Friday, November 3, 2017

Good Deeds Punished? The Legal Risks of Employee Community Service


With the holidays just around the corner, employers are busy planning their company-wide charitable initiatives. To support their employees’ commitment to community welfare, many employers match employee donations to charitable or educational institutions and publicize volunteer opportunities. Some organizations, however, are making a shift to a new way of corporate giving that percolates from the bottom up: encouraging employees to “get involved” through contributions of time and talent. 

More companies are creating Employee Volunteer Programs (EVP), continuous, managed efforts that allow employees the opportunity for hands-on service to the community. Employer programs are varied and innovative. Companies frequently contribute by getting the word out through community outreach that pairs organizations with employee volunteers who have particular skill sets and interests. While some employers provide paid time off for employees who volunteer, others simply permit employees to volunteer during working hours or facilitate participation in charitable enterprises during non-working hours.  This kind of volunteerism has many proven benefits including increasing employee satisfaction, enhancing community perceptions of the employer and providing tangible benefits to the larger community.

Despite good intentions, these “good deeds” come with the risk of liability under the Fair Labor Standards Act (“FLSA”) if not properly managed.  The FLSA is the federal law that governs the calculation and payment of wages.  In some instances, time spent by employees in charitable activities may be considered as compensable time under the FLSA, requiring the employer to pay wages and even overtime to employees for time spent volunteering.

The FLSA does not require employers to pay employees for time spent volunteering for religious, charitable, civic, humanitarian, or similar non-profit organizations when such participation is truly voluntary.  However, when charitable events or participation becomes intertwined with company activities, questions arise as to whether an employee may really decline to participate.  Because of disparities in bargaining power, employees may feel pressure by employers to engage in charitable activities. Such pressure may even be overt. For example, a directive to all employees to participate in a “community day of service” – without any opportunity for an employee to opt out – suggests that participation is not voluntary. Subtle employer pressure – such as reassignment to undesirable tasks for non-participants during the time when others are volunteering – also raises issues.

Time spent working at the employer’s request, or under its direction or control, or for a charity related to the company or the company’s owner, is considered work time. The Department of Labor takes the position that when, at the behest of the employer, employees volunteer to do the same type of work that they perform as part of their normal work duties, the volunteer work must be included in the employees’ hours worked calculations.

Awards for FLSA violations generally include fee shifting. Consequently, an employer who runs afoul of the FLSA will be required to pay the employee’s legal fees. Even if the unpaid wages are small, the imposition of attorneys’ fees could result in a significant liability for an employer.

The Takeaway

The key to avoiding FLSA liability is to ensure that employee participation is voluntary and to avoid any perception that an employee will be penalized if he or she fails to participate. It should be clear that the employees are volunteering their time to the third-party organization directly, not to the company itself.  Employees volunteering in a capacity similar to their paid work—for example, an accounting firm encouraging its accountants to provide accounting services for a charity—is particularly problematic.

Observing the following guidelines may reduce risk of an FLSA violation:
  • The charitable organization must be separate from the business and unrelated in a significant way to the business owners
  • The charitable event does not result in direct economic benefit to the business
  • The time spent at the organization or event is outside of regular working hours
  • The company notices about a volunteer event or opportunity include a statement that the employees are not required to attend or participate  
  • Supervisors are not allowed to direct or control their employees’ participation
  • Employees who choose not to participate in the event are not treated differently than employees who choose to participate
Utilizing these approaches may help to avoid FLSA liability or minimize liability if a claim does arise. We all want to start the holiday season on the right foot, and a methodical, cautious approach may be the only way that the good deeds of the employees do not result in repercussions for the employer.

Friday, September 15, 2017

If You Don't Have Anything Nice to Say, Post it on the Internet


It was an axiom of childhood: “If you can’t say something nice about someone, don’t say anything at all.” The reality of business in the internet age is that if you can’t say something nice about a customer experience … you will probably post a negative review on Yelp, Google, Angie’s List or a similar review site.

For better or worse, customer reviews can have a profound effect on how people view a business and on their purchasing decisions. A recent Nielsen study indicated that 74% of consumers who search online for a local business do so using review sites. Consumers do not limit their evaluation to counting “stars.” They take the time to read multiple comments, sometimes from multiple sites. Reviews are a double-edged sword as positive reviews make businesses more trustworthy, while negative reviews are a strong deterrent to consumers.

