1. Seriously consider whether you have a good case. Even if you think you have a good case, take some time to think about whether you can win the lawsuit.
2. Determine the theories of law under which you will file your case. Do some research on the law and see if it supports your theories.
3. Determine whether you have evidence to prove your case. Think of and, if possible, locate evidence you will use to prove your case, including documents, writings, objects, records, and so on. Determine whether the evidence you think you have exists and, if so, determine where it is, whether it is in your possession, whether you know where you can find it, and whether you will be able to obtain it. Is there a chance that the evidence will spoil, decompose, deteriorate while you are awaiting trial?
4. Determine whether there are witnesses who will help prove your case. Was there anyone who observed first-hand any of the issues to be determined by your lawsuit? Are there witnesses who can testify about the different types of evidence you will present at trial? Will any of these witnesses be willing to testify on your behalf or would you have to summon them to court? Is there a witness in ill health or about to move to a different location who would be unable to testify for you in court? Can you lock in witness’ testimony through an affidavit or declaration?
5. Determine the expenses you will incur in bringing the lawsuit and consider sources for obtaining the money. Consider the money that you will have to spend to pursue a lawsuit, including filing fees and costs, earnings lost while you pursue your lawsuit, other litigation-related fees, and attorney fees. Can you take money out of your business or out of your home? Do you have savings that you can use to pursue the lawsuit? Do you know anyone who will loan you money to pursue a lawsuit? Is there anything about your lawsuit that would qualify you for any aid in paying for representation? Are you covered by insurance for the matter of the lawsuit?
6. Consider whether you have the physical and emotional energy to pursue a lawsuit. Whether or not you hire an attorney to represent you, you will be either representing yourself or aiding your attorney in your representation. Either way, you will have to spend a considerable amount of time and energy pursuing the lawsuit. Not only will a lawsuit consume a great deal of your energy, it will also likely be an emotional experience.
7. Think about whether the defendant will sue you back. There is always a possibility if you sue someone that they will sue you back (i.e., countersue). If this occurs, not only will you be committing the time, energy, and money to your own lawsuit, but you will also be spending time, energy, and money defending a lawsuit.
8. Carefully consider whether you will be able to collect on a judgment if you are successful in court. It rarely makes sense to file a lawsuit if you know in advance that it is unlikely you will collect on a judgment. Conduct an investigation of the party you wish to sue to determine what types of assets are available to satisfy any judgment you might receive.
9. Check whether your lawsuit is timely. Certain types of lawsuits must be filed within certain proscribed periods of time called statute of limitations. If you are not filing within the proper statute of limitations, your lawsuit will be dismissed. Check to see which statutes of limitations apply and whether you are within the proscribed times.
   For a detailed discussion about statutes of limitations, see Statute of Limitations Basics.
10. Before you file your lawsuit, make another attempt to settle your dispute. Consider whether there is any other way to resolve the dispute other than by filing a lawsuit.

To organize your testimony you should first make a list of all evidence you will present for your case. Once you list the evidence, you then make a list of the witnesses who will testify as to each item of evidence. Organizing your testimony before you go to court involves deciding which witnesses you will use to introduce the evidence for your case and the preparing of those witnesses to give their testimony.

Witness Characteristics The following characteristics should be assessed for each witness:

• Demeanor. How will the witness appear and behave in court? Will the witness be nervous or irritable? Will the witness be appropriately dressed? Will the witness answer only what is asked?
• Believability. Will this witness offer believable testimony?
• Impeachability. Is there any negative information about this witness that the other side will use to diminish the value of his or her testimony?
• Cross-Examination. How will the witness behave when cross-examined?
• Truthfulness. Can you count on the witness to be truthful?
• Availability. Will the witness be available to participate in the litigation? Will you have to compel his or her attendance?

If the answers to any or some of the above make the witness undesirable, are there any other witnesses available to provide the same testimony? Do you absolutely need this person to testify as to this evidence?

