From a Litigator's Desk: Sometimes the best thing to do is… nothing.

Friday, 28 February 2020 16:10 Written by  Thomas P. Donnelly

It’s the hardest advice to give; do nothing.  As lawyers, we envision ourselves as problem solvers.  It’s our job to take on a client’s problem, real or perceived, and seek to find a solution.  We listen, we evaluate, we plan.  We apply our knowledge of the law, our experience and our judgment to develop a strategy to best address our clients’ concerns and maximize potential outcomes.  We are often type “A” personalities.  We are drawn to action.

So it makes sense that the hardest advice for a lawyer to give is to do nothing; to maintain the status quo, to grin and bear it, to forego that argument or claim. Sometimes, however, to do nothing is exactly what a situation requires.         

For example, consider the small business with two equal owners both of whom are “involved” but to differing degrees.  Each invariably believes the success of the business is primarily the result of their effort as opposed to the efforts of their co-owner.  Should they separate?  Dissolve the business?  Sometimes the answer is certainly yes, but just as often the answer is no.  The cost of the dispute, not only in terms of money spent but also revenue and opportunity lost, must be considered.   It may even be that the co-owners’ combined respective skills are what drove the success of the business and that combination may be lost forever.   Business factors such as proprietary trade secrets or exclusive trade agreements may render separation for value impossible.  There is rarely a quick resolution to a business control dispute.

Similarly, when considering litigation, a party must consider whether litigation is actually in their best interest and not an emotional reaction.  Whether claimant or defendant, the economics of litigation, success or failure, must be considered.  Sometimes, however, the litigation economics form only part of the story.  A business owner must also consider the business management distraction that litigation may cause, disharmony or disunity in the work force as employees and management personnel take up sides, or even the impact on customers and clients.  A further concern is the question of how that portion of the public which becomes aware of the dispute - or even which must become aware of that dispute for business reasons – might perceive the respective positions of the parties.   In some cases, litigation may force clients and customers to become concerned for their own business, thus creating significant stress on the relationship.     

Tax reporting obligations are another area ripe with conflict.   Often times an analysis of a business control dispute or damages evaluation in litigation will involve analysis of financial and tax reporting.  A party must consider whether tax and financial reporting is consistent and that the facts as reported substantiate the position espoused by the party.  In the litigation process, we often encounter all manner of tax financial recordkeeping and reporting issues; inaccurately reported income, misdirected payments, mischaracterized expenses and inventory value manipulation just to name a few.  The parties to any dispute must consider the implications of public disclosure and avoid “taxicide”.        

Many business relationships disintegrate to the point where continued co-existence is untenable and intolerable. In many cases, there are legal mechanisms that can be brought to bear to induce a change.  A business owner is wise to consult with experienced professionals so as to evaluate the broad ranging ramifications of a particular strategy before embarking on what could be a dangerous or damaging path.  Sometimes it is best to do…nothing.        

Last modified on Friday, 28 February 2020 16:14
Thomas P. Donnelly

Thomas P. Donnelly

Tom’s practice focuses on commercial litigation and transactions. In litigation, Tom represents both Plaintiffs and Defendants. Throughout his career, he has undertaken the representation of both individual and corporate clients in subject matters concerning fraud, contracts, employment agreements, breach of fiduciary duty, securities violations, real estate and insurer bad faith. Tom’s clients include individuals and businesses local to the Philadelphia area, as well as national corporations.

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