It started out as a simple collection matter.  A customer had committed to purchase something by way of contract.  They failed to pay.  The company contacted them several times.  When the customer still didn’t pay they sued.  The customer still didn’t respond and the court issued a default judgment.  It’s the kind of thing that happens every day in business.  Only this time it turned into a small public relations nightmare when a Washington Post reporter picked up the story and wrote about it.

The collection matter that caught the reporter’s eye: the Washington Redskins had sued Pat Hill, a 72 year old life long Washington, D.C. resident, a grandmother, and a real estate agent who was a multi-year season ticket holder that defaulted on her promise to buy season tickets because the housing bubble burst and she was broke.

The good news is that after the media flap the Redskins requested that the court vacated the $66,364 judgment.  Note: defaults can accelerate the payments due and trigger interest, attorney’s fees, and court costs.  She had a 10 year contract through 2017 for two prime time seats at FedEx Field and the Redskins were able to recoup the full value of the unpaid contract.  The vacated judgment meant she didn’t have to pay. 

The other good news is that we all have an opportunity to learn some legal literacy lessons from the fumbles on this play.  Here’s what this zebra has to say about it.

Never ignore a lawsuit.  We’ve seen it before and we’ll probably see it again.  Ms Hill says she couldn’t afford a lawyer and therefore never responded to the lawsuit.  That’s a huge legal literacy mistake. 

If you ignore a lawsuit it does not go away.  It will bite you in the end zone.   That’s because once a suit is filed the judicial machinery is engaged.  The wheels start turning and the case takes on a life of its own.  There are deadlines.  If deadlines come and go and no one, not even you, is there to tell your side of the story, your side doesn’t get heard.  It’s that simple.  The only thing the court hears is the other side and that means they automatically win.  It’s called a default judgment.  You lose.  Case closed. 

Even if she couldn’t afford a lawyer, Ms Hill had some options.  She could have contacted legal aide.  She could have looked for a lawyer (perhaps another diehard Redskins fan) who would have taken the case on a pro bono (free) basis.  Or she could simply have shown up in court herself to explain the situation.

Unfortunately, Ms Hill isn’t the first person to ignore a suit and wind up with a judgment against her.  We recently saw, for example, how ignoring a case resulted in a $4.1 billion award.

You can’t score points if you sit on the sidelines.  So unless you can afford to loose, suit up when a suit is filed.  Show your face in court, get someone to do it for you, or at a minimum call the lawyer who filed the suit.  Their name and phone number is right there on the court papers.  Ask what they really want and try to resolve the case before a deadline comes and goes.

Ms Hill admits she ignored the lawsuit.  That single mistake caused a lot of aggravation.

The legal literacy score at the end of the first half: Redskins 7, Hill 0.

Come back tomorrow for part 2 when I discuss smoke signals and other mixed messages.

Copyright ©2009, Corporate M.O., LLC.

“The rules by which servicers are reimbursed for expenses may provide a perverse incentive to foreclose rather than modify”

Recent paper published by the Federal Reserve Bank of Boston, quoted by The New York Times, July 30, 2009.

I’ve written about the distinction between law and ethics before.  But shrinking English muffins and the “grocery shrink ray” pale in comparison to the hidden incentives lenders have to push struggling mortgage holders into foreclosure. 

According to the legal experts, the Obama administration’s loan modification program incentives are outweighed by the revenue stream banks derive from collecting mortgage late fees.  The longer the lender waits before foreclosing, the more late fees can be collected. 

Once the property is foreclosed on, the same mortgage company often participates in the transfer and resale process.  According to one insider, one mortgage company established its own title company so that it could keep more of the revenues from foreclosures – charging for a title search when the property was foreclosed on and titled transferred to the mortgagor, and again when it transferred to a new buyer, along with title insurance.  Ca-ching!

I’m sure there was plenty of contract language somewhere that allowed these lenders to justify raking in all of those fees.  But you can’t help question the ethics and social conscience underlying those business decisions when the collateral damage they create (undermining the loan modification program, exacerbating the borrower’s financial distress, and depressing housing values) far exceeds their own narrow interests.

©2009 Corporate M.O., LLC.

Americans still admire dignity.  But the word has become unmoored from any larger set of rules or ethical system.

David Brooks, “In Search of Dignity,” New York Times,  July 7, 2009

Brooks’ article speaks of dignity as a moral strength, a code of behavior that places the greater good above personal interests.  It’s a fascinating concept, one that is closely aligned with integrity and ethics.

Seems to me that if we’ve been “unmoored” that getting “anchored” to core values is a good thing and precisely what thousands of corporate mission statements and ethics policies do.  Yet, living up to the promise of core values is much tougher to do. 

Unfortunately, the lack of shame associated with undignified business behavior pursued in the name of profit promotes an anything goes attitude.  It leads to more self serving behavior until new laws are enacted to put a stop to it.  Recent examples include the off the books accounting practices of Enron, the derivatives of Wall Street, and of course the many contributors to the real estate bubble.

Imagine what it would be like if more businesses did more of what they “should” do instead of what they “can” do under some legal loophole.  It would simply the legal aspects of business.

If only we could restore the “dignity code.”  

 © Corporate M.O., LLC, 2009

Aggressive comparison advertising is on the rise.  Just last week, for example, Sara Lee sued Oscar Mayer over a hotdog ad that implied a certain type of Oscar Mayer frank beat the entire Ball Park Frank product line in a national taste test. 

With everyone fighting tooth and nail for customers and market share, I thought I’d pass along a good article from Advertising Age that includes 5 tips at the very end for how to avoid getting sued or alienating consumers when engaging in comparative advertising. 

It’s called “The Gloves Are Off: More Marketers Opt for Attack Ads,” by Emily Bryson York.  You can read it by clicking here.  I highly recommend it.