Types of Witnesses There are two types of witnesses that can be used to provide testimony:

1. Lay witness. A witness having personal knowledge of the facts or evidence about which he or she will testify.
2. Expert witness. A witness who by reason of education or specialized experience possesses superior knowledge regarding a subject about which average persons with no training are incapable of forming an accurate opinion or making a correct conclusion.

Preparation of Witnesses Although testimony will be provided by witnesses of varying levels of age, experience, communication skills, knowledge, expertise, familiarity with the litigation process, nevertheless, certain points should be covered with all witnesses when organizing their testimony. They are as follows:

Arbitration. The most traditional and well-known form of alternative dispute resolution, arbitration is usually agreed to well in advance of a dispute between the parties. The parties submit their dispute to a neutral party who renders a legally enforceable decision.

Facilitation. A process in which a neutral third party uses his or her skills to promote communication between parties to a dispute. The focus of facilitation is communication.

Fact-finding. This process involves an impartial third party used to analyze the issue(s) and to present findings of fact and make recommendations for a resolution. Fact-finding can be used by the parties to continue their own negotiations for settlement.

Mediation. Mediation is very popular form of alternative dispute resolution. It is an informal process geared to the settlement of disputes between parties by the action of an intermediary, or neutral party. Participation in mediation is typically voluntary. The mediator does not render a decision at the end of mediation; instead, mediation leaves the control of the outcome (i.e., the actual settlement of the dispute) to the parties. A mediator does not render a formal decision as to which party is correct or to blame, although he may provide his opinion as to the strengths and weaknesses of a case.

Neutral/case evaluation. A non-binding process where an experienced neutral case evaluator is brought in to evaluate the facts and offer an evaluation of likely outcome of the case.

For detailed discussions about mediation and arbitration, see Pros and Cons of Mediation and Pros and Cons of Arbitration at AllBusiness.com. Small Claims Court Basics Small claims courts exist for the purpose of resolving simple disputes quickly and economically, and they are considered courts of limited jurisdiction. Parties are typically not represented by attorneys in small claims court actions. The procedures in small claims court are much more informal than in other types of litigation. The judgment is usually rendered immediately after the hearing. Appeal rights for both plaintiffs and defendants are limited.

There is an abundance of assistance available for filing your claim in small claims court. It is generally assumed that an individual or small business owner will be filing a small claims action without the benefit of an attorney, and as such, most states provide information and assistance to parties involved in those actions. For a comprehensive list of links to each state’s self-help resources and information centers, go to the National Center for State Courts Web site. For a guide to Small Claims Court where information is provided about each state’s rules and requirements, go to ConsumerAffairs.com.

Dollar limits. Small claims courts serve to resolve disputes over comparatively small dollar amounts with dollar limits ranging from $1,500 (Kentucky) and $2,000 (Massachusetts) to $10,000 (Alaska and New Mexico) and $15,000 (Delaware, Georgia, and Tennessee). A chart listing the small claims court limits for each state may be found at Nolo.com.

Statutes of limitations. Statutes of limitations are laws that set the deadline or maximum period of time within which a lawsuit or claim may be filed. The deadlines vary depending on the circumstances of the case, and the type of case or claim. The periods of time also vary from state-to-state. If a lawsuit or claim is not filed before the statutory deadline, the right to sue or file a lawsuit or claim is barred. Under certain circumstances, a statute of limitations will be extended beyond its deadline. Statutes of limitations apply to actions filed in small claims court as well as other courts.

For a detailed discussion, see Statute of Limitations Basics at AllBusiness.com.

Types of disputes. The types of disputes and claims typically brought in small claims court include:

• Failure to repay a loan;
• Failure to provide personal service;
• Failure to pay for personal services;
• Failure to fix a car or other major appliance properly;
• Landlord/Tenant disputes (i.e., failure to return security deposit, destruction of rental property);
• Debt collection;
• Return of personal property;
• Claims for equitable relief; and
• Breach of warranty (claim that an item purchased does not work the way it is supposed to work).

