In the next section of our nine-part series about the biggest business vulnerabilities, we dive into Claims and Suits (For and Against). Nearly every business is going to have disputed claims against other companies or individuals. These can range from simple contract disputes with customers or vendors to company threatening tort claims (Something like an injury claim). Only the most minor of these cases should be handled without legal help. There are just too many things that can go wrong, and good attorneys generally make or save you money on claims.
A few years ago, a client came to us after having been sued in small claims court and after having appeared before the judge. At that occasion he asked the judge for a continuance to get a lawyer. Little did he know that he just gave up a variety of defenses and objections to which judge and where the case would be tried. When we got in our hands were tied. We were fighting for him at a severe disadvantage. Ultimately, we were able to do some good for him but not nearly as much as we could have if we had had the case from the start.
Frequently litigants ignore cases altogether. This is not all that common when they get a formal summon from the court, but equally as hazardous is a Demand for Arbitration. If a business enters into a contract with an arbitration clause, the other party, rather than going to court, can press a claim in arbitration. In effect this is the same as taking you to court but in a private forum. If you do not answer, the other party can proceed to get what is called an Arbitration Award, which is enforceable in state or federal court just like a judgement.
Beyond the claims themselves is the issue of claims management. They can be time consuming and very distracting to running a business. As a general rule the management of a company should only be involved on a day-to-day basis if a claim is large enough to have a significant impact on the company’s finances, reputation or future operations. Letting yourself spend your incredibly valuable time doing something you were not trained to do and that very likely makes you so mad that you cannot think straight is a huge waste of your time and skill set.
I have a client who runs a significant business. He has a great moral compass and is always focused on doing the right thing. Conversely, he gets pretty worked up when the company is wrongfully accused. Not infrequently we get very bogus discrimination claims even by employees whose own doctors say they cannot do their jobs and then file EEOC complaints because they cannot do their jobs. No kidding! Ultimately, I had to strike a deal with the president that I would only let him know about these if he absolutely needed to. The cost of using up all his super valuable brain power to do otherwise was robbing the company.
On yet a deeper level of claims management is the issue of employing attorneys in other states or locales. Managing these attorneys requires skills in setting expectations of how they will treat and bill your company. Establishing firm boundaries can pay huge rewards in the efficiency and effectiveness of counsel. This is a job best left to an attorney who knows the ropes and can manage this for you.
Not only do attorneys generally understand how to pursue or defend a case better than management, but we also understand attorney billing. I recently was managing a case in another state. We received discovery from the opposing party. I immediately called their lawyer and got the documents in Word. I had my client prepare the responses and we sent them off to our lawyers in the other state. Somehow our lawyers managed to bill thirty-five hours finishing up a nearly completed job that should have taken maybe three hours. All they had to do was cut and paste in some formalities and objections. My client did not understand how outrageous this was, but I did. The bill got severely cut and the attorneys will not be hired again.