No business is immune from occasional negative reviews.  Marketing experts suggest that when faced with a bad review, businesses should provide a detailed reply to demonstrate the company’s overall responsiveness and its concern for the customer making the post.  Companies may also wish to encourage satisfied customers to write positive reviews, especially in those instances where they have received exceptional service. Eventually, the good reviews will “bury” any negative comments and provide a fuller picture of the company’s behavior.

Although some bad reviews are an almost inevitable part of doing business and actually can provide valuable feedback, some posts cross the line.  Reviews that falsely accuse a business of criminal acts or intentional malfeasance can severely damage a company’s brand or reputation – damage that can take years to reverse.  The motivation behind such unfounded posts range from a general disregard for the accuracy of statements, to intentional misstatements intended to punish the business for perceived failings. Such posts are not limited to customers; competitors and former employees sometimes also post false statements to damage a business. While litigation may appear to offer some relief, it comes with practical and legal challenges that must be considered before proceeding.

Elements of the Claim

Just because a review is bad doesn’t mean there are grounds for a lawsuit.  A review must be false to be actionable.  If a customer posts that there were cockroaches in the soup – and there were cockroaches in the soup – there is no claim for defamation.

The review must also be factual and not just the poster’s opinion.  Distinguishing between facts and opinion can be tricky.  Comments that service was rude, slow or unknowledgeable are likely statements of opinion and not actionable.  However, a post that says that the poster believes that waitstaff was rude because they spit in the food is more than an opinion. If unfounded, such comments can be the basis for a defamation suit.

Successfully demonstrating that a poster made false and malicious claims may be sufficient for a court to order the poster to remove the review but to recover monetary damages a business must generally be able to show that it suffered a financial loss because of a false review.  A drop in sales or a decrease in new customers is the typical metric.  Having a system in place – prior to any postings – that tracks sales leads, website traffic or new customers can be very helpful in quantifying losses.  In addition, it may also be possible to recover costs incurred for additional advertising or re-branding to combat a false negative review.

Don’t Expect Any Help from the Review Site

Business owners often expect that the review site will assist them in removing a false review.  They won’t.  Most review sites take the position that reviews contribute to the “marketplace of ideas.”  In their view, a bad review (even a false one) will be sorted out by the market over time.

Some sites take the “marketplace of ideas” mentality to an extreme by punishing businesses for suing or even threatening to sue a poster, even if the post is patently false.  For example, a business that sues or threatens to sue an Angie’s List customer may be banned from advertising on the Angie’s List site.  In addition, Angie’s List will place a prominent warning on the business’s page that company is “hostile toward an Angie’s List customer.”

Review sites can adopt this potentially radical position because of the Communications Decency Act. Section 230 of the Communications Decency Act gives immunity to sites such as Yelp, Google and TripAdvisor from claims based on the defamatory posts of independent third parties. Exceptions to such immunity are few and generally require that the internet site actively participated in or contributed to the negative reviews.

This does not necessarily mean that businesses are without options.  Courts may order internet sites to remove defamatory postings and most will voluntarily remove posts that a court has determined are false.

Act Fast

While evaluating options and determining the feasibility of a legal claim can be complicated, one thing is clear: business owners faced with negative reviews need to act quickly to devise a strategy to limit their injury and to evaluate their legal options. Once posted, a single negative review can proliferate and appear on multiple websites or be tweeted to other customers. Having a strategy in place in advance can make for a focused, more efficient response.

Timely evaluation of legal options is also important. In Pennsylvania, defamation claims must generally be brought within one year after the posting of the defamatory claim.  Although there are circumstances that could extend this period, acting quickly to understand both the scope and limitation of legal rights and to collect and monitor loss data, is important in mitigating any losses.
While negative reviews are always troublesome, having a marketing and legal strategy to address the most extreme comments are important tools for any business that operates on the internet.

Wednesday, August 16, 2017

Location, Location, Location: Mr. Nutterbutter loses home court advantage!

Via YouTube
Mr. Nutterbutter, of course, is a giant, talking squirrel, and sidekick of acerbic late night comedian, John Oliver. Mr. Nutterbutter and friends, John Oliver, HBO and Time Warner, Inc., were recently handed a legal defeat when a federal court in West Virginia refused a request to allow a lawsuit, based in part on Mr. Nutterbutter’s comments, to proceed in federal court.