 
Some types of claims may not be filed in small claims court:

Attempt to settle prior to filing. Before you sue in small claims court, you should make one more demand on the other party for payment, return of property, or whatever else you plan to ask the judge to make that party. It is a good idea to make this demand in writing because you may be required to demonstrate to the judge that you made an attempt to settle the dispute before filing your claim in small claims court.

Where to file. A small claims court action must generally be filed in the county in which the party being sued resides or does business. It may also be filed where a contract was signed or where a personal injury occurred.

If a defendant has no contact or business in your state, you will likely have to sue in a state where the defendant resides or does business. If it becomes necessary to file your small claims court action in another state, the process may become unwieldy, complicated, and expensive. If this occurs, it may not make sense to pursue your matter in this manner.

Notify the defendant. After you have filed your claim in small claims court, you must arrange to give each defendant a copy of your claim before your case is scheduled to be heard. It is your responsibility to make sure that each defendant is notified. The cost of the notification is borne by the person filing the claim.

There are three basic ways to effect notification of the defendant:

1. Certified mail by the court clerk;
2. Personal service by process server; and
3. Substitute service by process server at the defendant’s home or place of business.

Preparing for the case. You should prepare your case as thoroughly as you can. You are the one who best knows the facts that occurred. Gather documents. Seek out witnesses and ask them to appear in court on your behalf. Think of what the defendant will say and what evidence he or she will bring to court. Make notes of what you will ask the defendant. Practice what you will say to the judge. Write notes of what you will say.

It is also a good idea to go to the court where your claim will be heard and watch a couple of small claims court cases so you will know what will be required of you. In doing this, you will also get an idea of the temperament of the judge who will hear your case.

Your day in court. Make certain that you have all of your documents and that your witnesses are available for court. Arrive early to give yourself enough time to get organized and relax. The courtroom procedures for small claims court actions are informal, and the judge will give you guidance for how to proceed. When your case is heard, the judge will do everything to guide you through the process.

Be brief and succinct when explaining your case. Answer all of the questions the judge may pose. Be prepared to explain the amount of money you are claiming. Don’t get into an arguing mode.

If you win, you should ask the judge to award you your court costs and any other costs reasonably incurred in bringing the action.

Appealing a small claims court decision. Appealing a small claims court decision is limited for both plaintiffs and defendants. In many states, only the party who was sued can appeal. In some states, a decision may only be appealed if there was a mistake of law, not a mistake on the facts of the case. Also, there is typically a very short time within which to appeal a small claims court decision, generally ranging from 10 to 30 days after the decision was rendered.

A party may be represented by an attorney on appeal of a small claims court decision. The reason an attorney is allowed on appeal is that appeals from small claims court decisions are heard in formal court. And although attorneys are allowed for small claims court appeals, the court proceedings remain informal, as with the small claims court trial itself. It will be up to you whether you decide to hire an attorney for an appeal. For a more detailed discussion, see Appealing a Small Claims Court Decision at AllBusiness.com.

