Ten tips for lawyers' clients

Nation's Business, Oct, 1994 by John Toothman

Sooner or later, every business will face a threat of litigation or be forced to consider suing someone. Whether going in as plaintiff or defendant, a businessperson should be aware that routine business practices are viewed in litigation through the peculiarly distorted optics of the legal system.

Even the strongest case can be undermined by a few stray facts, out of which an opponent can weave a theory that guarantees the case will be long, expensive, and risky.

But there are ways to avoid some of the major pitfalls of litigation, to improve the odds of winning, or to avoid it altogether. Here are 10 suggestions that can help you achieve either of those goals:

1. Read and understand every document before signing it. Everyone knows better, yet almost everyone signs documents they have doubts about, perhaps because they are in a hurry or simply want to give their counterpart the benefit of the doubt. Regardless of the excuse, lawyers and judges generally cannot change a "deal," even if it consists of dozens of ridiculously one-sided provisions in tiny print on the back of a preprinted form.

Even with a supposedly "non-negotiable" agreement, one always has the option to walk away.

2. What you say can and will be used against you. A persistent misconception people have is that oral statements or agreements are not binding in court. Documentation can be more concrete-- important matters should always be reduced to a signed writing--but the practical difference is primarily that oral statements are harder to prove with procision, though just as legally binding once proved.

3. Avoid doing things that you would be embarrassed to repeat to your grandmother--or a judge--no matter what the provocation. It can happen to even the most even-tempered business people:

4. Resist the temptation to threaten an opponent with legal action or retaliation. Threats to put someone out of business may only give them ammunition for a counterclaim. The toughest opponents let their actions do their talking.

5. Maintain complete, orderly records, but retain them only as long as they are needed. Some businesses keep records on cocktail napkins stuffed into shoe boxes, others keep every scrap of paper for centuries. The best document-retention policy is somewhere in between, so that documents are kept only as long as required by law or the needs of the business.

Documents are like old clothes: If they have not been used for a year, clean out the closet.

6. Keep sensitive information confidential. Customer lists, trade secrets, or conversations with lawyers, to name a few, may be protected from wholesale disclosure in litigation, but only if they are kept confidential. The evidentiary privileges that protect confidential information are very fragile things, so guard them carefully.

Share confidential information with outsiders and it might as well be published in a newspaper.

7. No matter what the Census Bureau says, we all live in small towns. For instance, the best-kept secret can leak if a trusted employee suddenly goes to work for a competitor. Even if company secrets are safe, litigation will be hot news in the local rumor mill, which can be hard on a business's reputation. And companies with reputations for being litigious may find that customers or suppliers no longer trust them.

In other words, do not assume that the darkest secrets are safe or that enough.

8. At least half of the free legal advice from television, newspapers, neighbors, and relatives is wrong. But which half. Many boring legal details are lost in translating the law into small talk or Hollywood scripts. (Your common sense and business experience are far more reliable than the cocktail party bar.) When you're in doubt, you should check with a real lawyer, not the latest episode of "LA Law."

9. Confront problems rather than ignore them. Problems left on the back burner have a way of boiling over. For example, in many employment-termination cases, problem employees can point to regular salary raises and "satisfactory" reviews by supervisors as evidence that a hidden agenda, such as discrimination, was behind their termination.

Accounts receivable, as another example, are not like red wine: They do not improve with age.

10. While ignorance might be bliss, or at least an excuse, in some situations, it is neither when you are involved in litigation. Many laws provide for "strict" liability, meaning that one can be liable even though there has been no fault or intent to commit a crime. This includes, for example, many tax, environmental, and criminal laws.

No matter how revolting the thought of litigation and legal fees may be, it is better to see a lawyer at the first sign of trouble, rather than when it is too late to avoid it.