The kerfuffle began when Bob Murray, CEO of Ohio based Murray Energy Corporation, was upset – very upset – with his portrayal in the June 18 segment of John Oliver’s Last Week Tonight. During the show, political comedian John Oliver took aim at Murray and other coal company executives for their opposition to coal safety regulations and for their treatment of coal miners.

Oliver’s criticism was not limited to the Murray Energy Company. He criticized Murray personally, referring to him as a “geriatric Dr. Evil.” He also took Murray to task for claiming that an accident at Murray Energy’s Utah mine which resulted in nine fatalities, was the result of an earthquake. Oliver disputed Murray’s explanation, citing a Congressional investigation that had no evidence of a geological event.

Mr. Murray’s ire was increased when Oliver recounted the actions of two Murray Energy employees who returned bonus checks. One employee returned a check for $11.58 after signing it “Kiss my ass, Bob” while another returned a check for $3.22 after signing it “Eat shit, Bob.”  Mr. Nutterbutter, the human size squirrel, endorsed the employees’ actions by offering Mr. Murray a check for “3 acorns and 18 cents…made out to Eat Shit, Bob, memo Kiss My Ass.”

Apparently Mr. Murray had anticipated his harsh treatment at the hands of Mr. Nutterbutter and John Oliver. Prior to air, Murray’s attorneys sent a cease and desist letter to Last Week Tonight, threatening legal action. The communication was not an idle threat.  Over the past fifteen years, Mr. Murray was not shy about asserting his legal rights, suing local reporters, environmental activists and media outlets.

Undeterred by Mr. Murray’s letter or willingness to litigate, the show aired, with both John Oliver and Mr. Nutterbutter acknowledging the risk of a lawsuit.

Murray made good on his threat: he filed an action in state court in West Virginia against Oliver, HBO, and Time Warner, claiming defamation, invasion of privacy and intentional infliction of emotional distress. Describing the nature of his distress, Murray’s complaint states that the broadcast upset him more than anything else ever had (which presumably includes the deaths of the nine employees killed in one of his mines).

The case attracted the attention of the American Civil Liberties Union (“ACLU”) which filed an amicus brief – which was almost as entertaining as the original on behalf of Mr. Nutterbutter.

Unfortunately for Mr. Nutterbutter and his friends, the plaintiffs seem to have won the first round by defeating a motion by the defendants to remove the action to federal court. This means that the action will be tried in West Virginia state court. Mr. Murray further demonstrated his willingness to play hardball by filing an unusual motion seeking to disqualify the ACLU’s amicus brief.  Mr. Murray’s lawyers argued that that Oliver’s previous on-air support of the ACLU and his fundraising, biased the ACLU on Oliver’s behalf and created a potential financial interest of the ACLU in the outcome.

While the foregoing may seem like pointless procedural wrangling, with little to do with whether Mr. Murray has suffered any injury, knowledgeable litigators know that such actions represent strategic decisions which can have an enormous impact on the outcome of the case.

As in real estate, the “location” where a law suit is filed is important. There is significant variation among states and between the federal and state courts. These differences can be an advantage for one party or an additional hurdle for the other. Each state has its own laws of civil procedure and evidence which determine how a case will proceed and how it will be decided.  For example, a twelve person jury is not always required in state civil trials. States allow juries of as few as six members and do not always require a unanimous decision in non-criminal proceedings.

State court dockets may impact how long it takes to bring a case to trial while state rules of evidence determine what evidence is presented to a jury. Many states, including Pennsylvania, elect judges who may potentially be subject to real or imagined political pressure from one of the parties. And, as in sports, there is also a real “home-team advantage” in litigation. Juries and judges may be unconsciously biased in favor of a person or company that is or has been a significant benefactor of a community, or who is simply more “relatable” than an anonymous, out-of-state party.

In addition to procedural laws, each state has it own substantive version of torts such as defamation, intentional infliction of emotional distress and invasion of privacy. While the core elements of each of these claims are similar from state to state, there are differences which can be significant. For example, the interpretation of some state versions of these torts may make it extremely difficult to secure an award of punitive damages, while other states are more willing to impose damages unrelated to any economic detriment.

