How Not to Get Sued

Rich Ziade: How not to get sued. A thread.

Paul Ford: Oh, good. I love a good Twitter thread. Are we going to do that live?

Rich: X, Paul.

Paul: X, I’m sorry.

Rich: My name is Rich Ziade.

Paul: I’m Paul Ford. We’re the co-founders of Aboard, which we’ll tell you about in a second. And this is the Aboard Podcast.

Rich: It is.

[intro music]

Rich: How are you?

Paul: I’m doing fine. We had some technical glitches with the last one. And, uh, we have now…

Rich: It sucked!

Paul: We’ve spent hours unpacking that, and now we have a pretty good setup.

Rich: To clarify: This is the podcast formerly known as Ziade and Ford Advisors.

Paul: Correct.

Rich: And we are also on YouTube. If you want to keep listening, just audio, and not see our faces, sorry. I mean, sad for you. But if you want to see our faces and some cool visuals, we’re on YouTube as well.

Paul: Sorry, Potential Spam was calling.

Rich: Uh, Spam Likely?

Paul: No, it’s Potential Spam now. They grew it up a little bit.

Rich: I have an idea. Do you know spam, like the canned ham?

Paul: Yes, I do.

Rich: I think Spam Likely? Is a good name for the canned ham.

Paul: Ooh, interesting.

Rich: Because you don’t know what’s in it really. Spam likely.

Paul: Potential spam.

Rich: Anyway, welcome to the Aboard Podcast. Aboard’s our startup. We’ll talk about it a little bit later. Uh, what do you want to talk about Paul?

Paul: Well, you know, we like to talk about big, broad subjects that are relevant to people in business and who are trying to build careers. And so we think about that. What’s going to be useful? What’s going to be helpful? And one that popped into my head the other day, and that we both should talk about is, relates to how we started our business together, which is you used to be a lawyer.

Rich: For like a minute.

Paul: For a minute.

Rich: For a hot minute.

Paul: You went to law school. You love the law.

Rich: I love, I love the, the, the sort of deductive reasoning aspects. I use the law all the time. Law school teaches you to think a certain way. It’s not like med school where you sort of ingest information. Every exam in law school is an open-book exam.

Paul: Right, it’s a process.

Rich: It’s a process. It’s a way of thinking. It also… It also teaches you how to handle an adversarial situation in a lot of ways. So yeah, I went to law school. My dad said I had a trusting face and he said you should go to law school.

Paul: That is a lot. We won’t even break that down right now.

Rich: He used to watch Matlock. Do you know Matlock?

Paul: Hell yeah, I know Matlock.

Rich: It’s like midwestern friendly lawyer.

Paul: For those who are younger than 200 years old, it was, um, what was it, Andy Griffith?

Rich: Andy Griffith.

Paul: Yeah, and it was sort of like an old-timey actor, and he’s a good, goodly lawyer. He’s kind of in there with Murder, She Wrote. Like, I’m bet that Matlock was on Murder, She Wrote, and Angela Lansbury was on Matlock.

Rich: Yeah, yeah, exactly.

Paul: You don’t get that good crossover like you used to get with the old TV—

Rich: Well, they would show up.

Paul: Yeah, yeah, they up.

Rich: Oh, yeah, yeah.

Paul: Somebody from Night Court would show up in like Seinfeld or whatever.

Rich: Yeah, yeah.

Paul: Not Seinfeld. Seinfeld was too cool.

Rich: There was another one, Different Strokes and, uh, the girls school. What was it called?

Paul: Oh, um…

Rich: Facts of Life.

Paul: Facts of Life.

Rich: Facts of Life.

Paul: Yeah, there was the whole like, Norman Lear empire where like The Jeffersons and All In the Family.

Rich: Yeah yeah yeah.

Paul: So what you have to understand is people who grew up when Rich and I grew up saw the world as a holistic, connected—

Rich: Yeah, where we churned our own butter.

Paul: Every, every yeah, exactly. Everything was part of it.

Rich: Anyway—

Paul: Okay sorry.

Rich: Yes, I have a law degree.

Paul: So let me—

Rich: I took the bar exam. Passed the bar exam, okay?

Paul: It’s hard.

Rich: But had to formally retire. You have to retire.

Paul: So you’re retired.

