Protecting Yourself & Your Business from Being Sued

Hi. I am Irvin Schorsch, founder and president of Pennsylvania Capital Management. As you know, our mission is to not only create wealth and help our clients preserve it but to also provide solutions through the lens of money and finance as their lives change. I’m excited to introduce you to a game-changing leader in the legal world, Alex Gertsberg.

Alex works with business owners and entrepreneurs around the world and shares them with the tools and the advice they need to scale their businesses and their companies. I’m excited about our conversation today, Alex, and what actionable steps our listeners can take away from this podcast. Let’s jump right in. What made you get into the business of protecting entrepreneurs from getting sued?

Great question, Irvin. And thank you for having me on your podcast. I appreciate it. I’m glad to be here. What got me into this business? Do you remember back in the day, there was a TV show called LA Law?

Sure.

When I was a kid, while everybody else was watching Elmo and cartoons, I don’t know what it was about LA Law, but I was obsessed with it. As a kid, I wanted to be Arnie Becker, and I thought, “Man, that guy, when he opens his mouth, he captivates audiences, and he captivates jurors. He influences people, and he’s rich, and he drives this great Mercedes, and he’s a problem solver.”

Now, he was a divorce lawyer, but I wanted to be a lawyer because I thought that’s what lawyers did, that’s what they looked like, and I loved everything about it, and I grew up watching LA Law, and somehow that merged into my identity as a kid, as an adolescent, as a teenager, and so I just always knew that I was going to be a lawyer.

And then fast-forward, I went to college on an ROTC scholarship, served in the army, went to law school, was an army reservist, served in Iraq, and then came back from Iraq. And the first six years of my career… It’s been 23 years now of practicing law, the first six of those were in courtrooms was as a defense attorney for businesses and business owners. How that happened?

I wanted to be actually a criminal defense attorney, and my dad said to me, “Alex, you should be whatever kind of lawyer you want, but if you want to pay off your student loans and you want to make some money, be a business lawyer.” I actually really did appreciate very early on entrepreneurship, the art of it, the science of it, the lifestyle of it, the personalities in it, the gamification of life that entrepreneurs embody. I just loved everything about entrepreneurship and the risk.

Very early on, I was representing business owners in defense, in litigation, and that morphed into representing businesses in matters other than litigation, so mergers and acquisitions, business setup, risk management, and then I became an in-house lawyer. I was general counsel for a telecom company for eight years, and then I started my law firm, and that was 11 years ago that I started Gertsberg Law Firm, and now we have a number of businesses next to what is now Gertsberg Licata.

Alex, I have to say, when we first met, I was intrigued when you said that one of the biggest risks to small business owners and entrepreneurs is getting sued.

Yep.

And I think where I’d like you to really start with this is what can our listeners do to protect themselves from getting sued, meaning what’s the mindset that brings them to that conclusion early on so they don’t stumble and fall?

Yeah, it’s really simple. Start playing offense instead of defense, right. And it’s really… it’s always fascinating to me because the entrepreneur is an offense player generally, except when it comes to protecting themselves from plaintiffs, from lawsuits, then their defense. Now you’re calling your lawyer only when the summons comes in the mail, when the cease and desist letter comes in the mail, when you’re reacting instead of being proactive, and it makes sense to me. I can empathize.

When you’re an entrepreneur, you’re thinking about cash flow, you’re thinking about what’s necessary, what’s nice to have versus a must-have, growing your business, employee benefits, things like that. I totally get it. The problem with that approach, calling your lawyer only when there’s a minefield exploding all over the place, is that, number one, it’s extremely expensive and inefficient. You’re now paying your lawyer to get you out of a problem that is very public, stressful, distracting, time-consuming, and all of that goes into the soup that is expensive.

You’ll eventually make the money back that you’re going to lose in this lawsuit, but you’re never going to make that time back. You’re never going to get that time back, that opportunity back, the stress back. So how do you play offense? Well, it starts by understanding that there’s only six plaintiffs who can sue your business. There’s only six. There’s no seventh plaintiff. Customers, vendors, employees, shareholders, the government, and competitors. If you walk away with only one thing from this podcast, Irvin, your listeners, it’s a game changer.