The posture of the parties may also make a difference. Media defendants claiming First Amendment protections have not fared as well in state courts as in the federal court system. In a recent case, Hulk Hogan sued Gawker,[1] an on-line entertainment news outlet, for invasion of privacy. Despite Gawker’s status as a member of the media, a Florida jury awarded Hogan $115 million in compensatory damages and $25 million in punitive damages. Contrast this with the famous Hustler case of 1988,[2] in which evangelical and political leader Jerry Falwell, was parodied in a satiric article. The Supreme Court ruled in favor of Hustler, and limited the ability of a public figure to recover against a media outlet for a comic portrayal.  While every case, particularly those involving defamation, depend on the exact words utilized, the accuracy of the comment, and the manner in which a reasonable person might interpret such language, it is undeniable that the forum for litigation can have a significant impact on the outcome.

While basketball teams – and squirrels – can certainly overcome the challenges of not having a home court advantage, it is not without effort and the assistance of able counsel. But all is not lost. Mr. Nutterbutter may have other friends willing to file amicus briefs on his behalf.  It is rumored that noted commentator, Triumph, the insult dog, is considering a brief in support of Mr. Nutterbutter. Whatever the outcome, the litigation promises to be at least as entertaining as the segment that gave rise to it all. Nuts to you, Mr. Nutterbutter!



[1] Gawker Media LLC v. Bollea, 129 So. 3d 1196 (Fla. 2014).
[2] Hustler Magazine Inc. v. Falwell, 485 U.S. 46 (1988).

Monday, July 17, 2017

Four Factors to Consider Before Including Arbitration Provisions in Agreements


Arbitration provisions are a common feature of the agreements we review and prepare for clients.  They require the parties to the agreement to submit some or all of the disputes between them to arbitration before one or more arbitrators rather than litigating in court. 

There are several traditional justifications for favoring arbitration. Some are more persuasive than others.

Consideration #1: Arbitration is Cheaper than Going to Court

Many attorneys will justify arbitration by claiming that it is cheaper than going to court.  Savings are theoretically achieved because most arbitrations have limited discovery and little or no motion practice.  Less discovery and fewer motions to write and respond to means less attorney billing.  By contrast, a court proceeding may involve significant discovery and elaborate motions practice.  This generalization is often honored in the breach. However, a complicated arbitration can involve significant discovery.

The fees for the arbitrator or arbitrators themselves can also be significant.  In a court proceeding, the judge, the clerk and other court staff are all paid by the state or federal government.  For the cost of a filing fee (almost always less than $500), a litigant gets the benefit of all these resources.  An arbitration is not subsidized by tax money.  The parties to an arbitration pay the fees for the arbitrator (which are often more than $500 an hour), a fee for the organization that administers the arbitration (which is typically based on the amount of money in dispute) and a fee to rent the office where the arbitration will take place.  Many arbitration provisions call for multiple arbitrators, increasing fees to thousands of dollars per day.

Consideration #2: Arbitration is Faster than Litigation

Arbitration is relatively fast.  Whether it’s faster than litigation depends on your court options.  The federal courts, particularly in the Eastern District of Pennsylvania and the Court of Common Pleas in Philadelphia County, process cases very quickly.  Other state courts, for example those located in Bucks or Lancaster county, tend to move more slowly.

Consideration #3: Arbitration is More Private than Ligation

Arbitration is undeniably more private than litigation.  Nearly all filings in a court proceedings are in the public record.  Many proceedings have a verbatim record of what transpired.  Even the courtrooms themselves are open to the public.  In many courts, the public can access and download court records from the Internet.  Not so with arbitration.  The only people allowed to access the arbitration proceedings are the parties and the arbitrator.

Consideration #4: Arbitration is Final

A disappointed litigant can appeal a court’s decision at least once.  When arbitration works the way it should, the decision of the arbitrator is extremely difficult to appeal.  This helps to reduce costs and brings finality to disputes. 

But arbitration does not always go the way it should.  There are a number of procedural machinations available to an attorney wishing to avoid or delay an arbitration by challenging the arbitrator’s jurisdiction or claiming impartiality.  These sideshows can quickly eclipse the speed and finality of an arbitration.

The Take Away

Although there is an increasing emphasis on submitting disputes to arbitration, we discourage clients from kneejerk inclusion of arbitration provisions in their agreements.  The professed benefits of arbitration often fail to materialize either because the arbitrator’s fees exceed any cost savings or because the propriety of an arbitration ends up in a prolonged court battle. 

