Friday, July 23, 2010

Signing Off

by John L. Watkins

I want to thank everyone who has read this blog over the past two years. Effective tomorrow, two of my fellow shareholders and I will be joining the Atlanta office of another law firm.

It has been a privilege practicing with the lawyers at CTF. All are first rate, and I wish my colleagues staying at CTF all the best for the future.

My colleagues and I who are leaving are very excited about our new opportunity. I will continue to post and to write articles on legal topics in other forums.

Regards.

John

Sunday, May 23, 2010

The Bad Guys Are Still Out There (But Can Usually Be Dealt With)

By John L. Watkins

Readers of this blog know that proactive early steps with a lawyer (such as by documenting contractual and business relationships properly before a dispute develops) help avoid lawsuits and save money in the long run. Further, wearing a white hat by being honest and forthright in your business dealings will substantially lessen the chances of legal trouble.

A couple of recent experiences have reminded me, however, that the bad guys are still out there. Who are the bad guys? Bad guys come in a lot of varieties, but they tend to be characterized by a number of qualities, foremost of which is greed. Bad guys believe there is nothing wrong with taking advantage of another person. Bad guys believe that success in life and business is characterized by what you can get, not what you have earned or what is fair. Bad guys almost always believe that the end justifies the means, and the end is always what benefits them.

There is another interesting point I have observed over the years about bad guys: It is amazing how fundamentally unreasonable (or worse) clients tend to find fundamentally unreasonable (or worse) lawyers. Although this observation may bring a wry smile, the unfortunate reality is that these pairings tend to result in disagreements turning into blood feuds and lawsuits being brought that should never have been filed. It is also almost always a much more difficult proposition to resolve disputes and lawsuits when such a pairing is involved, at least until the expense of litigation has made proceeding prohibitively expensive for them.

There is no magic secret for avoiding bad guys. Further, close business associates who were once trusted colleagues can change as time passes. Simply stated, good guys can turn into bad guys. What is the root cause of this? Typically, it all boils down to money or power, or, put more accurately, a desire for more money, power or both. This statement may strike you has horribly cynical, but, having handled litigation for over 25 years, I am convinced it is true, or is at least true in many instances. Perhaps this is part of human nature, bringing to mind the old lawyer joke that "this town isn't big enough for one lawyer, but it is plenty big enough for two."

Although there is no magic secret for avoiding bad guys, there are a few things you can do to avoid a nasty encounter, or to increase your chances of a positive outcome if you have one:

1. As always, properly document your internal company relationships (through shareholders' agreements and operating agreements) early on, and at time when personal relationships are positive. If rights and obligations are clearly defined in a binding agreement, there is much less chance of a future dispute. There is also a much greater chance of a prompt and predictable resolution if a dispute develops.

2. If you have not documented your internal company relationships, but relationships are still friendly, see a lawyer and document them now.

3. If you have not documented your internal company relationships and a dispute appears to be on the horizon, see a lawyer now. If you are a shareholder of a corporation or member of an LLC, you should hire your own lawyer as opposed to the lawyer who has been acting for the company. If relationships are not properly documented, it is probably not the end of the world, but you need to know where you stand and develop a strategy for resolution.

4. Are your company's key external relationships properly documented? Are your supplier contracts documented? Are your customer contracts documented? Do you have properly documented terms and conditions? Are your warranty obligations defined and are any "implied" warranties disclaimed?

5. Are your employment relationships properly documented? If your company has key confidential information or trade secrets, do you limit access and take other steps to protect it? Do you regularly stress to employees with access what information is truly proprietary? Note that simply taking the position that "everything" is confidential may not be effective and may create problems later.

6. This is much more subjective, but is important: Are your relationships with key business partners (suppliers and customers) satisfactory? Are these relationships such that the suppliers and customers want to continue rather than simply work out the balance of the term of the contract? Extremely one-sided relationships -- regardless of whether one is on the giving or receiving end -- often lead to disputes.