Rich: Yeah, you have to take continuing education—

Paul: That explains your work ethic.

Rich: Yes, fair.

Paul: For those who don’t know, Rich’s work ethic is a little more profound than mine. He took that well.

Rich: Fair.

Paul: Okay. So here’s the thing we start this company.

Rich: Yeah.

Paul: You are good at difficult conversations. You welcome them you lean into them. You don’t love them. I hate them. I’m terrified of them. And I’m really scared as a first-time business operator of getting sued. And let me explain why. We didn’t do anything. I’m not doing anything bad. But I’m in a world now of contracts. I’m in a world of taxes. I’m in a world of obligations that I don’t fully understand.

Rich: You…yeah.

Paul: And I was really, like, genuinely, when you don’t understand something, it becomes very scary. You’re very scared of that letter showing up on legal letterhead saying you owe us this money or—

Rich: It’s uh, it’s rough.

Paul: You get emails from people who are like, hey in the contract it says this, and so on.

Rich: Yeah.

Paul: So that, I had some of those dynamics. And then before we started the business, I’d been an editor and actually one of the funny things of being an editor is that when you, people think you’re like making the magazine pieces better. But the first thing you have to do is manage litigation risk for the magazine, because somebody always wants to sue the magazine.

Rich: Sure. Sure. Sure. Sure.

Paul: If facts are wrong, they go, well, I’m going to teach you a lesson.

Rich: Yeah. Or threaten to sue.

Paul: Exactly.

Rich: Or send a letter, or whatever.

Paul: Exactly. And so—

Rich: Put the correction out and we’re, I mean, it depends.

Paul: And so, I thought we could talk about how to avoid getting sued.

Rich: Yeah, so let me disclaim first. This isn’t formal legal advice.

Paul: That’s right. We’re not lawyers.

Rich: Uh, let’s get, uh, let’s break this into two key pieces of advice.

Paul: Okay.

Rich: The first is, uh, well let’s get the bad news out of the way.

Paul: Okay.

Rich: Anybody can sue anyone. Like anybody can sue anyone.

Paul: I mean that is bad news.

Rich: You just got to get some paperwork. You actually don’t even need a lawyer. You could sue someone without a lawyer. Anybody can sue anyone. Anybody can—not only that, just to back up a second. Anybody can hint that they may sue someone or threaten that they may sue someone.

Paul: I can send, I could go make up, I could put my letterhead, I can make it look all swirly. Like Jacoby & Meyers.

Rich: Yeah, small caps.

Paul: And I could send you a letter right now saying, Rich, you haven’t met your obligations in our partnership.

Rich: Yes, yes. I mean, the threatening legal letter is sort of the first sort of salvo in a confrontation that could lead to a lawsuit.

Paul: One of the fundamental lessons about that, too, which I had to internalize, is that the threatening legal letter, if you’re not someone in this world, feels like the worst day of your life.

Rich: It’s scary.

Paul: And for the lawyer, it’s Thursday afternoon and they billed an hour and a half.

Rich: Yeah, and look, there are many circumstances, that legal letter may actually be the first step in a lawsuit. Or it may be a bully tactic to get you to do something. Like stop doing something or pay a bill or whatever it may be.

Paul: You have to take it seriously. You can’t—

Rich: You should read the letter.

Paul: You should read the letter. You shouldn’t hide from it.

Rich: Yes, you shouldn’t hide from it.

Paul: But it in no way means that your life is over or that you are out of control in this situation. You have a lot of control.

Rich: That’s right. So let’s talk about most people who get the letter aren’t shocked by the letter.

Paul: Yeah, that’s true.

Rich: It’s usually after like five bad phone calls and a couple of terrible meetings and it’s like, “We’re done!”

Paul: Every now and then there are those people who just love to sue.

Rich: That sucks. Yeah, yeah.

Paul: You don’t really get that at an agency, but like, your shoe store will get sued because a guy is just like, I didn’t like the shoe.

Rich: A litigious person or a neighbor that’s cranky and hates the fact that you painted your house yellow next door to them, they’ll sue you.

Paul: Yeah, yeah.

Rich: Yeah, I mean people sue. People, like we said earlier, anybody can sue.

Paul: Well also the person who does that, who is like the serial lawsuit sender?

Rich: Yeah. Yeah. Yeah.