1. Observe other trials. Before you have your day in court, you might want to go to the court in which your case will be heard and observe the judge and the proceedings. This will give you a better idea of what to expect procedurally and what the judge’s courtroom is like and make you somewhat more relaxed for your own trial. Observing other trials will give you information on how to act and how to dress appropriately for that particular courtroom.
2. Be prepared. Do your homework. Know what to expect. Interview all of your witnesses and make arrangements for them to be available to testify. Have all of your exhibits ready. Have necessary copies of all documents that you will provide to opposing counsel and the judge. Prepare a trial notebook that will guide you throughout the case.
3. Be polite, courteous, and respectful to all parties. This includes the judge, jurors, court personnel, your witnesses, opposing counsel, opposing party, and opposing witnesses. This cannot be overemphasized. It is a good idea to refrain from being overly argumentative with opposing counsel and from making too many objections in open court. You can be certain that the jury and the judge will observe every move you make while you are in front of them.
4. Tell a good story. Develop a believable and consistent theme for your case. You should present your case in a manner that is convincing and compelling. If your case involves complicated issues, you should attempt to present those issues in lay terms.
5. Show the jury; don’t tell. Don’t just stand up in court in front of the jury or the judge and tell them about your case. Use movement, inflection, props, visual aids, exhibits, videos, and anything else to keep the judge and jury interested and attentive.
6. Admit and dismiss your bad facts. Be prepared to do damage control when the other side brings up the flaws in your case. Bring up your bad facts on your own, discuss them, deal with them, and move on.
7. Present admissible evidence that establishes each and every element of your claims and any defenses you might have. Make sure that the evidence you plan to use to prove your case is admissible in court. Do your own research on admissibility of evidence. The rules of evidence are complicated.
8. Respect and pay attention to the jury. If you are in front of a jury, you should always be respectful and pay attention to the jury’s reactions. This is the body that will render a decision on your behalf. In addition to presenting the law and facts of your case, you should also be aware of when further demonstration or explanation is required.
9. Never ask a question in open court to which you don’t already know the answer. This is true even if you are questioning your own witness.
10. Make proper objections and use opportunities to approach the bench in court. Although objections and approaching the bench both cause disruptions in the flow of court proceedings, you need to balance these against making an important point, getting clarification, and making a proper record for appeal.

For more information, go to the Litigation section of the Legal Center at AllBusiness.com.

Good contracts are clear, complete and appropriate for the situation. A one-size-fits-all approach will only get your business into trouble. Prepare agreements that anticipate problems and are drafted in your favor. Spell out everything and do not assume that anything — terms, payment, employment, etc. — are understood.

OSHA offers many resources designed specifically for smaller employers. The agency wants to encourage all businesses to establish safety and health programs and to find and fix hazards to prevent workplace injuries and illnesses.

For small business owners, OSHA offers a free consultation service that includes help in identifying workplace hazards and establishing or improving safety and health management systems companywide. It also offers many services designed to help small businesses cope with OSHA rules and regulations.

There are exceptions to the OSHA regulations for some small businesses. For example, there is a partial exemption for employers with 10 or fewer employees. Small businesses of that size do not have to keep OSHA injury and illness records unless OSHA or the Bureau of Labor Statistics (BLS) informs them in writing that they must keep records.

In addition to small businesses with less than 10 employees, businesses in certain industries are also exempt from OSHA’s regulations. If your business establishment is classified in a specific low-hazard retail, service, finance, insurance, or real estate industry, you do not need to keep OSHA injury and illness records unless the government asks you to. However, all employers must report to OSHA any workplace incident that results in a fatality or the hospitalization of three or more employees.

Business establishments classified in agriculture; mining; construction; manufacturing; transportation; communication, electric, gas, and sanitary services; or wholesale trade are not eligible for the partial industry classification exemption.

Penalty Reductions for Small Businesses

OSHA considers the size of the employer, among other factors, when determining the penalty to be proposed for any violation. The agency has always had detailed procedures in place for making this determination; they are currently embodied in Chapter IV of the Field Inspection Reference Manual (FIRM; OSHA Instruction CPL 2.103), which is conveyed to and followed by all compliance staff.

The FIRM provides that proposed penalties will be reduced by the following percentages in considering employer size:

• a 60 percent penalty reduction may be applied if an employer has 25 employees or fewer
• 40 percent if the employer has 26-100 employees
• 20 percent if the employer has 101-250 employees

Not having good written agreements. Put all your important business agreements in writing. Oral agreements are usually difficult to enforce and leave you with no recourse for compensation or legal action. Make sure your contracts are well thought-out, drafted in your favor, and give you flexibility and protection.

Unclear expectations and rules for employees. Make sure your employees acknowledge that they’re “at will” employees, which means they can quit or be terminated at any time without exposing your business to liability. Inform your employees that discrimination, sexual harassment, and other illegal acts won’t be tolerated.

