Advice on Risk Management and Litigation Avoidance–From a Litigator?

It may surprise those who have not worked with our litigation group to learn that we counsel our clients on litigation avoidance and strategies for the management of various risks nearly as often as we represent them in contested matters throughout the region. The term “litigation avoidance” might conjure up images of intense mediation sessions in disputes headed for the courtroom, but that isn’t the case.

In reality, risk management programs and litigation avoidance strategies are simply ways in which a business can alter or improve its practices to avoid potential conflicts with clients, customers, patients, employees, vendors, and others. Here, we’ll examine what goes into a litigation avoidance analysis and discuss some basic things companies can do to reduce the risk of becoming involved in costly, time-consuming litigation.

Don’t Wait to Ask Questions

Measures designed to avoid litigation and manage risk often are considered only after a company is embroiled in a dispute, but the most opportune time to consider and pursue these measures is before a dispute arises.

Prior to embarking on a course of action or continued inaction, the decision makers should ask plenty of questions:

  • Should we refrain from taking action that may have serious, although remote, consequences?
  • Must or should we take precautions to guard against those remote consequences?
  • What will happen if we fail to take precautions and an injury occurs?

Often, the best answer is simply an educated assessment of the reasonableness of a proposed course of action or inaction. A thorough consideration of legal risk, however, will enable the company to more fully and accurately assess the total cost and true benefits of a course of action.

For example, an employer may question whether it must or should incur the expense of conducting certain investigations, including criminal background investigations of applicants. These investigations can be expensive, and are not always perfect. Prior convictions for serious crimes may be missed, and the absence of a criminal record is not necessarily a reliable indicator that an applicant will not commit misconduct in the future. While performing a criminal background investigation may not be required by law, the failure to conduct one may be significant factor in the determination of whether an employer was negligent in hiring an applicant, should that applicant later be accused of wrongdoing on the job.

An informed response to a question such as the one posed in the example above involves a review of applicable laws, regulations, rules and judicial opinions that may require, direct, discourage or even prohibit the action being considered. Where such sources do not offer helpful guidance, the inquiry focuses on whether the proposed action or inaction will be deemed reasonable under the circumstances. Those “circumstances” include the nature of the activity, the nature of the community in which the company is located, operates or conducts the activity, and the nature of the company and the degree of sophistication and expertise decision makers are expected to have due to their training and experience.

Analysis of these factors will lead to an informed decision that not only makes financial and practical sense, but also makes legal sense and minimizes the risk of litigation or the risk of a poor result if litigation cannot be avoided.

“Lessons Learned”

A common misconception about litigation avoidance and risk management programs is that they derive from a standard list of “best practices” that all companies should observe. While there most certainly are things that nearly every company can do to minimize risk, some of the most effective recommendations arise out of very specific problems and situations. Sometimes recommended strategies and practices arise out of litigation in which the company already has been involved. In these instances, once the case has been resolved, it is wise to meet with the attorney who handled it for a “lessons learned” meeting. In these meetings, counsel reviews what can be distilled from the litigation experience to improve the company’s practices and thereby avoid similar claims or disputes in the future. At a minimum, the goal is to enhance the likelihood that the company will achieve the most successful and economical result in the event that future claims or disputes cannot be avoided.

Looking Forward

Even where no potentially problematic decision looms on the horizon, there are things every business can do to reduce the risk of being drawn into litigation. Chief among these is the development and institution of its own “best practices” and policies. These can be developed to govern recruiting, termination, benefits, workplace behavior, disciplinary actions, accounting and record keeping, the use of technology and equipment, relationships with vendors, and myriad other day-to-day operations. Business leaders can stay abreast of industry trends and changes in this regard by reading news and industry publications as well as attending seminars, workshops and discussions devoted to the implementation of best practices.

Investing in litigation avoidance and risk management can help businesses avoid costly litigation and prevail in matters that must be litigated. Although such strategies frequently are developed in response to a particular problem, businesses should anticipate problems by developing and implementing “best practices” and operational policies. Counsel should be consulted to ensure that the policies and practices comply with applicable legal requirements and observe community standards of reasonableness to maximize their effectiveness.

Lauri Cleary is a highly skilled litigation counselor who shares risk management and litigation avoidance strategies with Lerch Early clients. For more information about risk management, contact Lauri at (301) 657-0176 or