Paul: They’re hitting like a hundred people, right? Like it’s actually—

Rich: Yeah. They fan out. Yeah. Yeah. Yeah.

Paul: They end up with tremendous amounts of like, it’s not really power, but kind of like notoriety because they do this.

Rich: It’s terrible.

Paul:They have a kind of loud voice in the community, because they sue everybody.

Rich: That’s right.

Paul: So there’s that, but that, that’s kind of an outlier and the judge tends to know them and be like—

Rich: “What are you doing here, Dan?”

Paul: “Dan, get out of here!”

Rich: Yeah.

Paul: Yeah. All right. So that’s one.

Rich: So how’d you get there? And it’s going to feel a little bait and switchy, I guess. But if you got to that point, it means something else broke down. It means things melted down. And if things go silent, if, if things got bad, and then you didn’t talk to each other for like, three weeks.

Paul: Yeah, this is how this goes.

Rich: And it’s gone quiet. It’s a bad scene, right? And what’s happening is, it’s not that people are lawyering up, they’re stewing, right? The communication is broken down. And so what this comes back to, and it’s kind of a, you know, a curveball here in terms of advice, because it has less to do with the law, and more to do with relationships.

You said earlier, when I started my company, you know, I started to freak out, I freaked out about getting sued. And that’s frankly well-founded. You’re essentially, if you have a company of 30 people and you’re dealing with five vendors and you’re dealing with six clients, you effectively have 30 relationships, 40 relationships in your life.

Paul: You’re exposed.

Rich: Your landlord, your clients, your vendors, your employees, you now have many lines to you.

Paul: This is real. And like, you might be on great terms with your employees and very low risk there, but your landlord is a whole other world.

Rich: It’s a whole other world.

Paul: You’re involved in all kinds of things—

Rich: You threw a party where somebody kept urinating out the 11th floor window.

Paul: Right.

Rich: And the landlord got a huge fine from the city or something.

Paul: Now that’s your problem.

Rich: And they’re gonna come back at you, or they’re—now look, again, you say, “Mr. Landlord, this was embarrassing and terrible. Can we talk about this?” And then by doing that, when people see each other’s faces, there’s like, the likelihood of diffusing the situation goes up like 40%.

Paul: It really does.

Rich: Phone calls aren’t as good. You gotta see each other.

Paul: You know what I bet was great for lawyers? The pandemic.

Rich: Interesting.

Paul: Cause nobody’s stopping by. Nobody’s having coffee.

Rich: Nobody’s stopping by. And the Zoom doesn’t cut it. The Zoom call doesn’t cut it.

Paul: No, because the Zoom is all about getting to some, the Zoom is about getting to the outcome.

Rich: That’s right. So how do you not get to that point?

Paul: Before you get there, right? There was a thing you used to say a lot, because you saw my anxiety about this. And we were, every organization that’s kind of worth its salt is writing a lot of contracts, right?

Rich: Yeah.

Paul: Like there’s just contracts flying around. And I always felt ours were short.

Rich: Yes.

Paul: And that was sort of by design. And you were like, you gotta understand. Anyone can sue anyone else. That’s principle one.

Rich: Yeah.

Paul: Principle two is that the contract is not—don’t, the contract is binding. Everybody signed it. But the reality is that the contract is a recipe for what to do, it’s instructions for what to do when things go wrong.

Rich: Yeah. It’s not good.

Paul: It’s not, it doesn’t…it isn’t the relationship.

Rich: No.

Paul: The relationship has a connection to the contract, but it isn’t the relationship.

Rich: That’s right.

Paul: It’s subtle. But what that means is that, and what this really means is when, um…and when we had that one client, okay, who would love to go back to the contract.

Rich: She’d paste clauses in the agreement.

Paul: Right.

Rich: And look, let’s say the contract—

Paul: And she kept hiring us, right? Like this is—

Rich: Like we, she, she had a particular view of how—

Paul: From her point of view, this was a good relationship.

Rich: She, yeah, exactly. She had a particular view of how services worked.

Paul: Mmm hmmm.

Rich: Like we could have been a caterer.

Paul: Yes.

Rich: Frankly. And, and look, how do you get there? You get there when, let’s say the contract says, we’re gonna do a thing for you, and you pay us on the 30th of every month.

Paul: Okay.