7. Similarly, are your employees happy? Do your employees want to work for you, or are they simply waiting for the economy to improve so they can move on? If the employees are unhappy, who is to blame? Step back and look at things from the employees' point of view: If in their position, would you be happy with the relationship? If the answer is "no," take steps to fix the problems. If the answer is "yes," and you still have employees who are disgruntled, complain, and act out, you may want to consider severing the relationship. One disgruntled staff person can cause a lot of trouble and distraction throughout an organization. You probably should consult with an employment attorney before taking action.

8. If a customer, supplier or employee begins making demands that are of a nature they could lead to a legal dispute, see a lawyer as soon as possible. Do not misunderstand me, I am not suggesting you need to see a lawyer if an employee asks for a raise. However, if a demand is made outside the scope of normal and ordinary business, you probably need legal advice. Good business lawyers tend to be great coaches, and can help develop a strategy for making sure that a disagreement does not morph into a dispute or a lawsuit. Often, this is accomplished by the lawyer remaining in the background.

9. If you receive a demand letter, particularly from a lawyer, see your lawyer immediately. By this point, you are already a little behind the curve. The other side already has briefed their lawyer and thought through a strategy. You will need to act quickly to get up to speed. This is particularly not a time to try to go things alone. If you try to deal with the other side's lawyer without the benefit of counsel, you will be at a great disadvantage.

10. Sometimes, mediation is a great way to resolve disputes early and without great expense. Mediation is a process that involves bringing in a neutral third party to help the parties try to reach a settlement. A mediator does not have the authority to resolve the dispute, but acts (sometimes strongly) to try to help the parties reach a voluntary settlement.

The problem, however, is that many bad guys and their lawyers will not want to go to an early mediation. They may claim to need discovery (the legal process for obtaining information) or may argue that you do not "understand how serious they are about the claim." Statements like this may be driven by the client, but the unfortunate reality is that they are often driven by the lawyer's desire to make a larger fee before the case is settled. At some point, however, it is likely that the case will go to mediation, either because reason prevails or because a court directs the parties to go to mediation. For more information on mediation, go to my mediation website.

Unfortunately, you can follow all of these tips and still find yourself in a lawsuit with a bad guy. If this is the case, there is little choice but to fight it out in court. Although I cannot say that the bad guys never win, if you have been honest and forthright in your dealings with the other party, you will have a far greater chance of prevailing in the long run.

If you do not have a business attorney and are in Georgia, give me or my colleagues a call. If you need more information about how to find, evaluate, interview, and work with a business attorney, you may want to consider my book, An Insider's Guide on Hiring a Business Attorney.

Tuesday, May 11, 2010

An Insider's Guide on Hiring a Business Attorney

by John L. Watkins

In numerous posts on this blog, we have stressed how serious legal issues can usually be avoided or their severity substantially lessened by involving an experienced business attorney early in the process. For instance, obtaining professional assistance in drafting a contract on the front end is almost invariably less expensive (and more effective) than litigating over a "home made" contract (or no written contract) on the back end. I have yet to have one lawyer disagree with this fundamental precept.

Nevertheless, my experience continues to suggest that business people still try to go it alone, pull a form off the Internet, or re-use a contract prepared for an earlier (and often quite different) transaction, all in a misguided effort to save money. Late last year, it dawned on me that many business people may know that they need a good business attorney, but may not have the foggiest idea of how to find one. Perhaps they get a recommendation from a friend or acquaintance at a cocktail party. Perhaps they meet a lawyer at an event. These methods, however, are not the most reliable for finding and evaluating a professional who should become a trusted member of a business's inner circle.

Having recognized the issue, I researched whether there was any publication that would offer a step-by-step method for business owners and executives to find, evaluate, interview and engage a business attorney. I found nothing that really fit the bill.

