So you want to Sue someone, do you?

Before you rush to sign up, buy this movie. And then buy the book. A Civil Action is perhaps the most accurate portrayal of civil litigation. Ever.

You’ll have to do what you can do but it has many excellent lessons. Understanding the economics of a lawsuit drives the outcome much more than the facts.

  • Out of the pan and into the fire…

A good article from The New Zealand Herald about the building feeding frenzy to assign Blue Chip legal responsibility. It appears the range and numbers of professionals potentially liable is growing.

Maria Slade reports:

Grimshaw & Co is joining a growing bandwagon of lawyers and burnt investors seeking to make professionals liable over the advice they gave.

A range of professionals are in the lawyers’ sights, from financial advisers and solicitors, to valuers, auditors and corporate trustees.

Further,

North Shore lawyer Andrew Hooker has reviewed the cases of around 160 investors who have lost money in finance companies, and believes at least half of them have grounds for taking action against their financial advisers.

“The scale of advice would go from sound to slightly questionable, to absolutely disgraceful. And there are a significant amount of people in my view at the absolutely disgraceful end.”

Many were put into the same six finance companies – Bridgecorp, Capital + Merchant, OPI Pacific Finance, MFS Boston, St Laurence and Property Finance.

Pay careful attention to Robert Duvall and Sidney Pollack roles in the movie.

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3 Responses to So you want to Sue someone, do you?

  1. Carol Cross says:

    Another good film about the state of the law and “money” is The Rainmaker by John Grisham. In the end, the “good guy” wins a victory for his client, whose son died because the Insurance Company denied a bone marrow transplant . The jury was shocked and outraged that the Insurance Company routinely denied most claims and were only interested in maximizing their profits and awarded 50 million in punitive damages.

    But! the owner and CEO of the Insurance Company had looted the company and they went into receivership and the “good guy” and his client never got a dime. This film also demonstrated that “money” rather than truth and justice determines who wins civil law suits. The powerful party with the most money can generally delay and maneuver and outlast the less powerful party, the weaker party, to the lawsuit who runs low on resources and has to fold.

    In the Civil Law and Franchising, the deck is stacked against franchisees to ensure that franchisors continue to be able to stand to stimulate the economy and feed the special interesrs, and franchisees are premeditated sacrifices under federal regulatory policy in the United States.

    The Small Business Administration actually subsidizes the huge franchise brands, the BIG Business, and the banks and lenders greatly profit from franchise loans and franchise activity, as do the developers, the Landlords, and city, state, and federal governments, and even the consumers, who have a wide choice of retailers to choose from.

    The FranchiSOR BAR in the USA has all of the money and has developed all of the case law and has captured the regulator and writes the FTC Rule, in reality, and, therefore, as you indicate, Les Stewart — it is generally like trying to revive a corpse for franchisees to look for recourse in arbitration or the courts for being tricked into purchasing an unviable franchise that has destroyed them financially and emotionally. Under the terms of the boilerplate and non-negotiable franchise agreements that are signed by the psrties, franchisees are declared dead when they fail to thrive.

    Of course, there are attorneys in the FranchiSEE BAR who do make a good living but it is difficult for them to overcome the status quo of public policy and federal regulatory policy and over thirty years of case law that favors the franchisors. Franchise attorneys do not take cases on contingency as do “personal injury” attorneys becaise the law is stacked against the franchisee bar, the weaker party, and only if they can prove fraud and intentional misrepresentation of material facts can they win for their clients, and only if their clients have the financial resources to stay the course. .

    I, of course, believe that the original sin is the FTC Rule that was promulgated to protect franchisors from charges of fraudulent inducement to contract or fraudulent concealment of material facts, etc.. Out of their desire to protect the franchisors from lawsuits that could destroy entire systems, the FTC and the State Regulators intentionally or inadvertently gave the franchisors the ability to sell their franchises at any degree of risk of survivability and profitability to new buyers. Perhaps, they were unaware of “churning” thirty years ago but this seems unlikely because “churning of failures” contributes to the survival of franchisors when franchisors benefit from fire sale of the tangible and intangible assest of the failed first-owner franchisee to the second owner of the franchise in perpetuation of franchise systems and system gross sales.

    Giving the government the benefit of the doubt, there was no way that they could establish a “reasonable” failure rate of startup franchisees or a “reasonable” success rate of startup franchisees and not inhibit franchising. There was no way that they could mandate unit performance staistics and “earnings” be disclosed by the seller of the franchise to the buyer of the franchise without inhibiting franchise activity in the economy. The US economy in the late 1970’s was said to have been coming out of Recession BECAUSE of FRANCHISING.