If you didn’t know that you can protect your business by simply attacking the relationships, from a legal standpoint attacking, contract language, employee handbooks, policies, and procedures that kind of attacking. If you didn’t know that there was only six plaintiffs that you had to worry about in terms of developing risk management strategies, then I want you to go to your lawyer, I want you to grab them by the lapels, and I want you to say, “Why have you never told me that there’s only six plaintiffs I need to worry about and then proactively protect me from those plaintiffs?”

I have to ask here what goes through my mind is, if you’ve only got six potential plaintiffs, couldn’t you take them one step at a time? Make this really simple and say, “All right, vendors have these kinds of issues. Clients have those kinds of issues. What do I do to make sure we really are bulletproof in terms of the potential lawsuits?” How do you train your actual clients?

Yeah. No, that’s exactly right, Irvin. You do take them one at a time. There is a sequence to this process. We call it CoverMySix, and you start with the low hanging fruit. The low-hanging fruit is the, what we call it, the waterfall dispute resolution provision. Low-hanging fruit keeps you out of court almost every time, and what that means is that in your customer contracts, in your employment agreements, in your vendor agreements, in your shareholder agreements, everyone, every business owner should have language in there that says, “Before you can sue me, customer or employee or vendor or partner, before you can drag me into court for the next 18 months, you have to do five things.

You have to give me written notice of your beef. Then you have to wait. You have to wait 30 days so that I can address your concern. Then, if those two things fail, you and I are going to have a face-to-face meeting in my conference room in person. If those three things fail, then we’re going to go to a confidential mediation, non-binding, but we’re going to bring in a mediator, and we’re going to try to resolve your dispute that way. And if all four of those things fail Irvin, we’re going to have a confidential industry-specific arbitration in my town, not in Alaska, not in Arizona, in my town. It’s going to be led by an industry expert in my industry, not some state-appointed judge or eight to 12 jurors who know nothing about this industry, and it’s going to be confidential, and it’s going to be expedited.”

Five steps, and it’s a waterfall. You don’t go to the second step until you go through the prior one. And Irvin, I’m telling you, it’s low hanging fruit because courts love it. If you file a lawsuit after having signed a contract with those steps in it, the court will throw it out. You got to follow a few basic rules. It can’t be boilerplate. It has to be conspicuous. If it’s a consumer transaction, they have to have… it should be in a separate document. Courts their dockets are overwhelmed. They love throwing cases away and giving them to an arbitrator to resolve. It gets you out of court, and by the way, by the time you get to step five, the parties are usually exhausted. They just want the matter to be done with. That is low-hanging fruit.

As I listen to you, who wants to go through the aggravation, being individual bringing that lawsuit when all along the way you have that opportunity to step up and say, “All right, let’s settle this, or I didn’t think of those issues. Or you know what? Let’s figure out how we can come to a more amicable solution so I can stop wasting my time and money.”

Irvin, for anyone, whether it’s you or any of your listeners who have gone through litigation before, the short answer to your question is only the lawyers. Only the lawyers win here. They get paid in most cases regardless of whether they win or lose, but the client is miserable even when they win because to get to that point, they’ve had all that uncertainty and stress and expense and distraction and publicity.

The other thing that you know when you go through litigation as many times as we have and as many times as any of your listeners have who have gone through it, is there is this heat of passion in the beginning when everybody wants to slam their head… their fists on the table, they want their day in court so desperately they want to be heard because the other side’s not listening to them. What they really want is to be heard, right.

They want to shout out their position out loud, and they want it to land with someone. Well, that’s why you have the face-to-face meeting. That’s why you have the mediation. By month two or three or four of the litigation, most of them just want to go home. But guess what? Now you can’t get out. In most cases, when you file a lawsuit, the other side files a counterclaim, and to get out the other side has to let you out. Now, you have to either have an agreement or you have to convince the judge to dismiss your case.

