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Avoiding Business Litigation: Some Tips

Business litigation rarely revolves around fundamental principles that deserve defending, no matter what the cost. Business owners, corporate officers, and managers should keep in mind — no matter how frustrating the behavior or offensive the claims that led to litigation — the company’s best interests will nearly always be better served by settling out of court or, better yet, avoiding litigation altogether. What follows are some pointers to help you steer your company away from the type of trouble that can easily lead to litigation.

Most — but not all — business litigation originates in one of four places: disgruntled shareholders, employees, partners, or customers.

  • Avoiding shareholder derivative lawsuits: Shareholder agreements can contain buy-sell provisions that give the company the right to buy out an unhappy minority shareholder based on a pre-set price formula. Work with a business attorney to include these when you incorporate.
  • Avoiding employee lawsuits: Above all, document everything. Have clear and documented policies regarding employee performance and reviews, grievances, and absenteeism. Have established procedures employees can use to address harassing or discriminatory behavior, and similar procedures for whistleblowing.
  • Avoiding partnership disputes: Partnership agreements can contain buy-sell agreements that permit you to buy out another partner for a pre-arranged sum or based on a pre-set formula.
  • Avoiding customer or client litigation: Ensure that all of your contracts with customers and clients are exceedingly clear and contain provisions requiring mediation or arbitration as well as choice-of-law provisions. Ensure that these contracts cover as many of your interactions with clients and customers as possible.

Above all, be sure to work with one of our experienced business attorneys to prevent costly litigation — and to fight on your behalf when necessary.

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