Not getting an experienced corporate attorney. Every growing business faces issues that require the services of an experienced attorney. Issues such as stock-option plans, employee negotiations, state and federal tax issues, and intellectual property rights all require a corporate lawyer experienced in representing start-up and emerging companies. Specialized attorneys will charge more than generalists do, but in the long run, the money you spend on experience will save you time, aggravation, and money.

Ignorance of the law. Don’t be intimidated. You can’t afford to ignore legal issues just because laws are numerous and complex. Learning a little about the following basic areas of the law can keep you out of legal hot water:

Basic contractual rules

How to protect your ideas and inventions (copyright, patent, trade secrets, confidentiality agreements)

Major employer-employee laws

Securities laws affecting how you can raise capital for your business

Governmental regulation of your industry

Not keeping proper corporate records. Improper record keeping can cause problems with the IRS, hamper your ability to raise equity capital, and result in personal liability. Yet small businesses are notorious for failing to keep the required corporate records. Failure to document meetings of the board of directors and shareholders, failure to record stock issuances, and failure to document stock transfers are common infractions of the guidelines that protect the status of a corporation.

Not clearly documenting partners’ rights and responsibilities. Founding shareholders or partners should have an agreement that answers the following questions:

How much time and effort is each person expected to contribute?

How much capital will each person contribute?

What happens if the business needs more capital?

What happens if one person leaves the business?

What happens if one person dies?

Will the stock or partnership interest be bought back from the estate of the deceased or from the person leaving the business?

Starting the business as a general partnership instead of a limited liability entity. Under many states’ laws, partners are jointly liable for the debts and obligations in general partnerships. If the business encounters a problem, all of your investment in the business — as well as all of your personal assets — are at risk. Legal options such as corporations, LLCs, and limited partnerships can help you avoid liability.

Getting involved in litigation. Litigation fees can be astronomical, and they can quickly drain management time and resources. Consider alternative means of dispute resolution, such as mediation or arbitration. Or, if a reasonable settlement offer is available, think seriously about taking it instead of spending more time in litigation. Try to get an arbitration clause in all of your contracts.

Ignoring intellectual property issues. Even low-tech companies have intellectual property issues that may be important to the future success of the business. For example, do you require your employees and consultants to sign confidentiality and invention-assignment agreements? Have you registered for a trademark for an important company logo or product? Do you put copyright notices on your written information? Are your trade secrets adequately protected?

If in doubt, run any potential issues by an experienced attorney. Erring on the side of caution may help you avoid the dire consequences that overwhelm many small business owners.

Copyright by Richard D. Harroch. All Rights Reserved.

Even if you’re not on the SOX radar, you can still benefit from initiating your own version of the security requirements of SOX. A lot of SOX regulations make good security sense that can protect your company regardless of its SOX status.

