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The First Step in Dealing with a Legal Problem

The First Step in Dealing with a Legal Problem
Pat Dickson - Thu Apr 05, 2012 @ 08:22PM
Comments: 0
Do nothing.

How can I say this? Do nothing? When you are suddenly hit with a legal problem, especially a big one, how can you just do nothing? Immediate action needs to be taken! We could end up in court! This problem could really cost us!

Well, in most cases, do nothing, and when to do nothing is often a business judgment, not a legal one. So take my opinions herein as business advice. I often favor doing nothing because in my experience only about 5-10% of what at first appears to be a serious legal problem becomes one. Plus, I'm only saying do nothing at first because in many cases time is your ally. Let me give some examples.

1. A huge demand letter arrives in the mail. Some attorney you've never heard of is threatening to sue you for infringing several patents and claims you have to pay a bunch of licensing fees totaling $500k. The letter consists of hundreds of pages of technical diagrams involving all sorts of stuff you are accused of using on your web site. Just a brief flip through tells you this has nothing to do with your direct products and services. The letter says you have 10 working days to reply to all of his points. I take the whole packet and shove it in my bottom desk drawer, and write a reminder in my calendar to revisit this ominous package next week. A week passes, I get an email reminder from my calendar and return to my bottom desk drawer. I pull out the letter and do a search on this enemy lawyer and find out he is mass mailing his patent infringement package to thousands of companies. I then take the whole thing and throw it in the trash. Case closed. By throwing this thing in the trash I take the position I acted in good faith at simply disposing of a frivolous claim not even worth my company's time or money. Besides, the letter did not arrive by registered mail and nor was it served. I spend the rest of the day going after a large down payment on a big contract, a big check arrives via FedEx the next day, and years pass without another big patent infringement letter. In my opinion, had I responded at all, I would not have been serving my client's best interests. By even replying to this enemy I could have been opening the door to some real trouble. Let the other guys receiving this bogus letter spend thousands of dollars paying a patent lawyer for a review. Let someone else waste hundreds if not thousands of internal man hours putting together a bunch of documentation that will only be used against them in the future. Sometimes no response it the best response, but it isn't always a legal angle you are taking by throwing that letter in the trash. It is a business judgment. You have limited resources. Put them where they count.

2. An established customer hits you with a huge contract: You've been doing business with a customer for years and the relationship is cordial and the margins are right where the CEO wants them. Back in the 90s they signed your standard form contract and since then prices and quantities have been established on the old Change Order Form you've been using for 2 decades. In fact, you know your CEO personally handles the pricing and quantity changes every quarter and is totally happy with the way business is going. This new contract is 100+ pages long and it is the last thing you want to read. You know without looking it isn't going to give you anything you don't already have. If it is my desk this contract lands on during a customer visit, I say thank you for the contract, ask about his wife and kids and the trip he just took. After I take him to lunch and pay the tab, shake his hand and send him off, I go back to my office. I put the contract he just gave me in my bottom drawer. I forget about it. In many cases, the customer forgets about the contract as well, and business proceeds as usual. After all, you already have a contract in place and the Change Orders have been working just as the CEO wants. Why change anything but Change Orders? Things are where you want them with this customer relationship and no big crazy contract is needed to complicate things. Sometimes doing nothing is the best. Silence is your most excellent answer. If the customer calls asking where I am on the contract, I tell him the truth. I haven't gotten to it yet. If really pressed in following weeks, I'll say I thought he was just giving me the contract because it was some standard form his company just put into place and the good news is we don't need to worry about it. We already have a contract in place. Of course, the time may come when you have to sign the contract or lose the business, but we'll cross that bridge when we get there.

3. A Salesman Quits over Commissions and Threatens to Sue: Do nothing. Assuming you believe you've paid the right amount, just wait until a demand letter arrives on an attorney's letterhead. Don't waste your staff's time doing calculation after calculation or calling outside counsel for an opinion. In most cases the threat will blow over. Besides, if you put anything in writing you run the risk of providing information that damages your position, or becomes later precedent other salespeople can use against you. When you receive a threat and you believe you've done the right thing, just hold tight. Anything you do to try and cover your tracks or build a favorable argument can backfire. You don't know what is coming yet. Wait for a formal demand to come through the door. Let me explain this concept a little better with a domestic example. Have you ever been in trouble with your significant other and thought you knew why? Have you ever run to them and made your list of apologies only to get into more trouble? What if you think she is mad at your for not remembering your anniversary, when it is really because you forgot date night? When you run in and apologize for forgetting your anniversary, you are suddenly in double trouble. In the angry salesman example, what if you are proactive and write him a long letter explaining how several sold leads were not his when he thought his only argument was the wrong percentage had been applied to a few of his biggest and undisputed accounts? Sometimes doing nothing is a position of strength. In any event, patience and waiting to take action is rarely a bad choice, unless you are facing a legally enforceable deadline or immediate action is a pretty obvious choice.

Do nothing!

Comments: 0