Why go through that process of losing control of your dispute when you can be methodical about it, keep it private, and let the emotions and the temper burn out in the beginning so that by the time the people are in a room together talking through their problems, the emotions have settled down a little bit. They still have that legal expense. That’s still… The meter has still been running, but it’s not running through motion practice, through pre-trial conferences-

Right.

… and deposition, but they’ve still been writing checks to their lawyers, so it’s just a much smaller number of checks for much smaller amounts. We wrote a book recently, my partner and I called The Lawsuit-Free Company, and that dispute resolution provision, we put it right there in the appendix.

Every business lawyer should be putting those provisions into every one of their client’s business contracts, and if they aren’t, either get a new lawyer or take a look at that book. It’s one of the appendices in the book.

Are there certain types of businesses or areas of business that are especially vulnerable to lawsuits?

Yeah, definitely. There are… I guess, in general, what I would say is the more regulated the industry, the more things you can be sued for as a general matter, right. So from an industry standpoint, that’s one. Two, the bigger the company, the bigger the target. Walmart has hundreds, maybe thousands of lawyers because there’s so many customers and so many employees. So the bigger the company, the more customers it has, the more employees it has, the more vulnerable it is to lawsuits.

And then the other thing on the employee piece is the more employees you have, that by itself increases your risk exposure. And the reason for that is, usually, what I say is your employees are usually the smallest number of plaintiffs with the highest number of claims that they can bring against you, the most things they can sue you for.

The reason for that is that you have several hundred years of federal law, state law, local law, and potentially industry regulations that have accumulated that are focused just on the employee, and that is one reason why there are lawyers who just do plaintiffs side employment law and nothing else, and that’s one reason a lot of them are contingency fee lawyers. They only get paid when they prevail.

It’s an algorithm for them. They know which cases are automatic jackpots. They know that if you don’t have good overtime records and a disgruntled employee walks into their office and says, “The boss has had me running errands for him and responding to emails in the evenings on the weekends, he hasn’t paid me overtime. I’ve been working there 30 years. No overtime records and no overtime policy.” That employment lawyer is salivating. The more employees you have, the bigger the target on your back.

Tell me this. If we look at your firm’s role in working with the client companies, how do you become a valued team member looking at this from the small business perspective?

That’s a great question. I’ll talk about my firm, but I’ll talk about lawyers in general, right. A good business lawyer should not just be a lawyer, should not just be solving the particular legal problem that the client walks through the door with.

I don’t believe that. I believe that it has to be a transformative relationship. The lawyer has to be a resource. The lawyer has to be a problem solver. The lawyer has to transform the client’s business trajectory. So-

Actually, Alex, I have to say, there’s a point of here. Being a fiduciary wealth advisor, I would say something very, very similar. If we’re not transformative to the client, we’re not doing our job through the lens of money and finance.

That’s the way we look at the world for the client. They don’t have the experience. They don’t know the right questions to ask. They don’t know how to respond because they’ve never been through it, whereas we’ve been through it hundreds of times with different clients, and we do have the judgment.

And we do know all the dumb mistakes that clients make, so we can, in effect, take the client’s experiences, help the newer clients as well as the existing clients with how to become transformative for the clients themselves. And in our case, just managing money isn’t good enough. You need to go far beyond that to be a form of a partner for that client at all times.

And you ought to have for that to work a right fit client. If a client walks through the doors of Gertsberg Licata and is narrow-minded, looking for a budget lawyer, looking for a quick answer at the lowest cost, and looking to get in and get out and not have a transformational relationship, my reaction is that’s just boring, lazy, not even remotely taking advantage of the wealth of knowledge and skills and relationships and experience that our firm has.

When Irvin Schorsch and Alex Gertsberg have spent a lifetime representing businesses and business owners and entrepreneurs and high net worth individuals, the experience that you accumulate there and the relationships that you create, we know who the fantastic professionals are in their industry. When someone comes in and doesn’t wonder, “Hey, what more can Irvin do for me other than just manage my money,” they’re just wasting a really great resource, and they’re making it boring for you.