This prompted me to write An Insider's Guide on Hiring a Business Attorney (and How to Make the Relationship Work). The Guide was just published. The Guide is concise (just over 100 pages in total), and is not written in legalese. It explains how to go about finding and evaluating business attorneys. The book does not pull punches, as it is designed to help readers find the best business attorneys in their community.

You might be interested in why a lawyer would write a book about hiring other lawyers, or why a lawyer would be qualified to write such a book. The answer is pretty simple: In my practice, I have often had to engage lawyers in other states and internationally for clients. For example, a client may wish me to handle a litigation matter outside of Georgia in a jurisdiction in which I am not licensed. In most other jurisdictions, an out-of-state lawyer can handle specific litigation matters upon the permission of the court. (This is called being admitted pro hac vice). In order to do this, it is always a requirement to engage local counsel.

Similarly, if a business transaction involves another jurisdiction's law (perhaps because the opposing party insists), then it is often necessary to engage counsel from the applicable state (or country) to review particular legal issues. Accordingly, I have had considerable experience in finding, evaluating, and engaging counsel from other jurisdictions.

The Insider's Guide provides the benefit of my experience in finding and evaluating attorneys. The book covers tools that are available for this purpose. The book also explains how to interview an attorney for a possible engagement and key questions that should be asked. Having worked in both the big firm and small firm environments, I discuss differences between large and small firms (and please do not think that it is entirely pro-small firm just because that is the environment in which I currently practice). The book also discusses legal fees and alternative fee arrangements. Finally, the book provides tips for working effectively with a business lawyer (one hint: never lie to your attorney).

The book is $19.99. Those interesting in purchasing should visit the book's website, http://www.businessattorneyguide.com. The book will also be available in a matter of days on Amazon.com and through other distribution outlets.

I apologize for the plug, but this is an important subject. I do not know of any other publication that covers the same subject matter.

It should be stressed that the views in the Guide are mine alone, and the book does not purport to represent the views of Chorey, Taylor & Feil, A Professional Corporation, or other attorneys in the firm.

Sunday, April 11, 2010

Energy Independence: Still a Long, Tough Slog

by John L. Watkins

Last week, I attended an event on bioenergy sponsored by the German American Chamber of Commerce. The featured speaker was Mr. Jörg Mayer, the Managing Director of the Renewable Energies Agency in Berlin, Germany.

By way of background, Germany is far ahead in the field of renewable energy, being a world leader in solar, bioenergy and other alternative energy technologies, as well as conservation. Electricity is three to four times more expensive in Germany than in the U.S. Gasoline and diesel are also much more expensive in Germany than here. Thus, Germany has plenty of reason to become a world leader in alternative energy. Germany has adopted many government policies designed to promote, if not force, the development of alternative energy technologies.

What struck me most about Mr. Mayer's remarks was his statement that Germany's policy goal is to have alternatives supply 20 percent of Germany's energy needs by 2020. Given the cost of energy in Germany and the German government's push for alternatives, this was a pretty sobering statistic: If Germany's goal is to achieve only 20 percent in the next 10 years, it says very little for the chances of advancement toward energy independence in the U.S.

Many of my clients are involved in various aspects supplying energy or developing alternative energy technologies. Dieffenbacher GmbH + Co.KG, for example, has recently developed machinery for turnkey wood pellet production plants. Wood pellets are used to fire very efficient stoves used for heating in Europe, and usage is increasing in the Northeastern United States. Georgia is a logical place to develop pellet production plants because it is heavily forested and has a well-developed forest products industry.

Other clients are developing solar technologies. Another client has developed a system for extracting and processing grease from restaurant grease traps so that it can be processed into biodiesel. All of these technologies have great promise.

The legal issues arising from the development and adoption of these new technologies are many. The U.S. has traditionally produced electricity in centralized power plants (coal, nuclear and natural gas) and then transmitted the power by long distance through transmission lines. Many of the alternative sources favor a more decentralized approach, where the energy is produced at or near where it is consumed. Simply put, our grid system as it exists is not particularly well-suited to the adoption of alternative technologies.

