Five Things That Subject Businesses To Increased Litigation and Costs

By Walid J. Tamari, Special for  USDR

Failing to Maintain Corporate Formalities:
Businesses that fail to maintain proper corporate formalities expose
their shareholders to potential liability by creating an opportunity
for plaintiffs to argue that the court should “pierce the corporate
veil.” If a court pierces the corporate veil, plaintiffs may be able
to pursue recovery against, not only the business, but its
shareholders as well.

Failing to Properly Document Business Agreements and Transactions:
Documenting commercial transactions and understandings creates a
roadmap for business relationships while simultaneously establishing
the parties’ expectations. When businesses fail to keep appropriate
records, changes in circumstances and differing recollections can
create controversy between the parties, which can, and often do, erupt
in litigation. These types of disputes are often avoidable if there is
a paper trail that can speak authoritatively to the parties’ original
intentions.

Failing to Protect Trade Secrets and Confidential Information:
While businesses expend substantial time and resources developing
proprietary competitive advantages, it is equally important that
efforts are made to protect confidential information. In fact, the law
imposes unique obligations on businesses to proactively take steps to
protect their trade secrets. For example, if a former employee brings
a trade secret to their new employer, the former employer may have to
resort to litigation to enforce its rights to the trade secret, and it
may prove more difficult if the proper steps to document and protect
the proprietary information have not been taken.

Failing to Choose an Appropriate Dispute Resolution Mechanism:
Absent a clearly articulated arbitration provision stating the manner
in which a dispute between the parties will be resolved, a business
will be required to litigate in state or federal court. Litigation, as
opposed to arbitration, is an inherently public process, which could
result in exposure of a business’ trade secrets.

Failing to Select a Forum to Resolve Disputes:
Businesses that operate nationally or globally could incur
substantial, even insurmountable, legal expenses if made to litigate
wherever they conduct business. A plaintiff could be entitled to
pursue claims against a national or global business in a variety of
jurisdictions if the parties’ agreement is unclear or silent about the
location where disputes will be resolved.

Chicago Based Walid J. Tamari (www.tamarilaw.com ) is Founder of
Tamari Law Group LLC & a established business and civil litigation
attorney. Mr. Tamari represents businesses, business owners,
individuals in business and civil litigation matters. His broad
experience includes representing clients in commercial breach of
contract, trade secret misappropriation and business tort litigation.
For several years, Thomson Reuters’ Super Lawyers magazine named Mr.
Tamari as one of the top young lawyers in Illinois, a recognition
given to only 2.5% of Illinois attorneys. He has been featured on
media all over.

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.