The Maddox Law Firm, LLC

5 Rules for Avoiding Litigation

I had the pleasure of speaking with Steve Risbridger, C.P.A., of Reynolds and Rowella. Steve has conducted a superb career in accounting and finance, assisting individuals and closely held corporations in all manner of money, tax and financial-planning issues.

Steve likes to particularly focus on assisting business owners to chart an exit plan. In the course of that work, he frequently hears business owners say that they have a "five year plan". What is Steve's response to the idea of a five year plan?

"A Five Year Plan is No Plan At All"

The Maddox Law Firm very often is recruited to litigate issues that remind me of Steve Risbridger's advice. What I mean by this is that detailed planning by individuals and businesses can prevent litigation before it starts. Specific, articulated objectives combined with clear agreements and contracts go a long way toward staying out of court.

So, for all of you folks with a five year plan, here are five rules to follow in order to institute real plans and stay out of court:

  1. Use your calendar. Make it the tool that it is meant to be by stating specific objectives and committing to those objectives as immovable objects on your calendar. Start two years from now and back up month-by-month and quarter-by-quarter with everything that needs to be accomplished between now and then to realize your objectives.
  2. Commit the people who are important in your personal life and your business to those objectives. Sit with those people and dedicate the time to explicitly detail what those objectives and goals are and arrive at a solid consensus. Get their "buy-in". Who are these people? They're your significant other, your business partners and anyone else who owns either emotional, relational or financial stock in your objectives.
  3. Control your money. We so often come across cases in criminal court and civil court where individuals and business owners have frankly been lazy. They have allowed strangers to become intimately involved with their check books and finances, including permitting third parties to have signature authority. These practices may make day-to-day operation of your business and money matters easier for you, but they are a recipe for disaster. Know your money. It may be tedious, but you should be checking your finances at least weekly, and having your bookkeeper or accountant produce at least monthly reports of your charts of accounts, budgets, and expenses. Don't deputize others just because it's easy.
  4. Don't ever, ever do business on a handshake or allow someone to leverage their supposed relationship with you into the archaic notion that business should be done on mutual "honor". Come to specific terms as to every possible aspect of a business objective or business relationship and clarify those terms repeatedly. Then, have an experienced attorney memorialize those terms into an understandable, legally enforceable contract that contains concrete, reliable language.
  5. Once you've drafted your contracts or agreements, stick with them. When business is good and racing forward and you're making money, it's easy to play loose with the conduct of your affairs on the vague idea that you'll circle back later. That won't happen. As soon as you see the playing field begin to shift, or the conduct of your business veer from your contracts, stop. Return to the contracts and agreements and either amend them or draft new ones.

Planning is a deliberate, disciplined practice. It involves your calendar, commitment to terms and objectives and no-nonsense written agreements. You may still be forced to litigate at some point, but even if you do, with reliable contracts and detailed plans in place, that litigation will be less expensive and more likely to conclude in your favor.

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