Other challenges include protective intellectual property rights while still allowing for widespread adoption. Our research universities, such as Georgia Tech, need to become more streamlined in working with industry, and in respecting the intellectual property of their industry "partners."

Our public policy toward energy independence remains, frankly, an uncoordinated disaster. I am old enough to remember (as a teenager) the 1970s oil embargo. The simple truth is that our politicians only pay attention to energy policy when prices rise to an uncomfortable level or there are supply disruptions. Thus, when gasoline climbed past $4.00 per gallon, we paid attention. When the recession took hold and demand and prices fell, energy once again became yesterday's news.

Even when our politicians pay attention, their chief response is to hold hearings -- the modern day equivalent of a show trial -- and to demonize oil companies and other traditional energy producers. For the almost 40 years since the oil embargo, politicians of both parties have occupied the White House or controlled Congress. The simple fact is that nothing meaningful has been done and all of our leaders -- past and especially present -- ought to be ashamed of themselves on this issue.

It seems clear based on the German experience that alternatives -- as valuable as they may prove to be -- will not supplant the need for traditional sources of energy. Demand will continue to increase. We need to support the reasonable development of all sources of energy, alternative and traditional, as well as conservation and wise energy usage. In some instances, this is going to require abandoning the "not in my backyard" mentality that has stifled a number of initiatives.

It is also clear that we need to take advantage of technologies that are available now. For example, clean diesel technology is now widely available for automobiles. We just drove my four door sedan with a clean turbo diesel engine to Jacksonville and back and averaged 35.5 miles per gallon. The list price of the car was only $1,000 more than the comparable gasoline model. Other models are available (mainly from the German manufacturers) in different price ranges. In Europe, a very high percentage of autos have diesel engines. Diesels have not been as popular in the U.S., perhaps because we remember smoky and sluggish diesel cars from years past. Modern turbo diesels do not smoke and have plenty of power.

Hybrids, such as the Toyota Prius, offer very high fuel efficiency. My Dad has a Prius. It is quite comparable to other smaller cars to drive.

Other available options include modern foam insulation for existing houses. We installed spray foam insulation (it is sprayed in between the roof joists in the attic) about two years ago. We have found the manufacturer's promise of a 30 to 40 percent energy savings to be quite accurate, and it should pay for itself in a very short while. We also replaced our tank water heater with a tankless models. The tankless models are very expensive (largely because of installation costs), and the payback analysis really is not there, but ours has performed well so far.

Other existing technologies would provide substantial energy savings. In many hotels in Europe, you insert your room key card in a slot near the entrance of your room to activate the electricity. When you go out, you remove the key, and the lights go out. As it is, we could simply remember to turn the lights out when leaving our offices. In any city in the U.S. at night, you can see lights left on at night in office buildings. It is just a huge waste of resources.

Whether you believe in global warming or not, most people would agree that energy independence from potentially hostile foreign sources would be a good thing. Most would also agree -- hopefully -- that wasting resources is a bad thing. The policy and legal issues have a long way to go, but there is a lot we could do now if we just paid attention.

Sunday, April 4, 2010

Cloud Computing: Still Foggy From a Legal Standpoint

By John L. Watkins

I have written previously about the "cloudy" nature of cloud computing from a legal standpoint. Last week, I attended a seminar on cloud computing that was attended by about fifty lawyers and some "techies" interested in technology and cloud computing. The consensus resulting from the seminar appears to be that, although the list of legal issues is becoming a bit more defined (and lengthy), there still are very few answers.

Why Cloud Computing? Cloud computing, which is often called "software as a service," involves providing software and storage remotely (in the "cloud," or at a server farm in a remote location), instead of maintaining the software and storage locally, either directly on a computer or on a server for a local area network. Although this definition is generally correct, you should be aware that there are many variants of cloud-based services and formats that are way beyond the scope of this post.

