In-House Counsel

Two Routine Pieces Of In-House Legal Advice

This is very important advice that you don't want to find out the hard way.

By  
on

There are two things you regularly advise your business colleagues when you work in-house.

First:  Tell the client about the error.  The cover-up is invariably worse than the crime.

This is hard news for the business to accept.

The business folks don’t want to lose the client.  The client will be outraged by our error.  Whatever happened was bad, but it might fix itself.  The market will turn around; someone will think of a solution to the problem; no one will ever notice.  There’s plainly no need to tell the client.

Not only that, the conversation with the client will be terribly hard.  We don’t want to admit that we screwed up.  The client will legitimately be mad at us.  We don’t want to go through that.  Why don’t we just ignore the situation, and wait for it to go away?

Because you can’t.

The cover-up is invariably worse than the crime.

Sponsored

When the client learns of the error six months from now, what will the client think?  Both that you screwed up and that, when you learned of the screw-up, you hid it.  That just about guarantees that you’ll be fired.  And it just about guarantees that the jury that’s judging your conduct two years from now, if it comes to that, will be offended by your conduct.

Please note that “confessing the error” does not necessarily mean “admitting liability.”  Admitting liability is often a bad idea.  Admitting liability means that (1) you’ll lose in court, and (2) you probably will have sacrificed your insurance coverage.  That’s a two-fer that you don’t want to commit.  But it’s certainly okay to tell the client that the client will be made whole and, if it’s ever determined that you’re responsible for this, you’ll repay the client in full.  That’s meaningless:  If it’s ever determined (in court) that you’re responsible for this, you’ll have no choice but to repay the client in full.  But it sounds as though you’re telling the client that you’re upstanding.

(The desire to conceal mistakes from clients happens not only in corporations, but also at law firms.  One of your colleagues screwed up.  No one wants to tell the client.  And there’s some small chance that the client will never notice, so you’ll escape without having to admit the error.

Bad idea.  Tell the client about the mistake.  The client might be outraged, but it’s not half the outrage you’ll face in the future, when the client learns that you tried to conceal your mistake.)

I know that the business doesn’t want to ‘fess up.  But the Law Department has to be the adult in the room:  Tell the client about the error.  The cover-up is invariably worse than the crime.

Sponsored

Here’s the second piece of routine advice:  Don’t sue.

I understand that the joke (at that big public event, and at our corporate expense) was insulting and embarrassing.  But it was funny, too.  If you sue, the press will eat this up, both for the opportunity to repeat the joke (the article basically writes itself) and because the lawsuit shows that you can’t take a joke.  Don’t sue.  It’ll just be the Streisand effect, and more people will learn about the defamation from your lawsuit than did from the original affront.

When else must you advise clients not to sue?  The other company stole a couple of your employees.  It’s an outrage!  The employees may take with them one or two small clients, but it’s really the principle of the thing; you can’t let employees move to your competitors with impunity!

Yes, you can.

And it’s often the better course of action.  Six months from now, when we’ve spent a couple hundred grand in legal fees, and we don’t have any provable damages at trial, and your deposition is set for tomorrow, you’ll be cursing me for having filed the damned lawsuit.

So don’t curse me.  Especially not when you insisted, over my objection, that we file the silly case.

You should have heeded my advice:  Don’t sue.

Mark Herrmann spent 17 years as a partner at a leading international law firm and is now deputy general counsel at a large international company. He is the author of The Curmudgeon’s Guide to Practicing Law and Inside Straight: Advice About Lawyering, In-House And Out, That Only The Internet Could Provide (affiliate links). You can reach him by email at inhouse@abovethelaw.com.

Topics

,