1. Determine who’s in charge of security. Even a small company can designate a “chief security officer” — perhaps the most tech-savvy senior manager — who will be responsible for reports and recommendations to be shared with management, investors, employees, consultants, and contractors.
2. Create policies for the full scope of security. Policy statements and guidelines should influence the way you conduct your everyday business. Consider these questions as you develop your very own security policy:
   • Do our security policies, such as business conduct guidelines for Web usage, apply to everyone in our supply chain?
   • Do policies extend to contractors, suppliers, customers, and business partners?
   • Are all parties connecting into our network conforming to the same security policies?
3. Will a natural disaster affect our security and IT assets? Take the time to write out a few worst-case scenarios and the response your IT manager should take. If you live in California, for example, build IT security into your earthquake plan. Make plans to have this available to the next person in charge if you’re away when disaster strikes.
4. Be prepared for the unseen costs of a security breach. Discuss with your lawyer how damages to your company from a security breach can show up as a restatement. Some recompensable damages include:
   • Loss of electrical power
   • Cost of rebooting critical locations
   • Cost of labor to handle damage from blended malicious attacks
5. Integrate Internet security with physical security. Include the chief security officer visibility in your company’s overall security planning. In the event of a physical security threat, such as a fire or impending flood, make sure the person responsible for the building understands the requirements of the IT manager.
6. Don’t wait until you see a security problem. External consultants can help with Internet security planning and perform both internal audits to redefine cyber-security objectives. It’s hard to imagine, but many companies don’t even know they’ve had a security breach until long after they’ve been attacked.
7. Raise security awareness through education, publicity, and training. Use pre-existing internal channels to increase preparedness, compliance, and overall education. Create an email alias that goes to a response team focused on business continuity in the event of a major security incident.
8. Prioritize your company’s IT assets and protect them. Scrutinize the essential business services that are critical to the company and the IT resources that support them. Areas will include electrical power, telecommunications, banking, transactions, and communications mobility.
   • What are the company’s core services?
   • Are they adequately protected?
   • Are they adequately secured in a legally compliant way?
9. Work with legal counsel to address compliance and liability issues. Threats to an enterprise’s security are changing so quickly that it’s a challenge to stay secure and stay legally compliant. Go the extra mile and build in hardened layers of security at every connection edge of the IT network, especially if you are a small business that someday hopes to work with larger, publicly traded corporations.

In addition to the FTC rules, though, many states have implemented their own individual franchise rules and minimum disclosure requirements. Their policies all incorporate the FTC regulations as explained below but add additional requirements — and especially registration forms — in order to franchise. When considering franchising, remember to contact your state offices to determine if they have separate regulations or forms you will need to be aware of.

Overview of the FTC Disclosure Rule
The basic disclosure rule requires a would-be franchisor to provide potential investors with a disclosure document, either at the first face-to-face meeting or within a minimum of 10 days prior to when any agreements are signed or money exchanged with regard to the franchise investment.

Earnings claims and/or forecasts are an important element of the disclosure paperwork. In order for a franchisor to make claims regarding his or her earnings (either historical or forecasted) there must be a justifiable basis for the claims and supporting documentation must be included in the disclosure paperwork.

In addition to earnings claims, there are many other items that must be disclosed. These include any fictitious names of the franchisor and any trademarks associated with the franchisor. Additionally, the legal standing of the franchisor’s directors must be disclosed in as much as they have been convicted of or plead guilty to any felony fraud charges during the previous seven years, settled in a civil suit regarding fraud charges, and/or filed for bankruptcy in the previous seven years

Franchisors are free to advertise their franchise and can provide investors with any promotional materials they wish, but no written or oral claims may contradict or fail to live up to the disclosure documentation, which is considered the ultimate indicator of franchise standings.

The FTC rule requires disclosure only. Unlike state disclosure laws, no registration, filing, review, or approval of any disclosures, advertising, or agreements by the FTC is required.

An experienced franchise attorney will be able to draw up disclosure paperwork that meets all legal requirements, and he or she should be heavily consulted during the initial franchising process.

The FTC rule primarily covers business-format franchises, product franchises, and vending machine or display rack business opportunity ventures. If there are any questions regarding how your business is classified, or what specific regulations apply to your situation, there are resources available at the FTC Web site under the franchise section.

Some disputes can be resolved by using increasingly popular litigation alternatives such as mediation or arbitration. Businesses and individuals might agree to use alternative dispute resolution (ADR) rather than court action to resolve legal conflicts. There are numerous private organizations that sponsor mediation and arbitration. The American Arbitration Association and JAMS/Endispute are two national resources for resolving disputes without litigation.

For consumer complaints, many companies, public utilities and state attorney general offices offer customer service and consumer protection departments that effectively address these kinds of problems. If you have a problem with a regulated industry such as banking or insurance, contact the agency in your state responsible for overseeing that industry. Also, many community groups such as elder associations, civil rights groups and other organizations offer free legal help and information.