There are many theoretical advantages to cloud computing, at least from a technology standpoint. Because the software and and storage are maintained remotely, there is less hardware to buy and maintain and much less on-site maintenance. Software updates can be pushed out remotely and handled by the provider. Most services are available anywhere there is an Internet connection and a computer with a browser.

Most people probably already use cloud-based services, whether they know it or not. Facebook, LinkedIn, Plaxo and other social networking sites are cloud-based, with the services accessed through a browser and the information retained remotely. Services provided through Amazon.com and other vendors are cloud-based. Google services, such as the Blogger platform on which this post is being written, are cloud-based, as well as the suite of Google Apps (meant to compete with Microsoft Office). One of the most successful and well known cloud providers is Salesforce.com, which provides CRM (customer relationship management) software and services.

Cloud providers and proponents argue that the security of cloud-based services is probably at least as good as relying on a traditional local area network, if not far better. They also argue that the backup of cloud-based services is more automatic and reliable.

For many businesses, the most compelling reason to consider cloud-based technology is cost. Cloud-based services are typically competitively priced and substantially lessen, if not almost eliminate, expensive hardware and IT services.

The Legal Jungle. As compelling as the technical case for cloud computing services appears to be, the legal minefields are many. By way of full disclosure, I do not claim to be an expert on the many statutes that may apply to those considering cloud computing solutions. I know enough to say, however, that Congress (and some states) have adopted what is literally a crazy-quilt of statutes that potentially create substantial exposure and liabilities for users. Many of these statutes are designed to protect customers or clients from the disclosure or theft (for example, from hackers) of personal information.

Once again, good legislative intentions have created an uncoordinated nightmare of regulatory compliance. However, with the cloud, it does not stop at our border. Cloud providers may maintain server farms in other countries, potentially bringing international regulatory systems into issue. Questions are certain to arise over which country (or state) has jurisdiction over legal issues.

At the seminar, one of the techies in attendance commented that the legal issues could be largely resolved by the U.S. adopting European Union standards. I do not know enough about the EU standards to draw any conclusions, but it is virtually certain that the adoption of understandable international standards would simplify the issues and foster the adoption of cloud-based systems. Although this is a noble goal, it is frankly difficult to imagine that such a solution is viable in today's political environment.

One of the most troubling aspects of the legal jungle surrounding cloud computing is that the cloud providers are, as a general matter, unwilling to accept any contractual responsibility for loss of data or other potential nightmares associated with cloud computing. If cloud providers are really certain that their systems are robust, redundant and foolproof, then why do the legal terms and conditions disclaim responsibility at every turn?

Although it may well be true that the risks of data loss are greater with a traditional local area network, many businesspersons are somewhat understandably reluctant to "turn over the keys" to an off-site provider which may store critical data almost anywhere. And, as one prominent commentator has noted, if an IT department loses critical data, at least the business owner has the cathartic pleasure of calling in the IT director and giving him a pink slip.

At the seminar, the speaker commented that cloud providers are willing to negotiate terms for "large" customers, but are not going to do that "for someone who wants to spend $20,000 for services." This observation is probably dead on, but it provides little comfort for small or medium-sized business for which a $20,000 expenditure is significant. Ironically, many cloud providers target small and medium-sized businesses.

Any Way Out of the Legal Jungle? At the current time, I can offer no easy way out of the legal jungle for those considering cloud-based services. It is true that some aspects of the legal jungle affect any type of computer network. The adoption of cloud-based services, however, creates additional issues.

In a post on this blog last year, I commented that a provider willing to come forward and put its legal terms and conditions -- such as by guaranteeing compliance and against data loss -- where its technological mouth is could probably sell a lot of services, even at a premium price. If there is a provider out there willing to do this (and which has the financial muscle to back up any guarantee), please let me know, as I would love to hear about it.