I think I want transformative relationships, not transactional relationships. They’re the most interesting, the most filled with energy, and the most impactful. They have the greatest ripple effect on other people’s families, other people’s employees. That’s the kind of relationship I want to have.

Alex, it’s funny that you would say you want transformative relationships. I see it the same way. If someone just comes in and says, “Hey, I don’t like what this big firm is doing or that trust company is doing,” I want to know why. I want to know what’s lacking, and to me, we’ll know inside of 15 minutes how many of those gaps exist, all the different areas just with a few simple questions, and I enjoy that, meaning I get excited when I’m talking to someone who says, “I’m stumbling, or I’m not getting the returns that we had hoped for.”

Or, much more importantly, “Our family doesn’t connect well together. Can you help us with educating our kids so that they become the leaders of tomorrow and they don’t dissipate the wealth that we’ve created because obviously we’re attracting clients that have some wealth?” That’s great, but there’s so many different areas and so many different professionals that we can connect them with, and we actually have our own professional network with 56 different firms. We don’t pay them anything.

They don’t pay us anything. We’ve vetted them. They’re expert in their field, so if a client is lacking, whether it’s a cost seg study specialist or whether it’s an architect for someone in an area that we serve, we’re there helping them, and that’s the excitement. I mean, it’s exciting to see how we can serve a partnership-type role as their life changes. That’s the fun. Do you find that in your business too?

Yeah, I do. I think that there are a lot of really good wealth managers out there, and there’s a lot of really good lawyers out there, but there are not a lot of impact makers. There are not a lot of transformative professionals out there, and that’s a great way to differentiate ourselves, but we’re also in this business to help people.

We’re also in this business to make people’s lives better, and I guarantee you with 1000000% certainty that if any client walks into your office or my office and asks either of us, “Hey, you know what? I need to change accountants. I need a really great accountant, or I need a new marketing agency, or I need an IT manager,” I guarantee you that you and I will find them exceptional ones through our networks, either among our clients, through Strategic Coach, through I’m an entrepreneur’s organization.

There’s 16,000 members there. There’s any number of deep connections and broad connections that we have that will allow us to solve their problems for them better than them just going down Google and reading whatever that marketing agency is deliberately putting out there for them, right. The relationships that you and I have developed are enormous.

And that’s part of the fun to be able to share these very, very capable other firms and make a difference in the world, at least for us, and I’m assuming for you too. Would you talk about the connection between lawyers and entrepreneurs? Meaning how important is it for an entrepreneur to think like a lawyer or for a lawyer to think like an entrepreneur?

As a business lawyer, you just can’t be a good business lawyer without thinking like you’re a client, without knowing how they struggle, what they’re worried about, what their pain points are, what their operations are like. If you are not a business lawyer, you should think like an entrepreneur because entrepreneurs live in worlds of risk. We entrepreneurs have to understand risk and know how to place bets, right.

We can’t grow our businesses unless we know at least those two things. If you are a lawyer and you can understand those things that an entrepreneur understands, then you’ll be a better lawyer, frankly, because your clients are humans, and they are paying you money in a business transaction that involves those things. Risk, people, processes. If you’re an entrepreneur, you should think like a lawyer because if you don’t, you’re going to get sued for stupid things.

The true connection between good lawyers and good entrepreneurs is that they both know how to play both offense and defense, and they both should understand risk really well. Life is risk. Business is risk. You can’t grow your business without taking them and being smart about them, taking calculated, educated risks, and if you’re not taking risks, you’re just not going to grow, and that’s true for the entrepreneur and the lawyer.

Alex, if we shift gears for a minute here and we were to look at any small business, let’s just say a business with 20 people. You mentioned in the early part of this podcast about those six potential groups that could sue you.

