensuring that clear contracts exist with customers and vendors as well as having the proper file materials. When a dispute arises, hire an attorney with the right balance between the ability to quickly resolve a dispute and having the strength to litigate it if necessary.

Mark A. Romance: is a shareholder in the Miami office of Florida law firm Richman Greer, where he focuses his practice on commercial and complex litigation. He has significant experience in contract litigation, real estate, employment, product defect, non-compete, trade secret, intellectual property, and estate and trust litigation. He may be reached at mromance@richmangreer.com.

Steven Naclerio is counsel at Richman Greer and focuses his practice on corporate transactions and consulting with high net worth individuals as well as general business matters. He may be reached at snaclerio@richmangreer.com.