Executive Voices: An Op-Ed Column

Litigation Prevention
It's best to have a company lawyer who will keep you out of court

By Gary S. Parsons

Most of the advice you will read in the story on business law in this issue of North Carolina has a single objective — avoiding litigation. Having spent the bulk of my career defending businesses and individuals in civil litigation, I add my voice to those urging businesses to take serious steps to keep their litigation to a minimum.

Make no mistake; I consider the trial of cases to be the most demanding and exhilarating aspect of the lawyer’s art. The incredible focus of preparing for and conducting a well-prepared trial, together with the challenge of advocating for a client faced with critical consequences, are unmatched by anything else I have experienced in the practice of law.

With the escalating unpredictability and expense of litigation, however, trial lawyers are becoming the surgeons of the legal profession. Specifically, both these professionals are most often called upon when (1) the patient/client has failed to take preventive steps to avoid a potential problem, or those preventive efforts, diligent though they may have been, have failed, (2) conservative efforts short of surgery/litigation have failed, and (3) the downside to the patient/client of failing to go to surgery/litigation is sufficiently serious that it is worth the risk and the expense. Finally, litigation, like surgery, is something you would not wish on your family or friends.

Businesses can often avoid the courtroom in much the same way that patients try to avoid the operating room. First, if it has not already done so, every business should establish a relationship with a primary lawyer it trusts to serve as its confidante and gatekeeper to the legal services providers in the market, whether they are from the primary lawyer’s firm or from other firms. This selection should be based on several factors: (1) experience in the client’s industry; (2) recommendations of colleagues in the industry; and (3) indepth interviews with several potential candidates.

The selection should have little to do with: (1) the lawyer’s hourly rates — you will always be able to find a lawyer who will charge less; (2) the size of the firm — many excellent lawyers prefer to practice in medium to small firms because of the atmosphere and autonomy, and very average talent can sometimes survive amidst the numbers found in large firms; and (3) the lawyer’s statements about how great he or she is — look for the lawyer who asks what your problems are and is candid with you about his or her experience in solving those problems; a candid first-timer is a better bet for a long-term relationship than an overbearing person with experience who may not tailor his or her approach to fit your business.

The dominant criterion in selecting the lawyer must be trust. Many businesses today have guidelines for “management” of relationships with their lawyers. The fundamental flaw in this dynamic is that it equates the lawyer to the business’ other vendors. If the business chooses it lawyers as it chooses its suppliers of copiers, paper, pens and office furniture, it has made its first and worst mistake in defining the relationship.

Unlike material and other service providers, lawyers are legally and ethically bound to perform as the client’s fiduciary. This is the most sacrosanct relationship in the law. Fiduciaries are bound by law to act honestly, in good faith and in the best interests of their clients. In the event of a legal dispute with a fiduciary, the fiduciary is presumed, until he or she has proven otherwise, to have acted contrary to the client’s best interests.

Further, the Revised Rules of Professional Conduct of the North Carolina State Bar compel lawyers to put the client’s interests ahead of the lawyer’s interests in nearly all aspects of the attorney-client relationship. If the business is retaining a lawyer it feels it cannot trust to behave ethically and honestly in handling the client’s affairs without “managing” the lawyer under strict “guidelines,” the business did not devote enough care to selecting its lawyer to begin with.

Once the business has chosen its primary lawyer, it should involve him or her deeply in the important decisions of the business. Keep the lawyer in the loop on all important issues within the company, rather than running to him or her after something has blown up. A sexual harassment policy or grievance procedure can be written and implemented for less than the cost of one day of preparation for trial of a sexual harassment or wrongful termination lawsuit. A pre-execution contract review of 10 hours can save a thousand hours litigating over unclear or undefined contract terms.

Avoiding litigation risk cannot be discussed without considering liability insurance. Involve experienced insurance lawyers in the review of your insurance plan. Investigate the potential carriers’ reputations for service by consulting with industry lawyers and your business colleagues. Check on the cost of buying policy endorsements to eliminate exclusions from the policy. Insurers are constantly developing new products to cover previously uninsurable risks.

They are just as consistently developing new exclusions to remove from coverage previously unexpected risks that their current policy language covers. Time spent in having lawyers experienced in insurance coverage looking at the business and its current insurance portfolio can save the business from receiving a reservation of rights letter denying coverage for the largest portion of a major lawsuit, or worse, refusing even to provide a defense for the lawsuit.

Choose your primary care lawyer with the same care as you do your primary care physician. Then try something with both your lawyer and your physician that will serve you well — do what they tell you to do; your business and you health will be better for it.

Gary Parsons of Raleigh is a partner in the Bailey & Dixon law firm and is this year’s president of the N.C. Association of Defense Attorneys.