Stephen J. Golder
sjg@jenkinsfenstermaker.com

Pay a little now...or a whole lot later

How many of us regularly visit our doctor for an annual physical? Why do we do it? Is it because our spouse or a family member pressures us to go? Is it because our employer requires us to go? Hopefully, it is because we realize that the old adage is true… “ an ounce of prevention is worth a pound of cure.”

Would you prefer an early diagnosis of high cholesterol or high blood pressure, or be faced with a potentially life ending heart attack or stroke? Clearly, an early diagnosis of a serious health problem in and of itself, is scary, but it means your doctor has more options and you have reduced costs in time, dollars, pain and suffering. A late diagnosis often limits options, increases costs and complication rates.

Some of my physician friends and clients may take me to task for saying this, but businesses should view their business and/or labor and employment attorney as a “business doctor.” The best attorneys care about their clients and strive to prevent them from incurring any “pain or suffering” or at least minimizing it to the extent possible. An effective attorney is available not only when the client is “sick,” but also works with the client to avoid the minefields and pitfalls businesses face. At the end of the day, an attorney loves when a client calls before signing a contract or taking a particular action. At this moment an attorney can provide the best advice to his client and know that he or she will move forward with the information needed to make a well informed decision.

Not convinced? Let’s consider a true story. I have changed the names and certain facts to prevent disclosure of client confidences and the identities of any of the parties. “Joe” decides to invest in real estate. Joe finds a realtor who appears knowledgeable and well connected and then decides to invest about $1,000,000 in ocean front property. After signing a contract to purchase this property, his realtor advises Joe of a “great” opportunity. The realtor has found a buyer who wants to invest over $2,000,000 in the same general area. The realtor advises Joe that if he purchases some adjacent property, in 90 days he can flip all his property to this “buyer” for a considerable profit. Joe signs all the contracts to purchase more property and to flip all his properties to the new buyer without talking to his attorney. Joe then decides that he can roll his proceeds from the sale to the new “buyer” into other property and defer the payment of capital gains taxes. The realtor finds additional properties for Joe to acquire using the proceeds from flipping his properties to the new “buyer”. The realtor prepares the contracts and Joe signs them again without legal counsel. Joe also then purchases the additional properties that will be flipped to the new “buyer”. Joe’s investment is now approximately $1,750,000.00, not the original $1,000,000 he planned.

On the fateful day, the “buyer” is no where to be found. Joe learns that the “buyer” paid no earnest money and the contract that the “buyer” signed actually had a provision that would allow the buyer out of the deal. The realtor isn’t returning Joe’s phone calls. It gets worse. The contracts Joe signed to purchase properties with the proceeds of the sale do not have any contingencies in them. These new contracts did not say that the purchase of the new properties were contingent on the sale of the other properties to the new “buyer.”

Joe now owns $1,750,000 of property and has signed contracts with a seller to purchase an additional $2,000,000 of property. While Joe may have claims for negligence and/or fraud against the realtor or her employer, he is faced with costly, unpleasant and time consuming litigation, including a suit that will seek to force Joe to purchase the additional $2,000,000 of property.

Joe could have avoided this outcome with a call to his attorney. The attorney, in several hours, could have noted the deficiencies in the various contracts or at least outlined for Joe the risks in moving forward. In essence, with an expenditure of less than $1,000, Joe could have saved more than a $1,000,000 and avoided unpleasant litigation and the associated legal fees and costs. As noted, “an ounce of prevention is worth a pound of cure”.

Attorneys search for ways to help clients understand that calling counsel before a decision has been made, or a document has been signed, is the best decision they can make. It is almost always the cheapest advice one can obtain and often the most valuable. Once the document is signed or the action is taken, options can be limited. While litigation might not occur, the resulting problem and “pain and suffering” may have been avoided. If litigation does occur, true pain and suffering comes into play even when represented by an outstanding litigator.

Please consider letting your attorney become your business advisor, not just your problem solver or “fireman.” Both you and your attorney will benefit from this relationship and so will your business.