Do businesses need to allot a budget for legal expenses? Aside from payroll, most firms automatically define their budget for research and development, marketing and advertising, operational costs, and miscellaneous costs. In one report, it was revealed that US companies spend 166 percent more in litigation costs than foreign counterparts. This amount is about is not surprising since the United States is one of the most litigious countries in the world.
Most large corporations have legal departments and have full-time lawyers on staff. How about medium-sized firms, start-ups, and mom-and-pop stores? How do they fare in terms of legal protection for their business? That is an important business resilience question since litigation can come from all directions, for hundreds of reasons.
Celebrities, Litigation, and Bad Press
For instance, a few days ago, celebrity judge Simon Cowell underwent six hours of back surgery after sustaining an electric bike-related injury. America's Got Talent host was trying out a brand new two-wheeler when he crashed near his Malibu, California mansion.
There is no confirmation yet if the 60-year old celebrity would file a lawsuit or if he will take responsibility for his mishap. If he decides to file a case, Cowell would have to consult a personal injury attorney who will determine causation in the said accident. The lawyer would also prepare legal arguments regarding the liability of the bike manufacturer or distributor.
Later reports revealed that the e-bike model that Cowell used is banned in the United Kingdom. The hybrid aluminum and carbon-framed bike cannot be used in open roads in the UK and is only permitted in private, designated places used for sporting events. The accident occurred just when e-bike sales were skyrocketing as people turned to bicycles as alternative transportation during the pandemic lockdowns.
In another case many years ago, the band frontman Bret Michaels sued CBS television network when he figured in an accident during awards show. The Poison rock band singer sustained a head injury as he left the stage and hit a prop. The court favored him litigation, but the amount he was paid was left undisclosed. That, too, is another example of celebrity litigation that affects business revenue and brand image.
It is also possible that celebrities can make a profit during a controversial court case if they charge fees for media interviews and, maybe later, even a book deal to tell the narrative of the litigation as part of an autobiography.
Causation is always the key legal argument when a particular party is taken to court for any loss of life, injury, or damages sustained by a victim in an accident. A judge would always be careful to decide on such cases. Both plaintiff and defendants would expectedly call in technical experts as witnesses, and a thorough review of affidavits and evidence, as a matter of course, needs to be done.
Regardless, litigation involving celebrities does not bode well for any business or industry. Even if the court later finds the defendant not guilty, the negative press would have already affected the company's sales and brand image.
Research and Development as a Preventive Measure
One of the most controversial litigation issues is the Liebeck vs. Mcdonald's case in 1994. An elderly customer named Stella Liebeck went to a Mcdonald's restaurant drive-thru to order coffee. For some reason, the coffee spilled on her lap and caused burns to her groin area and legs. In the follow-through investigation, it was learned that the coffee served in that branch had a higher temperature when compared to coffee served in other restaurants.
When the case was tried in court, McDonald's refused to settle and insisted that it was the customer's fault that led to the unfortunate incident. The judge decided in favor of Ms. Liebeck and awarded her $200,000. $160,000 of it was the actual amount to be received. In the judge's decision, it was written that Ms. Liebeck had approximately 20 percent of the responsibility for the accident. However, the case still dragged on with Ms. Liebeck being awarded a total of $2.7 Million in damages.
Could the restaurant have prevented this incident if research and development had detected the hazards of serving coffee at high temperatures at a drive-thru facility? Perhaps this is a good lesson for businesses, big and small, to have foresight in the products and services they offer. Product or service testing needs to be more detail-oriented and must undergo a series of simulations to identify potential hazards and cause of litigation.
How Small Business Can Get Legal Protection
Every business needs legal protection, no matter their size or profitability. The first step for a small business owner is to separate personal finances from that of their business. That is also why many companies choose to incorporate to provide legal protection for their personal or family assets.
Second, hiring a legal firm or having a lawyer on retainer is always a worthy expense since the business owner can always consult and get legal advice for various business issues or concerns even before any problem starts.
Third, getting business insurance is also a good investment since it adds financial protection for any eventuality. The terms and coverage of the insurance, however, need to cater to the context and peculiarities of a specific business or industry.
Of course, knowledge of the law is always a good start for any person, whether one is engaged in business or not. Protecting one's business or family begins with understanding one's rights under the law as well the many responsibilities that must be fulfilled as an upstanding member of society. Setting aside a budget for possible legal issues is always a good option for any business or individual. While accidents do happen, these incidents may lead to long-term or permanent loss of time, income, physical abilities as well as emotional trauma. For an owner to make a business more robust, it must be prepared and grounded on solid legal advice and a sound budget for litigation, whether as plaintiff or defendant.