Rich: Okay? And then the third 30th of the month comes along and comes and goes and nobody pays. And then we pick up the phone a week later, we don’t want to be too aggressive, and say, “Hey, you didn’t pay your bill. It’s like, “Well, I’m not paying it.” “Why not?” “Well, I don’t think you fulfilled your services.” “What do you mean? We did fulfill our services.” “Well, what about this?”

Paul: Aw—

Rich: And then pasted clause from the agreement.

Paul: This is a class—

Rich: That’s unusual, to be clear.

Paul: Well, you know when that happens? It’s when the company on the other side tanks and they have to get out of their obligations.

Rich: Trying to get out of it.

Paul: So instead of being like, look, let me, I can give you 10%, and then after that, I have no money. Because frankly, I would have been empathetic to that in these situations, they often like, their bulldog comes and is like, you know, you never, you never did these five things.

Rich: I’ll tell you, I’ll tell you a story, a second story from real-world experience. We had an agreement with one of the largest investment banks in the world, and they wanted out of it. And they wanted out of it and they said it very matter-of-fact, like we’re out of it. And then I looked at them, and this is not a normal room to be in. I’m a nobody and these were like six partners at this firm. And I said, you can’t do that.

Paul: You signed the contract.

Rich: Yeah. And it wasn’t a threat. It was like, and then they understood. I’m like, how about—and then I went into constructive mode. They weren’t happy.

Paul: Sure

Rich: And we needed to rejig the relationship. I’m not gonna fight them. They have an entire floor of lawyers that are just bored.

Paul: This is—you got it.

Rich: Yeah.

Paul: Again, like I think the contract also people think that with a contract they have superpowers.

Rich: Yeah.

Paul: So you’ll sign this like giant agreement with a giant company, and and and then they’ll come in and they’ll completely alter the rules of everything.

Rich: Yeah.

Paul: And this is where you have to be a little proactive. You have to write like write the memo, and it doesn’t, they have to sign it. You have to send an email saying like hey, I just want to let you know.

Rich: Yeah.

Paul: Per your request, we’re gonna rejigger the schedule a little bit and like we’re probably not not gonna get these three things for you, but we are gonna get the other three things.

Rich: Yeah. Paul: And they’ll write back and go, “Looks good to me!”

Rich: Humans defuse conflict. Yeah when they see each other that’s a fact. That’s why The UN gets together. That’s why people have conferences. That’s why there’s the summit meetings. And that’s why companies and partners get together. Those get-togethers aren’t just to land business. It’s also to maintain those relationships, right? And, and by doing that, when things do go wrong, you can say, “Jim, let’s figure this out. We kind of screwed up, but you can’t tell me we screwed up for $100 worth. We probably screwed up for $30 worth.” They’d be like, “Oh, I don’t know Rich. How about $50?” And then you work it out.

Paul: This is a digression, but it’s worth a minute. Which is I actually think a lot of the work-from-home debate, a lot of the people on one side of that debate didn’t have relationships or dynamics where they were managing relationship risk. There, you know, and if you’re like kind of just checking in code, you kind of you don’t have to go to the office. I get it.

Rich: Yeah.

Paul: But where the managers get confused by this is they’re like, “I have to be there. I have to look people in the eyes.”

Rich: Yeah.

Paul: “I have to calm everybody down.”

Rich: Yeah.

Paul: And and I feel like that dynamic, because one side feels that in their bones and the other is like what the hell are you talking about?

Rich: Yeah, that’s right.

Paul: So just just a little tangent.

Rich: Yeah.

Paul: Anyway, regardless. So, okay, so there’s all this, so I come in, so a) we tell people we’re gonna help them avoid getting sued, and now we tell them they can’t, and now that we tell them the contracts are kind of meaningless.

Rich: No, they’re not meaningless They do represent the the responsibilities and obligations of the parties, like I have to deliver bottled milk to you every day, and you have to pay.

Paul: But the reality is you need to know what’s in that contract.

Rich: You need to know what’s in the contract.

Paul: And then you need to externalize that as a relationship, or you’re actually not doing your job.

Rich: You have to.

Paul: You have to.

Rich: You have to, uh, if things go south—

Paul: The contract is not merely a recipe for what, what happens when things go wrong. It’s a blueprint, blueprint for a relationship that needs to be evaluated daily.

