THE "MY WORD AGAINST YOUR WORD" PROBLEM

Avoiding Lawsuits

A Continuing Series

We first dealt with the "my word against your word" problem in the August 1, 2000 edition of Avoiding Lawsuits. As we discussed at that time, countless business lawsuits spring from competing versions of what was said or promised during routine business interactions. If you can defuse the "my word against your word" battle early on, you resolve the dispute and avoid the lawsuit. Our law firm "archives" provides some examples (with, of course, names changed and facts camouflaged to protect confidentiality):

Our client, Lou Satrial, an e-commerce consultant, makes the following deal with his best client: Lou will complete a project for the client by October 1, and if Lou does not meet the deadline, $100,000 will be deducted from Lou's fee. Lou hires a web site designer to assist him with a portion of the project. Lou agrees to pay the designer $200,000, payable on completion. Lou tells the designer that the job must be completed by October 1, or Lou will deduct $100,000 from what he owes the designer. The designer does not finish its work until October 5. When Lou balks at payment, the designer claims that Lou only said that October 1 was a "target," and nothing was said about the absolute necessity for completion by that date. Lou gets sued;
Our client, Hughes Lywrong Co., a manufacturing company, creates a new division, offering a new product. The Hughes executive in charge of the project offers one of the company's managers the opportunity to head up the new division, at a substantial raise in pay, with stock options and incentives. The manager agrees. The new division never gets off the ground, and after six months Hughes cuts its losses, closes the division and terminates the manager. The manager claims that he was secure in his old job, and as a condition of accepting the new position, he asked for and received Hughes' agreement to a "safety net" in which the manager would be guaranteed employment for at least two years. The Hughes executive who negotiated the deal remembers the conversation, but says everything was contingent on the division remaining in business. The manager denies that there were any contingencies, and sues for an additional 18 months of compensation plus incentives and punitive damages;
Our client, Owen Munny, a general contractor, is hired for a major office building renovation. During construction, Owen notices a design flaw, and brings it to the attention of the architect. The grateful architect asks Owen how much it would cost to correct the problem. Owen quotes a $200,000 price. The architect gives Owen the go ahead, promising that the paperwork will follow. Owen spends the money and, when the time comes to pay up, the architect claims to have no recollection of having authorized the work. Owen is left with a lawsuit.

No rational business person will pursue a costly "my word against your word" lawsuit when he knows he will lose. If, therefore, you can convince your adversary that you will win the fight no matter how fervently he believes in the rectitude of his position, the dispute generally gets resolved quickly and on favorable terms. The best and easiest way to do that is through documents: in the "my word against your word" battle, documents are the ultimate weapon. Your adversary's lawyer will advise him that in court, judges and juries see memories as fleeting and changeable, while documents are viewed as concrete and trustworthy. When faced with a choice between a memory and a reliable document, judges and juries choose the document almost every time.

Picture the cross examination in each of the examples above. The web site designer, the manager and the architect are each asked if they have perfect memories. Of course, they answer no. Do you write down appointments, addresses, and "to do" lists? Yes, they answer. And that's because you can't remember everything with complete accuracy and total recall, right? They're cooked. Then Lou, and Hughes, and Owen take the stand. Do you have a perfect memory? Of course not. Do you write down things so that you can remember them later? Yes. And now the clincher: Did you write down what happened in this transaction? Yes, they answer, I did and here's the document, created at the time as part of my routine business practice, before I ever knew I would end up in court. Game, set, match.

In the August 1, 2000 edition of Avoiding Lawsuits, we talked about using the "confirming letter" device to create a winning document. Sometimes, however, confirming letters are not suitable, often because the pace of the transaction outstrips the time it would take to draft and send a letter. For the same reason, many transactions do not permit the drafting of a formal, written agreement. In these instances, the most valuable thing you can do is to take notes, so long as you do it in the right way, meaning the way that will render the notes admissible in court. Here are some of the most important criteria you will have to satisfy in order for your notes to carry the day.

Get it down as it happens. To be admissible and believable, your notes have to include as little recollection and as much observation as possible. Notes taken during a meeting or while talking on the telephone pass the test. They do not depend on your memory for accuracy. But a memorandum dictated a day after the meeting presents some problems. Notes made contemporaneously with the transaction, or immediately thereafter, will help you the most.
Don't recopy your notes. Never recopy and discard your original notes, even if you only intend to make them more legible or clear up ambiguities or inaccuracies. Recopying raises the possibility that you editorialized in the process. Similarly, do not dictate a memo and then discard the original handwritten notes on which it was based. You need to be able to prove that the memo was faithful to the notes. Don't worry about doodles and coffee stains on the notes - this makes them more believable, and shows that you did not create something solely for courtroom purposes.
Make taking notes a part of your routine. Documents that are specially created for a particular event are not nearly as credible as documents prepared as a part of your ordinary routine. At a trial, you will be asked why you took notes. Did you foresee trouble and wish to create a document that supported your side of the story? Did you create a special document just for this incident? If you routinely take notes as a part of your everyday business activities, you have a perfect answer: I always take notes, and in this case I was only doing what I always do.
Be prepared to live with what you write. When a lawsuit is commenced, your adversary will have an almost unfettered right to obtain copies of your notes and other files. You need to keep in mind that your notes may become "Exhibit A" at some time, and you better be prepared to live with what you wrote down, good or bad. More than one major lawsuit has been turned upside down by an embarrassing note buried in a file. And just as often, what is not written down is as important as what appears on the page. If your position is that an assurance was given during a meeting, and if you took notes during that meeting and the assurance appears nowhere in your documentation, you will have a hard time proving your case. Live by the notes, die by the notes.

SUMMARY: Business executives concerned with avoiding lawsuits must put themselves in a position to win the "my word against your word" battle that predominates in business disputes. Major lawsuits are won and lost in courtrooms across the country based upon who "papered the file" most effectively. Judges and juries believe documents over memories almost every time. Remember: There is nothing more frustrating than knowing you are right, and not being able to prove it.

Powell, Trachtman, Logan, Carrle & Lombardo, P.C. is a full service law firm with offices in suburban Philadelphia, PA, Harrisburg, PA and Cherry Hill, NJ. Powell Trachtman represents a variety of commercial enterprises, entrepreneurs and business executives in respect to their litigation, litigation avoidance planning, business formation, business transactions, estate and tax planning, and other needs. We are also approved defense counsel for numerous insurance carriers in matters pertaining to professional malpractice, products liability, employment practices, directors and officers liability, and many other fields. For more information, contact us at info@powelltrachtman.com and visit our website at www.powelltrachtman.com.

©Copyright 2003 CCG Properties LLC. All rights reserved, except that recipients hereof are permitted, for noncommercial purposes, to provide copies or excerpts, with full attribution to us, to other interested persons for their personal use. Avoiding Lawsuits is distributed for general informational purposes only. It is not a substitute for personalized legal advice from a competent attorney.