What could I or our listeners do to make their small business proof above and beyond find it, develop the right contracts, the right language, addressing those six potential sources of lawsuit? Are there extra steps they could take to really make themselves litigation-proof?

The framework is what we’ve created as CoverMySix, right. You start with the six plaintiffs, and then you reverse engineer the limited number of things that each one of those can sue you for, and if it’s the government can investigate you for and bring criminal charges for in addition to a lawsuit, so it’s a process of reverse engineering, and you have to do this in cooperation with a lawyer who knows business law. Okay. That’s just a fact. It’s a reality. Litigation is a lawyer-driven process, so you have to work with a good lawyer.

There is some do-it-yourself activity there. We put it in our book, into The Lawsuit-Free Company. There are some DIY things there, but it’s being penny-wise and pound-foolish. If you have a good business lawyer who has obviously gone to law school, been experienced in defending, representing, advocating for business clients, they’re just going to do so much better in each of these steps, but the framework is six plaintiffs. You reverse engineer the things that each one can sue you for, and then from there, you make one more step, and you reverse engineer for each of those lawsuits, for each of those claims, what do I need to do to protect myself now?

And it’s one thing to keep in mind. And what those, those mechanisms that is now called your compliance system. Okay. A lot of it is going to be contract language. A lot of it is going to be policies and procedures, but getting from that top level of six to that next level of claims to that next level also involves something else that good entrepreneurs do really well, and that’s prioritizing. The number of laws out there are enormous. The number of employment laws in particular, consumer laws and criminal laws, it’s a giant number, but guess what?

There’s an 80/20 there. There’s actually a 90/10 there. There are a small number of things that employment lawyers go after the most in the employment section. There are a small number of claims that consumer lawyers go after businesses for the most. There’s a small number of things that the government goes after businesses for, particularly industry-specific things, right. And so prioritization, knocking out the 20% of the claims that are responsible for 80% of a business’s exposure, the Pareto Principle, that’s what we do with CoverMySix. That’s what a good business lawyer ought to be doing for you.

Alex, you mentioned your new book. Let’s take a moment. Show us your book or tell us about your book.

Alex Gertsburg:

Wouldn’t you know it, wouldn’t you know it, I don’t have a copy with me right now, but it’s on Amazon. It’s on Amazon. It’s called The Lawsuit-Free Company. What that book will do is empower you as a business owner to take control of your risk, to take control of your liability. Oh, my goodness. My 10-year-old just brought me a copy of my book. There it is, The Lawsuit-Free Company.

What it does is it gives you firepower, it gives you horsepower, it gives you muscle. I’m assuming that some number of your listeners are business owners. And if you’re one of them, I’m going to ask you to think about whether you’ve had the conversation, whether you’ve played offense before with your business lawyer instead of playing defense when… and waiting for the lawsuits to come at you before preventing the lawsuits from happening.

This book teaches you how to do that. It gives you the script. It tells you exactly what to look out for, what to ask your lawyer about. It does that prioritization for you, right. There’s no way that this book of 282 pages is going to identify every claim that the government could bring you… against you or employ. It doesn’t even pretend to do that. What it does is it creates the framework. It tells you where the low-hanging fruit is. It does that 80/20 analysis for you.

Do you believe this book and the types of services that you’ve outlined here make your small business clients more profitable and scalable?

100%. 100%. You think about if you’ve been in litigation before, then you know exactly what I’m talking about. You think about all that time that you had to spend in your lawyer’s office, getting ready for depositions, getting your deposition taken, educating your lawyer on your case, getting ready for trial, showing your lawyer what he needs to know to write that motion to dismiss or that motion for summary judgment.

Think of all the stress, all that time that you spent having to talk about that lawsuit. Think about all the times that you’ve been trying to play with your kids, but you couldn’t be present because your head and your attention was on all the nasty things that your customer’s lawyer was saying about your company in court. Think about all those conversations you had to have with your employees about all those nasty things that they said in court.