Tuesday, June 13, 2017

Saving Face: How to Protect Your Online Reputation


"It takes 20 years to build a reputation...and 5 minutes to ruin it." ~ Warren Buffet

Reputation - a difficult term to define.  It is an amalgamation of social perceptions, subliminal impressions, skills, branding, word-of-mouth and first hand experiences.  For businesses, reputation is an essential and irreplaceable asset. It is among the first considerations in trust building. It is frequently the basis of customer decisions and it can attract - or repel - talented employees. Once damaged, reputations can be difficult to repair. Second chances can be rare, if they come at all.

Reputational damage is always painful but it is especially so when the injury is the result of false or unfounded statements by customers, disgruntled employees, unethical competitors or persons with a grievance against the owners. The proliferation of social media, review sites and blogs magnifies the impact of any negative comments: there is little likelihood of criticism going unnoticed.  

Compounding the problem is the tendency of people to remember negative events more than positive ones and to use stronger words to describe them. The title of one article on the subject says it all, "Bad is Stronger than Good."[1]  In practical terms, it takes many more positive reviews or interactions to mitigate negative ones. Warren Buffet was right.

When reputational injury does occur, reputational marketing experts have an extensive toolkit, ranging from establishing or enhancing a positive on-line presence to a total re-branding including changes to the company name and intellectual property.  Such repairs are costly. Moreover, they do nothing to deter or temper the behavior of vicious and vindictive posters. Such bad actors are free to post and repost, generally diluting the impact of marketing dollars spent to repair the damage. Such cases may require more than reputational repair; they may require legal action to recover the funds necessary to undo the damage and to ensure that the poster does not continue a campaign of vilification.

Actions against the Poster

Laws protecting business and personal reputations originated in an era of print media.  Nonetheless claims for defamation continue to be among the most common claims brought by plaintiffs against internet detractors. Defamation occurs when a person or business publishes a false, derogatory statement about another person or business that causes injury.  When such statements are in writing or posted to the internet, they are termed "libel."

While defamation law varies somewhat from state to state, plaintiffs seeking to establish a claim must prove that (i) a defendant made a statement about the plaintiff; (ii) the statement was false; (iii) the defendant knew the statement was false or was negligent in ascertaining the truth of the statement at the time that it was posted;  (iv) the statement was "published"  - i.e. was disseminated to others besides the defendant and the plaintiff; and (v)  the plaintiff suffered an injury because of the false statement. In those cases where a plaintiff is a "public official" or a "public figure," he must be able to prove that defendant made the statement with reckless disregard for whether or not it was true.

In addition to defamation, plaintiffs seeking damages for injury to their reputation caused by on-line posts have brought successful claims based on the tort of "false light." Although similar to defamation, there are several differences that make false light a distinctive tort. Unlike defamation in which the requirement of publication can be established if the falsehood is disseminated to even a single party - as for example a customer - false light requires wider dissemination to be actionable. While both defamation and false light require the posted statement be false, false light also requires that the statement be "highly offensive to a reasonable person."[2] Innocent misstatements are not generally actionable. Plaintiff must be able to demonstrate that the defendant was at fault when he caused the false impression, either because the poster knew the statement was false or acted with "reckless disregard" for its truth or falsity. 

Action Against Subsequent Posters

The practice of "re-tweeting" information and of citing web sources and blogs can compound the reputational damage of the original post. The regurgitation of defamatory material creates a virtual "whack a mole" where the injured party successfully requires the poster to remove offensive material - only to have it to "pop-up" at another site.

Individuals who disseminate information that proves to be false are not protected from liability simply because they did not generate the original post. A plaintiff must prove all of the same elements required to establish defamation or false light in order to successfully make a claim against subsequent posters. Frequently, however, the threat of tort litigation can be sufficient to encourage such posters to take down offending material, thereby reducing reputational damage to the plaintiff.