On a related subject, I recently spoke to an insurance broker that is trying to put together an insurance product to protect companies against liability associated with data breach and other computer-related liabilities. If this product comes to market and appears promising, I will let you know about it in a future post.

Certainly, an insurance solution has some promise (assuming, of course, the insurer would actually perform, which is an absolute roll of the dice with many insurers). An insurer would have every incentive to develop and assist its insureds with risk management approaches that would boost compliance and minimize risk. Many small and medium-sized businesses simply do not have the expertise or resources to do this on their own.

Stay tuned.

Sunday, March 21, 2010

Trade secrets: Do You Own What You Think You Own?

By John L. Watkins

A recent case involving a dispute between the famous Mayo Clinic and a former employee, a physician, has been in the legal news. Mayo and Dr. Peter Elkin are battling about who owns the rights to a software program that Dr. Elkin participated in developing. According to a report from The National Law Journal, the case is headed to trial after the trial court denied summary judgment to both parties.

The software in issue helps manage medical information and puts it in a clear and understandable format. According to a report in the Pittsburgh Tribune-Review, both sides agree that the software has great economic value.

Delving into the merits of the Mayo/Elkin dispute is beyond the scope of this post. The nature of the dispute, however, raises a fundamental question that often rears its head in trade secret, copyright and other intellectual property litigation: Do you own what you think you own?

The vision of recent college graduates (or dropouts) writing software or developing other technology in a storefront office or a garage is a modern variant of the American Dream of rising from rags to riches. Such efforts are not necessarily mere pipe dreams. In fact, modern technology and decreasing barriers to entry probably make it more possible than ever for an entrepreneur to achieve at least a modicum of financial success, if not becoming the next billionaire.

In many instances, friends will work together in developing technology or another invention. Sometimes, entrepreneurs will “partner” with another company for a particular purpose. In some instances, an investor will come into the mix. In each instance, if intellectual property rights are not documented properly, the possibility of a future dispute becomes very real.

Further, the possibility of a future dispute or lawsuit increases in direct proportion to the success of the venture. Put more bluntly, it is not likely that anyone will fight over worthless technology. It is very likely, however, that disputes will develop over valuable technology, as shown by the dispute between Mayo Clinic and Dr. Elkin.

When inventors or entrepreneurs believe they have developed, invented or written something valuable, it is critically important to consult an experienced attorney before entering into any relationship with a third-party business “partner” or an investor. It is equally important that persons working together document their respective rights and obligations regarding the technology, writing or invention.

This is definitely not a situation where inventors, entrepreneurs or investors should try to go it alone or use Internet forms. Prospective clients should also not assume that every lawyer has the necessary experience or expertise to prepare proper documentation.

When the documentation is not properly prepared, the resulting litigation can, from a lawyer’s standpoint, be very interesting. The litigation will certainly be very expensive. At this point, however, the client is surely kicking himself for not having documented things properly on the front end.

This all boils down to yet another example of what readers of this blog will recognize as the Prime Directive: It costs far less to deal with a legal problem on the front end than trying to sort things out on the back end, particularly through litigation. The Prime Directive is especially important when dealing with any form of intellectual property.

Sunday, March 14, 2010

Want to Lessen Your Legal Risk? Wear a White Hat

By John L. Watkins

The classic Western movie or television drama is uniquely American. Westerns typically involve a confrontation of the good guys against the bad guys, with the good guys (either literally or figuratively) wearing white hats and the bad guys wearing black hats. The audience roots for the guys in the white hats, and, at the end of the day, good triumphs against evil and the guys in the white hats win.

Some legal cases are not directly analogous to a classic Western. Some aspects of the law are highly complex and technical. The correct language in a contract, will, or other instrument often makes the difference between winning and losing. Sometimes, a rule of law will control. In such cases, judges will often decide a case on summary judgment, meaning that a jury trial is not necessary. For these reasons, it is very important to pay close attention to the language of contracts, wills, and other legal instruments. In such cases, it may seem that wearing a white hat (or being perceived as such) is not so important. However, if a judge perceives that one party is wearing the white hat, it will help achieve a positive result and lessen the chances that a judge will send the case to a jury. Judges are, after all, simply human beings trying to do a difficult job.

