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Starbucks Lawsuit Highlights Legal Concerns for Startup Businesses

I saw this article yesterday about this lady who sued Starbucks over a “coffee maker dispute”. The ABAJournal reported on it today as well

That’s not the part that interested me.

She sued Starbucks and after years of litigation she finally settled.

For $250.

Although interesting, that’s not really the most interesting part to me.

Her lawyer is asking the Court to award legal fees in the amount of $175,000.

Yikes.

 

I can’t help but look at this article and have it remind me of what I hate about litigation.

Don’t hear me wrong, I understand the lawyer’s rationale given in the ABAJournal article-  taking contingency fee cases are sometimes though only way many consumers can prosecute their claims.

 

My thoughts go to a more general problem with litigation:

the overall effect of litigation tends to be, at the end of a long protracted lawsuit, the lawyers are the ones who win.

Not the clients.

 

When lawyers are doing their job advising their clients on how best to manage a business dispute, hopefully (and most often) lawyers are advocating for the client’s best interest. Often times, but not always, this approach results in lawyers advising their clients against filing a lawsuit.

 

So this is a good transition into the main reason for writing this article: – One problem that small businesses and startups run into (besides cash flow, of course):

Typically, businesses don’t know what legal services they need. “they don’t know what they don’t know”

 

So, sometimes they can end up engaging a law firm that doesn’t have their best interest in mind.

 

Case Example:

A business client (Client) came in a few months back. He had a business dispute with a customer (Customer) claiming it was owed  a large sum of money.

My Client had the ability to resolve the dispute with his Customer.  Unfortunately, the Customer engaged a law firm to represent it, that almost stopped the case from settling.

The other lawyer jumped in and his first action was drafting a lawsuit and encouraged Customer to file a lawsuit against my Client. He continued to advise Customer to file suit at every step of the way.

 

Thankfully, this lawyer did not get in the way of the parties from settling. This was primarily because the parties met individually apart from their lawyers and settled. (I might have given my Client this idea).

 

How unfortunate though.

When parties to a dispute resolve their dispute despite the involvement of their legal counsel, that is a problem.

In the event that case went to trial, the only outcome that would have been different, is that each side would have paid tens of thousands of dollars to their attorneys. I am fairly confident the outcome would otherwise have been no different.

 

In that instance, the lawyers would have been the winners.

 

So, businesses are left with the question, how do  you engage the law firms who have your best interest in mind?  Because, lets face it, any lawyer you meet that wants your business is going to tell you they have your best interest in mind.

 

I read a good article that offers good insight to what truly matter (and don’t matter) to businesses looking to retain outside legal counsel. The article provides insight from three in-house legal counsel to big business. See Above The Law blog – “13 Things That Keep General Counsel Up At Night” See that article here.

 

In-house counsel see the good, bad, and ugly, of engaging outside legal counsel.

 

As the general counsel see it, things that  a business will scrutinize over about a prospective law firm:

  •  Unreasonable Firm Billing Demands
  • Turnover and Attrition in Law Firms
  • Lawyers as Lousy Businessmen
  •  The Cost Of Litigation

The general counsel expound on this point:

There are two motivations of outside lawyers that are misaligned with clients’ incentives: (1) The billable hour and (2) The fear of being accused of ‘not leaving any stone unturned.’ … Rather than create efficiencies, the advent of eDiscovery has jacked up discovery costs. Thus, we insist on arbitration and mediation, including the ‘English Rule’ on cost-shifting. Further, we also insist that parties justify discovery requests.

Establishing a fixed cost at the outset prevents outside counsel from ‘going down every rabbit hole.’”

We cap deals and stay in constant communications with the firms to prevent overlawyering and churning documents.

 

Things that don’t matter to these general counsel:

 Law Firm Rankings.

As the general counsel explain:

We pay no attention to them. Great firms will have some terrible lawyers and vice versa.

We are looking for a relationship. Individuals are more important.

 

Take away

In sum, businesses should be concerned if they engage a law firm that attempts to push them into pursuing a lawsuit without first trying other cost-effective means to resolve the dispute. Although sometimes an immediate lawsuit is the necessary route (e.g. – enforcing a covenant not-to-compete against a former employee actively trying to steal clients), lawyers should have their clients’ best interest in mind.

If you are considering what to look for engaging law firms – in-house counsel are a good resource. They see the good, bad, and ugly of outside legal counsel.

 

 

Questions? Comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

 

 

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