Business and the Law 4

Reprinted with permission from Janet Attard* Copyright 2004. All rights reserved.
     
How do I decide if I should sue another company?

Decisions about whether to bring a lawsuit against any business or individual should be made just like any other business decision: on the basis of what you stand to gain or lose by following the particular course of action. Going to court is not something to do to get even. Generally, however, the decision about whether to sue will be based on how much the lawsuit will cost you.
If the amount is small enough that the dispute could be brought to small claims court (where you don't need an attorney), you would decide to proceed or let the matter drop based on the time it would take you to prepare your case and file the papers and the time you would spend at the courthouse waiting for your case to be heard.

If the amount involved or the nature of the dispute precludes using small claims court, you have to weigh the costs of the suit against what you stand to gain if you win the case or what you will lose if you don't sue. Unfortunately, when you add up the cost of the attorney's fees and expenses, court costs, legal stenographer's fees, expert witness fees (which may exceed $20,000 alone on a relatively simple matter, according to one attorney), and other incidentals, you may find it impractical to sue anyone unless the amount of the dispute is large and you have a clear-cut case.

What alternatives do I have?

The most expedient solution, of course, would be sitting down and talking to the company or individual with whom you have the dispute and trying to work things out on your own. Before you make up your mind not to budge or give in to anything the other party says, remember that standing on your principles may be a lofty ideal, but it may not get you anywhere. The goal in settling a dispute should be to come to some kind of win-win compromise that will let both you and the other party return to the business of doing business.
If you and the other party can't work out your differences on your own, you may then want to consider some type of alternate dispute resolution such as arbitration or mediation, which let you bring your dispute before an impartial third party trained in negotiation methods. You should realize that arbitration may be binding and mediation is not.

What is a nondisclosure agreement and when do I use one?

A nondisclosure agreement (also called a confidentiality agreement) is a contract used to protect client lists, methods of doing business, proprietary processes used in a business, designs, formulations, and similar intangibles from being used by anyone without your authorization. You might use one when you are presenting a patentable idea to a manufacturer or when you are hiring employees or contractors who will have access to information you do not want made available to others or used for any purposes other than your own.

Is there any way I can prevent employees from leaving and starting a business like mine?

Depending on laws in your state you may be able to prevent former employees (or businesses you buy out) from opening up a competing operation by having them sign a covenant not to compete. However, it is likely you will only be able to do so in a limited geographic area and for a limited amount of time. If you want employees or a business you buy out to sign a noncompete agreement, you should be sure to have the agreement drafted or at least reviewed by an attorney familiar with your state's laws regarding covenants not to compete.

Can I get sued if a customer doesn't like my work?

Possibly. It will depend on what the customer doesn't like about your work, what your original agreement was, and whether the customer has time and money to pursue a lawsuit.

How can I protect myself?

To protect yourself against unwanted lawsuits you should be cautious and honest in all your business dealings. Be realistic about the capabilities of your company, and have an attorney look over important documents before you offer or accept them.
In addition, to protect yourself against financial loss, make sure you have adequate business insurance. Although you may take every precaution to avoid a lawsuit, someone may still sue you, and even if he or she loses the case and you don't have to pay one cent in settlements, you could literally go broke paying the costs of defending yourself. The right business insurance policies can protect against that kind of loss.

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