Solving Legal Disputes

Legal disputes – actual and potential – come in all shapes and sizes when you run a small business. Consider the following examples:

  • The phone company puts your yellow page ad in the wrong classification and refuses to do anything about it.
  • A former employee claims that you wrongfully fired him or her.
  • Your landlord puts off repairing a leaky roof. As a result, valuable merchandise is ruined in a rainstorm.
  • Your insurance company offers a ridiculously low settlement when one of your trucks is totaled.
  • You want to stop a former employee from opening a competing business two blocks away and soliciting customers using a copy of your customer list.

How to handle such disputes can have profound effect on your bottom line, not to mention your mental health and the morale of your employees. Fortunately, you usually have a number of options available, giving you some control over the time, energy and money that you spend on resolving legal problems.

Often, the first reaction to a business dispute is, “I’ll see you in court!” But rarely is litigation the only or best method for resolving a dispute. Litigation is expensive and almost always results in hard feelings that prevent the contending parties from doing business with one another again, so it’s always smart to think about alternatives. A common approach to alternative dispute resolution (ADR) is negotiating a settlement.

Negotiating a Settlement

In most situations, a negotiated solution is far better and cheaper than one imposed by an arbitration or a judge. A settlement often can be reached speedily and at minimum expense. Litigation (and, to some extent, arbitration) cannot only empty your wallet – it can eat up an amazing amount of your time and that of your employees.

Always seek a negotiated settlement before you sue, even if you’re so angry you don’t want to speak to the other party. Try to evaluate the legal and financial situations objectively. Your goal should be to achieve the best result at the lowest cost. If instead you act on the conviction (whether it’s right or wrong) that you’re being victimized by the other side, chances are you’ll end up fighting for the last dollar because of the principle involved. A business person who is controlled by this sort of emotional reaction is almost sure to get ensnared in a lawsuit that will take too long and cost too much.

Here are some helpful pointers for negotiations:

  • Listen closely to what your opponent is saying. Acknowledge that you hear the points your opponent is making even if you disagree with them.
  • Avoid personal attacks. This only raises the level of hostility and makes settlement more difficult. Equally important, don’t react impulsively to the emotional outbursts of your opponent.
  • Try to structure the agreement as a mutual attempt to solve a problem. Jointly seek solutions that recognize the interest of both parties.
  • Learn your opponent’s priorities. Maybe dollars are less important than a formula for future business relationships. You may not be as far apart as you think.
  • Put yourself in your opponent’s shoes. What can you offer to make the settlement more palatable? The best settlements are those in which both sides feel they’ve won (or at least not given up anything fundamental).
  • When you propose a specific settlement, make it clear that you’re attempting to compromise. Offers of settlement (clearly labeled as such) can’t be introduced against you if you ever go to trial.
  • If a settlement is reached, promptly write it down and have all parties sign it. You should volunteer to prepare the first draft. That way, you can include protective language that, once included, your opponent may see as too minor to quibble about.
  • Money is a powerful incentive to settlement. If your business is going to have to pay something eventually, come to the negotiating table with your checkbook or a wad of $100 bills. The other side may settle at a surprisingly low figure if they can walk away from the bargaining table with payment in hand. Of course, if you pay with cash be sure to get a receipt.