Action Against Internet Service Providers (ISP)

Internet service providers enjoy broad protection against claims for libel and false light under provisions of the Communications Decency Act (CDA)[3]  Unlike other media sources, an ISP is not liable for the defamatory materials that may be posted on its site by third parties. Section 230 of the CDA is clear: "No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider."[4]  
 
Section 230 grants immunity to the ISP so long as the posted content has been created primarily by third parties.[5]  Internet service providers lose their immunity when the ISP is itself a content provider. Whether an internet service provider is also a content developer is a particularized inquiry, depending on the structure of the website and the manner in which the website allows access. [6] 

For an ISP, the operative rule appears to be "ignorance is bliss."  Although internet service providers are not responsible for the libelous statements of third party posters, they can be held liable as  distributors of libelous information if they know, or have reason to know, of its defamatory content.[7]  To avoid such potential liabilities, internet service providers are frequently willing to take down material from their sites once they have been advised by a plaintiff of the libelous nature of such material.

Act Quickly To Seek Professional Advice

Legal options to reduce or repair reputational damage are multi-layered, complex - and require quick responses. Most states, including Pennsylvania and New Jersey - have a one year statute of limitations on defamation and libel actions. Absent extraordinary circumstances, this requires plaintiffs to file an action within twelve months of the posting of the material - no matter when it was discovered. Individuals or businesses that have been injured by false, disparaging claims should contact counsel as quickly as possible to determine their legal options. The first step toward repairing a reputation may be defending it.
             

[1] Roy F. Baumeister & Ellen Bratslavsky et al., Bad is Stronger than Good, 5 Rev. Gen'l Psych. 323 (2001).
[2] See e.g. Larsen v. Philadelphia Newspapers, Inc., 543 A. 2d 1181, 1188 (Pa. Super. Ct., 1988).
[3] 47 U.S. C. §230(c)(1), (f)(3).
[4] 47 U.S.C. §230(c)(1).
[5] Courts have held, however, that the act of selecting third party materials or minor editing of such information was not sufficient to lose the immunity of the DCA. See e.g., Batzel v. Smith, 333 F.3d 1018 (2003) (act of selecting material for internet site insufficient to void the immunity of the CDA); Donato v. Moldow, 865 (A.2d 711 (N. J. Super. Ct. 2005)(minor editing of comments and providing tips on posting insufficient to void the immunity of the CDA).
[6] See e.g.,  Fair Hous. Council of San Fernando Valley v. Roomates.Com LLC, 521 F.3e 1157 (9th Cir. 2008)(holding that pre-populated drop down menu was sufficient to make made defendant a content provider for purposes of the CDA).
[7] Cubby, Inc. v. CompuServe, Inc., 776 F. Suppl. 135 (1995).

Tuesday, May 9, 2017

A Practical Guide to the "Nastygram": Best Practices for "Conflict" Emails

We spend hours each week writing letters accusing people of breaching their obligations, defending our clients against the accusations of others and telling other lawyers to "pound sand" when they are not being reasonable.  We affectionately refer to these communications as "nastygrams."

You have probably written a few yourself.  There are often several volleys of emails exchanged in a typical business dispute before any lawyer is ever involved.  Since these emails can affect the trajectory of a dispute and its eventual resolution, we encourage our clients to contact us early when a dispute crops up.  But the ideal is not always feasible.  Here are a few of our best practices for your "conflict" communications:

Include Context
No one wants their emails taken out of context; so include the context.  It can be tedious but it's important.  For example, you sell 10,000 widgets to a customer but 5,000 are broken.  You call the furious customer and agree that if the customer does not sue you, you will give them a significant discount on their next order.  After the call, you write a brief email: "I am sorry about the broken widgets and I am looking forward to putting this behind us."  Although you give the discount on the next order, the customer sues you anyway and claims that your email admits liability.  A better email would have been: "This will confirm our agreement that you agree to forego taking any action against us because of the broken widgets and we will give you a 50% discount on your next order. I am looking forward to putting this behind us and hope to have a mutually beneficial relationship going forward."

Write Your Emails To The Judge.

If a small dispute turns into a large one, a number of people are going to look at and make decisions based on your conflict emails.  Opposing counsel will review them.  You may be questioned about them during a deposition.  A judge may make decisions based on their content. 

When you write conflict emails, pretend you are writing them to a judge.  Stick to the facts and leave out emotional invective.  Absolutely no profanity or personal attacks.  Try to stay away from technical jargon, use plain language instead.  Why?  Because these things make you look horrible in front of a judge!

Don't Admit Things If They Are Not True.