Rich: It needs to be, I wouldn’t say evaluated. I would say nurtured and tended to.

Paul: Okay.

Rich: Um, see—

Paul: Nobody looks at a contract and goes, time to nurture.

Rich: Look, if you’re a business and you want more business, you need to nurture it anyway. Like if you’re not doing that—

Paul: And I want more business.

Rich: You want more business. If you want to avoid conflict or diffuse conflict, when things go wrong, you want to, you want to maintain the relationship. And it’s all, it goes back to relationships.

Paul: Last thing I want to talk about, I want to end on the most boring possible thing. You ready?

Rich: Yeah.

Paul: Insurance.

Rich: All right.

Paul: Okay. But this is another thing, which is like, what is liability insurance? How does that all work? Because that was another thing that kind of threw me, everybody who demanded we have it and we had errors and omissions and like, what is that?

Rich: When you are providing goods or services to someone else, or frankly, access to a piece of property, you need liability insurance. If I have a clothing store and someone comes in and I just mopped it and they slip and fall, they could sue me, right? And when they sue me, that could wreck my whole business. They could say, oh, you broke my, I broke my back. You give me a million dollars. And I don’t have a million dollars.

So you get what’s called liability insurance. That’s called premises liability, which is essentially whatever happens on your premises, is covered by you pay some insurance money., and if some, somebody brings a lawsuit against you, the insurance company steps in. Puts lawyers on it and actually pays out.

Paul: Okay.

Rich: They handle it for you.

Paul: Okay.

Rich: If you’re a consulting firm, there’s something called errors and omissions insurance. So if they say, “Hey you delivered the software to me, but the data is leaky and everything’s in the wrong language,” or something, and you ruined my customer reputation, my reputation with my customers, I can pull up that policy and say, hey, this and this and this, and they’re gonna cover it. Now, is it necessary? Yeah, it is necessary, because you can have severe events that could do in a storefront business, or could do in—the most damaging brutal liability is design defect liability.

Paul: Hmmm.

Rich: If you designed a car and the brakes, the way they worked, would occasionally jam and not work, and that’s a design defect, not a manufacturing defect. Meaning, like, one of the cars was, the brakes were installed poorly. You got one issue. Instead, you have a design defect, which means everybody’s under threat.

Paul: So you have to have a recall—

Rich: It’s a class-action lawsuit. It’s a huge, huge deal. Anyway insurance is part of protecting yourself from lawsuits. Here’s, I think, another thing, I think this is probably the more useful sort of piece of advice to share. Anybody can weaponize the law. If somebody is, has it out for you, they can, they can use the law to create a lot of headaches for you. And that could be an employer who wants to get someone fired. They could rummage through their emails. That could be an employee who wants to get their employer in trouble and they could say he, they said something to me. So it’s, it’s a sort of a, let me bolt on one more piece of advice, which is be careful what you do and what you say. And do less of it and say less of it.

Paul: This is, this was a big lesson for me, which is in the way I summarize it is irony doesn’t scale. Like, you love to say ironic things if you’re like, you think of yourself as a funny, hilarious person.

Rich: Yeah, yeah, yeah. Absolutely.

Paul: And I love to be droll, and I love to be like, oh, well, it looks like this is a disaster. Well, there goes your career.

Rich: Yeah.

Paul: And, um, you know, I remember there’s a, there’s a book called Agency about running an agency. One of the pieces—

Rich: I need to read that book.

Paul: One day. One day. There is a piece of advice in it, which is don’t joke about saying like, “You’re fired!” Because one day you’re gonna have to fire the person.

Rich: Oh. Like, you’re not actually firing them, you’re making a joke about it.

Paul: No, it’s like they brought in like a, you know, the wrong kind of crumb cake and it’s like, “You’re fired! Ha ha ha!”

Rich: Yeah. Don’t do that. No.

Paul: No, because then like two weeks later you are doing a shutdown of their division.

Rich: I mean, it’s annoying and dry to say, but, you have a legal relationship with everybody you’re dealing with.

Paul: This is the big thing, right? You are not, you’re like, you’re going to work.

Rich: You aren’t buddies. You’re not buddies.

Paul: Well, it’s tricky, right? You and I actually have a relationship that is bound by a contract.

Rich: Well, we have an operating agreement for our businesses. Yes.