    Apparently, it took the FTC ten years to amend the FTC Rule and there was never a time where the “powers that be” thought the economy could stand the great shock of true disclosure to new buyers of franchises and thus the new Rule, effective in July of 2008, continues to prorect franchisors and to allow them to sell franchises to the public at any degree of risk of failure and unviablity of the franchise to the buyer. .

    I am conflicted always because I understand that the economy IS a nation’s first line of defense and is as important as its Armed Forces to the protection of the health and welfare of the people.

    However, I just can’t stomach that the Patriot Express Loan Pilot Program was passed by the Congress and SBA in June of 2007 in anticipation of a recession and that VETS AND THEIR FAMILIES are now the targets of the franchisors and the banks and the lenders and that VETS and their families will be sold high risk and unviable franchises under the current status quo of the law. The actual known risk of the investment in term of unit performance statistics will not be disclosed to them. They will lose their collateral posted to get the loans and their personal guarantees will destroy and silence them in failure.

    The gamemenship of the special interests and government will go on and even the sub-prime mortgage scandal and all of its implications that has spilled over into franchising will not save many of the VETS or their families who will be granted SBA loans to buy franchises that are high risk, and were high risk, even before the black swan of recession started to swim in the economy. The irony is that the franchisors do survive the recessions on the flesh of innocent franchisees and this is why we have ineffrective and dishonest regulation of franchising by the government.

    Catch 22.

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  2. franchisefool says:

    Carol,

    With the notable exception of the United States, there is no franchiSEE bar. The volume of legal work is large enough in the U.S. that a law firm could survive by just representing franchisees.

    In Canada, this is absolutely not the case. Even the highest volume, boutique law firms survive by representing both franchisees and franchisors. Any practice knows that the real clients are franchisors.

    This, of course, does not prevent some law firms in boasting that they are franchisee “champions” while actually billing a higher % to franchisors. The loyalty lies where the cash flows.

    Every franchise lawyer knows there are legal arguments that would really irritate all the franchisors. A lawyer is first and foremost a small businessperson who needs to not alienate future, much better paying clients.

    For that reason, I have seen perfectly good claims sabotaged by expert, but self-proclaimed franchisee lawyers. The clients are told they do not have a case and that they should simply go bankrupt.

    I take a look at the situation and find them a lawyer who is an industry “outsider” to plead their case. And they win. Especially when it’s as simple as not having been given disclosure documents.

    The situation is worse for smaller markets such as Australia, the UK and New Zealand. The pool of talent is that much smaller and therefore that much more easily captured by those that pay 95% of the legal fees: Big Franchising.

    Legal services are credence goods and are therefore susceptible to selfish experts who cheat. How would any one-time client know the arguments that are left unsaid? Only another expert could pick out when a fight is fixed.

    This is one reason why I am rather unpopular with attorneys. Unlike medical professionals, the franchise bar does not even tolerate a 2nd opinion.

    In this way, contracting for legal services is more hazardous than being in a franchisee:franchisor relationship.

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  3. Carol Cross says:

    Yes, Les Stewart. I watched an old repeat of family feud the other night in which one of the questions was —-which or what business is more likely to cheat you? —–and the “lawyer” was one of the top answers.

    The Code of Ethics of attorneys is kind of like reading a comic book when reality intrudes. The Legal Profession polices itself and since they are a profit-making business whose “product” is the law, they try to get the highest price for their product from the highest bidders. Most attorneys who make it to the bench come out of the big law firms who represent the interests of big business. This is perhaps why our higher courts have earned the reputation of being biased toward big business and big business is protected by regulatory policy and law that they, big business, have the influence to promulgate in the first place. Unfortunately, those who want to make the really big bucks in the practice of the law do not work for government and if they are working for government, they are looking forward to working for those that they regulate when they go back and forth through the revolving doors of government.

    I always wondered how and where franchise failures get the money to pay bankruptcy attorneys. This is a big and growing business and I know bankruptcy attorneys get paid by someone. I know bankruptcy is often an escape for corporations and well-healed citizens who can retain their million-dollar estates under the law of certain states in personal bankruptcies.

    I once had a conversation with a Probate Judge, an unusual and good man, who would allow county citizens to approach him without an attorney (until this was declared against state law) and who was set up and removed from the bench, who said: Always! Try to know as much about your case as your lawyer and don’t be afraid to look over his shoulder at the law.” When our State passed “Transfer on Death” Laws that meant that probate could be bypassed and the legal profession wanted to keep it quiet to protect the value of all the Wills in their safes, this good man was already under pressure from the legal establishment and he started to lie to me but he couldn’t and he told me the truth. They used the “law” to get him when he violated a technicality of the law to do the right thing for a family with a pressing problem. I’m sure he wasn’t surprised.

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