Some people treat the resolution of a business dispute-particularly one involving a customer-like making up with a boyfriend or girlfriend after a fight.  There is a tendency for both sides to say, "I was wrong to."  It allows the other person to avoid the full blame for the dispute and can smooth the way to reconciliation.

Resolving a business dispute is different.  Do not admit wrongdoing unless you are sure you have done something wrong.  Your admission can haunt you.  You do not have to be cantankerous with the other party by blaming them for the dispute but if you do not believe you are at fault say so.  Something like "I disagree that our company is at fault but we value this relationship and want to move forward amicably" will usually do the trick.

Do You Really Want To Put That In An Email?

Before firing off scathing emails, consider whether an email is the right way to communicate. We like email because it builds a permanent record of communication, including the exact time it was sent.  Also, taking the time to write a thoughtful email can allow the sender to cool down and carefully consider the communication.
When improperly used however, emails can alienate the recipient, seeming more like an unrelieved monologue than a valuable interchange.   Emails also lack the information that body language or tone of voice conveys. Language printed in an email may seem harsher than in a spoken conversation. Moreover, the "permanence" of email, which makes it a valuable recordkeeping device, also allows them to be easily forwarded to a wider audience or posted on social media.

Think carefully about how you choose to communicate. A phone call or an in person meeting can often de-escalate a situation and lead to a quicker resolution in a way that emails cannot.

What Do You Want To Happen?

Have a clear picture of what you want to accomplish with the communication.  There are a variety of legitimate reasons for conflict emails but they usually fit into a few categories.  You may be trying to build a record of what happened.  You may need to correct someone else's misstatement of events so that it does not appear you agree with them.  You may want the other person to do or not do something. 

If you do not have an easily articulated reason for writing an email or the reason is to punish someone, "vent" or generally "get something off your chest", do not send it.  Remember that not sending a communication can be a very effective strategy.  Silence has its advantages.  It conceals your position and your knowledge of the facts, possibly making it more difficult for the other party to interfere with your strategy.  But be careful not to let silence look like acquiescence.

Tuesday, May 17, 2016

How To Make Money Getting Into Fights

The mantra of many defendants is “I don’t have any money,” “you can’t squeeze blood from a stone” or “I’m judgment proof.”  Sometimes they are right but sometimes they are just not looking hard enough. 

Many defendants have fallen on hard times because of the actions of a third party.  Someone refuses to pay the defendant and now the defendant can’t pay you.  “Not my problem,” you say.  The defendant should sue the third-party so he can pay me my money.  But defendant doesn’t have any money to sue the third-party. 

A depressing reality in litigation?  Bad luck stacked on bad luck? Maybe not. We encourage our clients to view legal claim as assets.  And just like any other asset, a claim can be bought, sold or traded.  If a defendant cannot pay but has a lawsuit against a third party, the defendant can offer the claim in lieu of or in addition to a cash payment to the plaintiff.
 



 Defendant transfers claim against third-party to plaintiff as settlement of plaintiff’s claim against defendant.
  

After a defendant conveys the claim against the third-party to the plaintiff, plaintiff steps into the shoes of defendant for the purposes of asserting the claim against the third party.  This may be very appealing if the third party has the financial wherewithal to pay a judgment.

Before accepting a claim against a third-party to satisfy a judgment, there are some big questions to answer.  How strong a claim does defendant have?  Am I going to need defendant to cooperate in the litigation on an ongoing basis?  Does the third party have any money to pay?  Getting the answers to these questions requires detailed legal analysis and due diligence on the financial status of the target company.

“Oh that’s cool, I could build an entire business around buying and selling litigation” you say.  Probably not.  Champerty (pronounced CHampÉ™rtÄ“) – scrabble players, your welcome – is the common law doctrine that prohibits a person with no previous interest in litigation from financing it and sharing in the proceeds.  For a transaction to be champertous – scrabble players, again, your welcome – and, therefore, illegal, the party taking assignment of the claim must have no previous interest in the claim, must expend its own money to prosecute the claim and must be entitled to the proceeds of the claim.  Courts have held a plaintiff in the position described above has an interest in a claim and does not present a champerty problem.

What’s the take away?  Legal claims, whether for breach of contract, fraud, civil RICO or anything else, are assets that may have value.  They are often overlooked and may present opportunities for you to exchange claims against judgment-proof defendants for claims against “deep pocket” parties.