7 Tips for Managing Business Litigation 

 

Companies need to manage business litigation, not as a chore, but as an opportunity.  Your lawyer can help.  Here’s how:

 

Communicate with Your Attorney.  Business leaders can find create opportunities and avoid mistakes by speaking with counsel about situations.  Often an executive’s self-described “stupid question,” will avoid litigation or drive a change in company policy that increases profitability.  For example, changing a warranty clause might improve profits by several percentage points.  Executives face tremendous pressure to make significant decisions quickly.  Yet, it’s important for executive leadership to have that “sixth sense” to know when fifteen minutes on the phone with counsel might help gain an edge or avoid a lawsuit. 

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Standard Contracts Should Be Updated Annually.  Every company should have standard agreements for its most-regular transactions. Because of the modern pace of innovation, standard contracts should update annually.  Minimally, counsel should review “lessons learned” in the prior year with the executive team to update the agreement.  It helps to review competitors’ agreements as well. 

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Providing Information.  A lawyer is only as effective as the information the client provides.  Client who provide information promptly, fully and with full disclosure are more likely to obtain good results.  Clients who provide information slowly, incompletely or dishonestly have results in trial that range from poor to terrible.  Making the lawyer ask for information more than once means that something else is not being done on the file. 

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Litigation Can Create New Opportunities.  Litigation is usually a binary calculus: someone wins and someone losses.  However, financial disputes can create new opportunities.  One example was in a case where the C-level executives were locked in a turf war over pricing, while the cooperation below C-level was excellent and in good faith.  The employees negotiated a new agreement and won a nice victory for everyone. 

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Effective Litigation Dollars. Generally, this office is a profit center. In one case, legal expenses of around $5,000 yielded payments of over $800,000. In another case, attorneys fees and costs of under $30,000 led to over $1.3 million in payments.  In a defense case, a few thousand dollars helped avoid most of a $200,000+ claim.  Avoiding fruitless pursuits is a function of experience, information and integrity.  Companies should also study their counsel’s ratio of legal expense to economic gain, loss prevention or loss.  Everyone has a record.

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Develop Your Legal IQ.  The executive has to be the master of many trades: innovation, entrepreneurship, marketing, finance, accounting, leadership, self-discipline and so forth.  However, the executive must also understand the legal arena: corporate form, regulation, contracts, litigation and discovery.  At least one executive, usually the CFO, has the added responsibility of coordinating the legal function.  On-the-job training is not enough to succeed.  Each executive should develop an individual plan to enhance the executive’s knowledge of the law.

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Reflect on the Business-Legal Decision.  Peter F. Drucker, perhaps the twentieth century’s most profound business thinker, said, “Follow effective action with quiet reflection.  From the quiet reflection will come even more effective action.”  There is little that is “quiet” about litigation.  However, the business leader who can think calmly will better understand the strengths and weaknesses of: the case, the opponent and the company’s own legal team.

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Conclusion.  Effective management of business litigation is one of the key factors to a successful business.  A business litigator both recovers owed sums and defends the company from claims.  Working with your law firm is an opportunity to produce results.

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Nathan Wirtschafter, Esq. is a California business trial attorney.  His law practice encompasses a broad range of business matters, and he represents clients in state and federal courts, arbitration and mediation.  He can be reached at (818) 660-2518 and ndw@ndwlaw.com.

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