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.

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