5 Questions Business Owners Should Ask Lawyers, But Rarely Do (Part 2)
Question 2: If I had a problem but don’t hear anything, does that mean it has gone away? Could a settlement help avoid costs or bad publicity? When does the statute of limitations kick in?
Answer 2: I am not sure if any problem goes away simply because it is ignored. But from a legal perspective many problems can sit out there for years and years and then rear their ugly heads just as a business begins to really flourish. This is because success means publicity, and publicity causes people to perceive wealth. Old problems often come back to haunt you as soon as people believe there are deep pockets willing to pay to make problems go away, whether there are deep pockets or not.
If you spend enough time with lawyers, then you will hear about protection offered by statutes of limitations, contracts, the truth, and the process of documenting everything that you do right and nothing that you do wrong. However, the truth of the matter is problems always remain problems until they have been addressed to the satisfaction of the other party. It doesn’t matter how right you are or how much you have done to protect yourself, because anyone can sue you for almost no reason whatsoever.
In many situations, the best option is to confront problems and try to settle them out of court to avoid costs and publicity. For example, rather than ignoring a vendor you will never use again that claims to be owed $1,500 for goods that were damaged beyond recognition with no fault on his part, consider coming up with settlement terms (i.e. $250). Have an attorney draft a settlement, waiver, and release agreement that ensures that if the vendor comes back for more, you will be able to defend yourself and recover your attorney’s fees.
Another example of using a settlement to your advantage is if a disgruntled employee is finally terminated. Do yourself a favor and have an attorney draw up a severance agreement that provides you with protection and gives the leaving employee something to think about before filing a lawsuit or reporting incorrect or misleading information with a regulatory agency.
You may think this sounds a lot like insurance, but the cost can be fairly nominal. In any case though, when people are disgruntled then a business is likely to see a lawsuit or a demand letter soon thereafter. If you have a settlement agreement in hand then your troubles might go away for the cost of the stamp to send a letter back with a copy of the agreement. However, if you do not have an agreement, then even the most silly and simple lawsuit could easily run you $5,000 to deal with.
However, an agreement will not always protect you from a lawsuit. And even if your attorney thinks you can win and collect attorney’s fees, it may not be advisable to forge ahead because the other side may be in the position to declare bankruptcy. You need to know your opponent and his attorney well, so if you get stuck in a lawsuit you can get out for a fair price early on.
Notwithstanding the foregoing, after seven or so years in most places, many of the various statutes of limitations apply, and problems really can start to go away. You will still have the occasional lawsuit that defies all logic, but for the most part any competent attorney can make those go away for relatively cheap. Recently I had one of these pop up for a client and I was able to convince the other attorney to make the lawsuit disappear, which he did at no charge to my client.
Legally, it is usually better to confront problems at the start. A competent attorney can help you determine if a settlement could make the problem go away or if the statute of limitations has already passed and you no longer need to worry about the problem.