Posted on July 4th, 2019
Below is a complete transcript of this video.
What’s going on, fellow entrepreneurs? It’s John Fagerholm again from DefendMyBiz.com.
Today, I want to talk about settlement agreements.
In labor claims, at least in California labor claims, a lot of times, they may not be valid claims. It may be some attorney sending you a demand letter, and saying, ‘Send me money, or I’m going to sue.’ Believe it or not, that’s okay, according to California law, at least.
I have clients that say, ‘I don’t care what amount of money. I’m not paying this person a nickel,’ and things like that.
I understand the anger and the hesitance to pay money that you don’t owe. However, I always … Well first of all, I’ll do whichever way the client wants to go. I’m … willing to do that.
However, I always suggest to the client that make this a business decision, not an emotional decision.
So for example, if … as an example in one particular case, I had a client that swears up and down that they didn’t do anything wrong, and looks like they have the paperwork to back it up anyway.
However, we got a demand for $100,000. Of course, that would be insane to pay that amount of money, but we were able to negotiate it down to $15,000.
The client said, “I’m not paying a penny more than 10.” That’s okay, if that’s where the client is. However, there’s a $5,000 difference there. My response to the client is we can say you’re not going to pay a penny more than 10, and leave it at that.
However, if they elect to sue, the retainer itself is going to be $10,000. It’s going to be a month, month and a half when that bill is up to 15. One of the worst results is to pay more in legal fees than you would have been able to settle it for months before that.
On top of that, besides the dollar amount that you’re going to have to pay eventually anyway in legal fees, if it does go all the way to trial, just the sheer risk …
The other side only needs to win on one claim, one cause of action. Then, you’re going to have to pay all the attorneys fees on the other side.
Imagine if it’s average trial cost for a smaller case, 150 grand, to go all the way through trial. So now the client’s paid me $150,000. Let’s say the award the jury gave is only $5,000. Well, that’s only $5,000 to the other side.
However, because they won that $5,000, there’s $150,000 minimum of attorneys’ fees on the other side.
So now $305,000 claim, or award to the other side, or cost to our side; whereas she could have gotten out of it $15,000 a year and a half earlier.
From my perspective, it’s just a business decision. It’s unfortunate that California set its system up like that.
Of course, we never want to be in a position where we’re just paying out money for no reason. In this case, I think the reasoning is that it could potentially cost you so much more in the end.
Even if we won everything, and you didn’t have to pay the other side a penny, you’ve still paid me $150,000 or so in attorneys’ fees, which of course, that’s great for my business, but it’s … in the end, it’s not great for my business because it’s not the best result.
All right, until next time.
Thanks everybody.
