Lawyers

Lawyers are an integral part of business in Euro-America. If you have an office and employees, you have a lawyer.

Japanese business people operating overseas are often baffled by the heavy use of lawyers in business. Lawyers are involved in many business decisions from taxes to Real Estate, to patents to intellectual property rights.

The most difficult matters for Japanese business people to deal with relate to insurance settlements and frivilous law suits.

It is distressingly common for businesses to face blackmail in the form of a threatened frivilous lawsuit. For Euro-American business people the problem is so common that it is usually causes little or no distress when it occurs.

Businesses have become accustomed to a low level of such legal settlements even knowing that settlements are so common that they encourage bad behavior.

What should you do about this and why? I recommend that you go along with the game. There is no alternative. If your lawyer or insurance company tells you to settle a claim or a lawsuit, do it. The issue is usually presented to you in terms of "it will cost you $XX,000 if you settle now or risk paying $XXX,000 if you wish to challenge the law suit . The main cost in the insurance claim or frivilous lawsuit is the cost of the lawyers. It becomes almost automatic that you reduce lawyers costs by settling early rather than later.

It is disturbing that "settling" encourages bad behavior. For example: a customer who bought your product used it in an absurd way: plastic coffee cup was used to contain acid, the cup melted and severely injured the user. Another example: a customer slipped on the sidewalk in a rain storm in front of your office and claims a severe

back injury. Simple investigation shows the bad back was caused by an accident ten years earlier. In both cases you will be nearly forced to pay the claimants very large amounts of money by your lawyers who will demonstrate that the cost of defending a law suit will cost you more money, even it you are successful in winning the lawsuit, than accepting a settlement early in the case.

That is why you must settle. Nearly every company in the top 1,000 Euro-American corporations has hundreds of outstanding lawsuits at the end of every year and hundreds to thousands that they have settled during the year.

Why does this happen? The legal system is not inherently expensive nor is it inherently unfair to corporations.

If you do a little research on each claim that is brought to you, you will find that there are one or two specialized lawyers in your locale who are exceptional and have an 85% chance of defeating the claim or winning a dismissal of the frivilous law suit. These exceptional lawyers will succeed with a small amount of legal time. An 85% chance of winning is usually a good business proposition. Discouraging claims based on accidents, dumb behavior or frivilous lawsuits is good for everyone. The problem is that there are only one or two lawyers who are good enough to have an 85% chance of winning. Those one or two lawyers rarely work for large business oriented law firms, they frequently work by themselves or for small firms and they are always very busy. The consequence is that you are advised to settle when your lawyer tells you to settle.

Two strategies to deal with this problem. One is used by firms big enough to have inside legal departments. Such firms hire low cost lawyers, who work under close supervision and make it obvious to the claimant that a long boring bureaucratic battle looms ahead of them. That scares off most small moderate claimants. The second is used in service businesses. The customer is required to sign a dispute resolution agreement that calls for "binding arbitration". Binding arbitration is invariably cheaper than legal actions. Businesses also have above average positive outcomes because regular use by businesses results in inside knowledge that is not available in the legal realm.

The use of lawyers and uncomfortable settlements in the Euro-American business environment is often distressing to business people from outside. Unfortunately the are few alternatives. It is one of the fixed costs of doing business.