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Dallas Business Journal: Five common mistakes businesses make when facing legal trouble

On Behalf of | Apr 10, 2022 | Firm News

by Katherine Stepp

[Originally published in the Dallas Business Journal]

 

From being sued to poorly handling an incident, businesses tend to make the same legal mistakes over and over. The way you navigate the situation will lead to better or worse results for your company. Here are the five most common legal mistakes we see from businesses, along with ideas for future planning to help you and your company be better prepared.

Mistake no. 1: Deleting emails and purging records

When a potential legal “mess” occurs, there is a tendency to immediately and internally “clean it up.” Emails and electronic files are stored in several places, usually sent to many recipients and even if deleted, can frequently be recovered. Physical files usually have copies. Failure to preserve emails or electronic files may lead to a finding of “spoliation” and related sanctions, up to instructions to jurors to presume that the lost information was damaging to your case. In extreme cases, this can even lead to an adverse judgment.

Do not destroy, delete or shred anything. Instead, preserve everything and contact your attorney.

Mistake no. 2: Giving statements and allowing employees to do the same

Don’t make statements or admissions to anyone — whether it be the opposing side, an investigator, a vendor or the media. Also, be mindful that today, many of your employees have their own social channels. Even a seemingly innocent tweet can cause repercussions. Immediately instruct your employees not to comment to anyone, publicly or privately. Even statements taken by well-meaning investigators or insurance adjusters may have disastrous results if not properly conducted (see mistake no. 4 below).

Before an incident occurs, it’s good practice to have a policy in place that dictates how and when employees should interact with the press and on social media. No matter how small your business may be, we suggest you take your team through the exercise: “What if 60 Minutes called?” This will align your team and help you be prepared for the future.

Mistake no. 3: Panic leading to rash decisions

We’ve discussed deleting potential evidence, but here we refer to more drastic measures. Do not fire the employee(s) involved in the incident without consulting your attorney first. Do not roll out non-disclosure agreements or create your own “hush” agreements. Do not change the employee manual without noting the date of the revisions.

Panic and fear are natural emotional responses to an incident. Very few businesses are accustomed to being involved in litigation. Let legal professionals guide you and coach you so you have a plan to get through the process.

Mistake no. 4: Engaging your insurance without a plan

You may carry general liability insurance, errors and omissions, malpractice, etc. When an incident occurs, some businesses say, “That’s why we have insurance. Let the insurance company handle it.” It is wise to have coverage, and most insurance claim departments are equipped with smart attorneys and investigators; however, insurance companies do not solely represent your interests.

Your insurance carrier may ultimately assign an attorney to defend you, but you should have your own attorney oversee the process. Promptly report the claim to your carrier as required by your policy. It’s better to give the carrier notice than hear about the incident from someone filing a claim against you. So, contact the carrier but do not authorize it to begin taking statements. No statement should be taken until you and your business are ready and have been guided by your attorney, who will be mindful of protecting privileges associated with an investigation conducted in anticipation of litigation.

Mistake no. 5: Not calling your attorney first

If you are being sued, think you may be sued or had an incident that you are concerned may cause legal issues, contact your attorney first. This may seem like an easy decision, but consider mistakes 1 through 4. You will have to fight the urge to cover it up, make it go away or fix it yourself. Call your attorney first. Experienced litigators deal with suits, threats and incidents every day. Don’t circle your wagons and react without proper guidance; the way you oversee this situation could impact your business’s reputation and financial condition for years to come. Contact your lawyer and let them manage it for you.

Remember

Attorneys don’t just mobilize when you are involved with an issue. The best attorneys can help you create a plan to avoid legal entanglements and effectively deal with any situations that arise. Forge a partnership with your law firm that encourages oversight and consultation along with representation. Preparedness and prevention can save you money and exposure, and potentially help you avoid negative legal situations altogether.

The information provided here is not legal advice and does not purport to be a substitute for advice of counsel on any specific matter. For legal advice, you should consult with an attorney concerning your specific situation.

Read in the Dallas Business Journal.

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