Paul: And, um, and we’re very, very good friends.

Rich: We never go to the agreement.

Paul: That would be—I gotta tell ya.

Rich: You never, if you ever—

Paul: That would be a disaster.

Rich: That’s a bad scene, right? It means it’s broken down between us.

Paul: If we haven’t gone out to drinks to talk about it?

Rich: Exactly. Which look, we’ve had our, our disagreements about where to take the business at some different points.

Paul: Yeah.

Rich: We just have to talk it through.

Paul: Yes, that’s right.

Rich: It’s kind of like the same advice you get for marriages and friendships.

Paul: Except the marriage is not, it is a legal construct, but that’s not the foundation. The legal construct comes after the marriage. The relationship comes after the contract here.

Rich: Yes, that’s right. That’s right.

Paul: So I think like that’s a big difference. So wait, let me just, let me break this down really quick. So if you are just like a freelancer, read some FAQs, get out there, learn a little bit, maybe you need a little insurance. Most likely your clients would ask you for it.

Rich: Sometimes they do.

Paul: That kind of thing. If you’re starting a business, go see a lawyer.

Rich: Yeah. Yeah. And it’s not expensive. If you’re starting a business, it means you’ve got some bigger ambitions.

Paul: Yeah.

Rich: Spend a little bit of it. You don’t need a white shoe firm. Just go get a lawyer that can help you out.

Paul: Literally someone who’s done it before.

Rich: Yeah, yeah.

Paul: It’ll probably cost you like $1,500 bucks.

Rich: Yeah. That’s right.

Paul: You get all the right paperwork and then you have a lawyer. So that actually feels good, because if somebody calls or somebody says like, I don’t, you know, I don’t, what you did was wrong. You know you can call someone and be like, Hey, what’s going on? And they’ll be on your side.

Rich: It is a big relief, when you forward a letter along to a lawyer, and he just sort of shrugs and says, don’t worry about it. It’s a very big—it’s the same as like hearing from a doctor that the test came back fine.

Paul: 90 percent of the time, if something happens, a lawyer will just be like—

Rich: We’ll handle it.

Paul: Exactly. I’m gonna write him a letter.

Rich: Yeah.

Paul: And when they see there’s a lawyer on the other side, everybody, lawyers love to fight. They love to fight with other lawyers. It’s their job.

Rich: Yeah, but they also know each other a lot of the time. New York City’s a big place—

Paul: “Mike, what are you doing here?”

Rich: Exactly.

Paul: It actually comes down to that. So, as the organization gets larger, now it’s actually like real, and you need everything buttoned up.

Rich: Yes.

Paul: And you need really good advice.

Rich: Yes.

Paul: So that’s, but that, that first 10 employees, one lawyer that you know is plenty.

Rich: Yeah.

Paul: And um, get, get, get some insurance. We have insurance at this firm, don’t we?

Rich: No.

Paul: Oh my God.

Rich: We don’t, not yet.

Paul: I guess we need some.

Rich: Which firm are you talking about?

Paul: Aboard. Aboard.com.

Rich: Oh, what a segue. Aboard.com. Collect, organize, and collaborate. It’s a free software as a service tool. Uh, it’s on the web, but the mobile app’s coming very soon.

Paul: I’m gonna tell ya—

Rich: Check it out. Join for free. It’s very cool. It’s a great way to organize stuff.

Paul: Uh, I’m going to say something utterly real. I’ve been using it a lot lately.

Rich: Yup.

Paul: And There, there have been many points in the development of this software where I’m like, I know why we don’t have a lot of users.

Rich: Yeah, yeah.

Paul: I now don’t know why we don’t have a lot of users. Well, we haven’t marketed the tool, but here we are.

Paul: No, no, I understand. Nobody knows it exists. But when I sit down and use it, I’m like, Yeah. Millions of people should be using this.

Rich: It’s very useful. This is pretty good.

Rich: Yeah. It’s actually pretty good. Check it out at Aboard. com. And, uh, thank you for listening. If you’re on YouTube, thank you for watching. Subscribe, like, and turn on that notification button.

Paul: That’s right. I got a haircut for this.

Rich: You’re looking good, Paul.

Paul: Yeah, you too Rich.

Rich: Have a lovely, lovely week. Bye.

Paul: Bye!