It is this giant growing snowball of time that sucks up all of those resources, time, energy, money, and you tell me that time and energy and money couldn’t have been deployed towards profit-generating activities. That expense all the money you paid to those lawyers that could have been avoided by that dispute resolution clause, tens, hundreds of thousands of dollars.

Alex, before we finish here, what motivates you to get up in the morning? I want to hear about Alex’s view on life.

Okay, Irvin, but you have to answer the question too. I’m going to give you my answer. I want to hear your answer afterwards. Okay.

Sure.

Because I think that’s such a great question, and I want to ask that question of everybody I meet, so I’m glad that you asked it. The one-word answer is energy. How do I get that energy? I get that energy from four places, and those four things swallow my entire world, my family, my job, my people. These four things, love, trust, authenticity, presence. Those are my personal core values. Those are the things that give me energy, that get me up in the morning. I assume a posture of love with everyone that I talk to. I give them the benefit of the doubt.

I assume that they are just like me, that they have the same kinds of struggles and joy and gratitudes and issues that every other human has, and I love them for it. I trust that everything’s going to be okay if I just do my best, and move forward and apply the things I’ve accumulated in my life. I trust that everything in my life is going to be just fine, and the reality is it always has, and that there are a billion people right now that would trade their best day for my worst day any day of the week, right. So I trust that everything has always turned out fine and that it always will.

I try as hard as I can to be present with the person that I’m with, even if that person is just myself. I’ve got ADD like a lot of entrepreneurs, so I distract really easily, so this takes work, but I stay present with my kids, when I’m doing a podcast with my clients. I try to stay as present as possible and authenticity, and I try to live my core values to be the person that I was born to be, to not seek praise or applause or approval. I try to source my own control and security and approval from inside, and that gives me authenticity and it allows me to be the best version of myself that I can. Okay. What gets you out of bed in the morning, Irvin?

What gets me out of bed in the morning is in many ways similar to what you described, but I use different language. I start every day when I get up with a moment of gratitude and a big glass of water every morning.

[inaudible 00:29:21].

Seven days a week. To me, my day’s got to start with getting in motion. I see many people sitting, lying around, just not building their life, and to me, it’s get started early. My values in many ways mirror what you described, love not only my family, which certainly comes first, my relation, or I should say, my devotion time that I spend every morning expressing the gratitude that I feel for another day of life. When I get to the office and I was here every day, even through COVID, I didn’t miss.

I find that I think clearer being in a separate setting from my home and the values that I talk about here, love, trust, authenticity, like you, giving my full attention to whoever I’m with now, that can cause problems because if there are other people that need my attention or judgment or something else, fortunately, I think I have the best team in the country to be able to feel those so we get the right time for each person that needs attention. But as I look at the trust that I feel for those around me, and I believe things will work out well, I’m one of those people that isn’t half glass full, more like three-quarters glass full or more all the time.

Oh, good.

And I look for people who we would refer to as bigger future people who are trying to build towards something special that we can be catalysts for, and that’s part of my fun in the business I’m in, and I love it. It’s been many years, more than 30 years in this business, and I’m more excited now than I was when I started. And I think have a much bigger impact on the people around me. So that’s what gets me motivated and up every morning. I do want to just mention here before we finish that our new book, which I wrote, Who’s On Your Dream Team?, takes many of those concepts.

It talks about how important it is to have a fiduciary wealth advisor, not a financial advisor, who puts the client’s interest ahead of their own in writing before they start and throughout the entire relationship because I think it sets an expectation of we want to be a partner, not a sales organization, and I’m very excited about that book. It’s my second. The first one was entitled Reinvent Rich: How to Make More Money, More Meaning, and More Moments in Life, and it focuses a lot on those values that get me up every morning. Very exciting.

I can’t wait to read your book. Thank you.

I’ll make sure you get a copy. I hope you’ve enjoyed today’s podcast. It was a lot of fun for me. I learned a lot about the legal profession and how useful and essential it is to small businesses and entrepreneurs exceeding their own expectations in life. Thanks, Alex, for being here.

Thank you, Irvin. Thank you.