Many cases cannot be resolved based on the language of a contract or a rule of law, and will be tried to a jury. In these cases, it is very important to be wearing a white hat, or at least not to be wearing a black hat. Almost all cases that are tried to a jury involve an underlying morality play that is very similar to the classic Western.

Regardless of the type of case, most cases that are tried boil down to four simple questions:

  • Did the defendant do something wrong?
  • Did the plaintiff deserve what happened?
  • Are there other factors that excuse either party?
  • If the plaintiff deserves to win, how much money should be awarded?

Of course, most cases that are subject to being tried are in fact settled. However, these same basic questions have to be considered in evaluating the case for settlement. All defense lawyers – at least if they have practiced long enough – have had tough cases. Perhaps the defendant is callous or unsympathetic, making it more likely that a jury would find the defendant did something wrong. Perhaps the plaintiff is particularly sympathetic, having done nothing wrong, and making it certain the jury would never find the plaintiff deserved what happened. All of these subjective factors count in evaluating a case.

If you do not believe that highly subjective factors are important, you should be aware that parties to high stakes litigation often hire highly paid jury consultants to help evaluate the risk of the case, and, more importantly, to assist in developing the most persuasive trial strategy. Jury consultants typically have a background in psychology, sociology or communications. Jury consultants will assemble focus groups and mock juries from the locality in which the case will be tried. The results are often surprising and may result in a change in trial strategy.

The highly subjective factors that so often come into play provide an important cautionary lesson for businesses: If a company wants to lessen its risk of being sued, or a bad result if it is sued, it should strongly consider how it interacts with its customers and the general public. Put simply, it should make sure it is wearing a white hat.

Here are a few things a company may want to consider:

  • Can customers easily communicate with your company, or, for example, are they shuttled off to a voice-mail version of Hades?
  • Does your company respond promptly to complaints?
  • Do your employees, or at least your local managers, have the authority to resolve customer complaints on the spot?
  • Is your company’s policy (and, equally importantly, its attitude) to go perhaps a little further than what would be considered standard or reasonable to resolve problems, returns, and complaints?
  • Does your company communicate in a direct and straight-forward manner with customers?
    • If the answer to the customer’s position is “no,” does your company communicate the reasons in a straight-forward manner?
    • If the answer to a customer’s position is “no.” does your company communicate any available alternatives?
    • Note: The fact that the answer is “no” does not mean that your company’s position is unreasonable or will be perceived to be unreasonable in the event of a lawsuit. Failing to communicate, however, has a high probability of being perceived as unreasonable.
  • Does your company document its efforts to resolve complaints so that, in the event of a lawsuit, your company will be able to prove what it offered?
  • If your company has a dispute with another company, has it responded to communications from the other party?

One theme that runs through these issues is communication. Over the years, I cannot begin to recall all of the lawsuits that could have been avoided simply if the defendant had communicated appropriately with the other party. Some -- in fact many -- lawsuits are filed simply because it is the only way to get the defendant’s attention. Most of these lawsuits could have been avoided.

Another theme that runs through these issues is responsibility. Companies who address complaints and problems in a direct and straight-forward manner and try to resolve them are far less likely to be sued than companies that ignore them. If responsible companies – those wearing the white hat -- are sued, their chances of a favorable resolution are much greater.

In Westerns, the cowboy wearing the white hat would always win the gun fight and ride happily into the sunset. The modern day equivalent of a gunfight – a lawsuit – is a more complicated proposition. Sometimes, cases are resolved on contract language or legal rules. However, if a case is going to trial, and one party is wearing a white hat and the other is not, the chances of the former winning are far greater.