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Mark Grossman

Slow Economy Will Increase Litigation

5 April 2001

One of the inevitable consequences of a down economy is that you'll notice an increase in litigation. Money gets tighter, tempers fray and the legalized warfare begins.

You know that deal you did on the back of a napkin? You remember, the one you were so proud of. The one you did in a day. It's in times like this that you may find that it's falling apart.

If you sell tech services, you may find that your customers are cash strapped, not making money on the Net and looking for ways to scale back a project that they bought during the go-go days. If you're on the buying side, you may find that your developer is making subtle or not so subtle cutbacks in your deliverables because they're trying to squeeze some profit out of their hurting business. Whatever the cause, when money gets tight, tensions rise and the result is often litigation.

When you get the first whiff of possible litigation, you must act immediately. Denial will only make it worse.

I must warn you as you read this. The fundamentals of tech litigation preparation that I'll discuss here aren't a substitute for involving your tech lawyer immediately. The advice you get from him early may just make all the difference 18 months down the road in front of that jury.

You might catch the scent of impending warfare in any of a number of ways. It might be that what used to be an informal relationship has now turned into one where they're now confirming everything by e-mail. It might be that they've now involved a senior management person who has never been involved in your project. Whatever it is, be sensitive to it and respond quickly by considering your own tactics.

You'll need to be more calculating and thoughtful about the things you say and do. Often you don't want to be the one that's perceived as causing an escalation in the tensions, so you may not want your lawyer to suddenly be in the fore if he's never been there before. Still, you should consider running all your written communications (yes -- e-mail counts!) by your lawyer before you send them.

One thing I find that my clients do is they try to make nice in writing in an effort to achieve a peace. While I'm all for achieving peace, you should work on that verbally. A confirming e-mail should be just that -- a confirming e-mail.

The problem with an e-mailed peace pipe, mixed with an e-mail that's really designed to send out the message that you're unhappy, is that someday you may find yourself reading your e-mail to a jury completely out of context. In that milieu, you may find that your mixed message damages your position.

I always advise against writing things like, ``While we've been satisfied with your work to date, we have noticed a deterioration in your responsiveness recently.'' You've filled this simple sentence with gratuitous remarks that may haunt you later.

There's simply no reason to talk about "your satisfaction to date." It's an e-mail about the "deterioration in responsiveness." Even the word "recently" is gratuitous and unnecessary.

The fact may very well be that you haven't really been satisfied with the work to date, but you may want to say that to coax more work out of them. It may be a good negotiating strategy. So, do say it. Just don't write it.

People want to write e-mail with mixed messages because it's all too natural to couch written thoughts in gentle ways. That's fine until you feel litigation creeping up on you. Then, you have to change your habits and view all correspondence through the eyes of a potential juror.

Along with changing your e-mailing habits, you need to get in a litigation preparation mind-set. How good is your documentation about the failure of the deliverable to meet the performance standards in the contract? (You did have performance standards in your agreement, didn't you?)

Did you follow the contractual procedures for acceptance testing? Did you send all your written notices on time? Did you send them to the address in the "Notices" section of your agreement? Please say you didn't e-mail your "Notice of Failure to Pass Acceptance Testing" when your agreement clearly requires that it be sent certified mail, return receipt requested?

It's not that your failure to follow every detailed procedural requirement in your contract means that you lose your lawsuit, but it does mean that you've given your lawyer one more hurdle to pass through on his way to winning for you. It's like wet ammunition.

It may work when it dries, but battle is not the time to test your thesis that it will.

Slow Economy Will Increase Litigation is republished from
Mark Grossman
Mark Grossman