Having more legal literacy in your business tool kit helps you squeeze out avoidable costs.  In today’s uncertain environment controling avoidable costs is more important than ever.

The law touches every aspect of business.  Identifying those touches and prioritizing them lets you make minor course corrections early in your decision making.  It can make the difference between hitting a bull’s eye or missing the mark altogether, between protecting business profits and preventing business meltdowns.  Sometimes it can be a simple as identifying what your confidential business informations is and taking the proper steps to protect it. 

To learn more about the small steps you can take to make the law a valuable and practical business partner listen to the replay of my interview with Alex Mandossian here.

This time the New York garment company who had previously engaged in publicity stunts went too far — they broadcast their poor grasp of legal literacy when they used a photo of a sitting president of the United States in a Times Square billboard ad to hawk their men’s outerwear.   

Sure, they contacted the AP photographer who took the photo of President Obama during his visit to the Great Wall of China inBadaling.  But according to the Associated Press, licensing the photo still requires obtaining the necessary clearances – in this case getting a model release from the President.  (To read the NY Times version of the story click here, the Washington Post version includes a picture of the billboard from a different angle.)

Pleading ignorance of the law, the garmet maker president said:

Is it a calculated risk?  Not being an attorney — I’m being, really, a designer, merchandiser guy in the apparel business — I would leave that to attorneys or whatever. 

Hmmm, a calculated risk.  Sure. 

Maybe they should take a hint from  Seinfeld’s George Costanza who discovered the hard way why not knowing right from wrong is more than a calculated risk.   

Ignorance of the law is a losing defense, so is saying the ad was placed in “good faith.”  You’d think that since Women’s Wear Daily, The New York Times, and the New York Post all refused to run a similar ad the company might want to know why.  But apparantly they’d rather beg for forgiveness than ask for permission.

Using someone’s photo in a commerical context implicates their right of publicity.  It requires some kind of basic a model release. 

A little bit of Legal Literacy can go a long way.

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.

So much of what I come across is examples of businesses that miss the boat on legal literacy, who don’t leverage the law for competitive advantage, and who don’t sidestep legal problems while they are still small and inexpensive to manage.   

It’s truly sad to see managers and executives willingly embrace legal problems as a cost of doing business when so many of those legal problems and dollars spent fixing them can be avoided with a little bit of foresight.

That’s why it’s a great pleasure to find someone who get’s it and is doing it right.  It’s even more exciting when I can share 2 examples in the same blog posting.

1.  The first tip of my legal literacy hat goes to Toys R Us.  This week they announced a trade-in program for potentially unsafe used cribs and other baby paraphernalia.  As a young grandmother, I appreciate their gesture on a number of levels. 

Even though Toys R Us sells products made by other companies, they understand that product recall notices often go unnoticed.  (One of the most recent crib recalls occurred this past July after the tragic reports of more infant deaths.  Add the Consumer Product Safety Commission product recall page to your favorites for continuous updates on product issues.) 

Since babies rapidly outgrow these products it’s not uncommon for cribs, car seats and other items that are in serviceable condition to be in circulation long for many years, sold at yard sales or handed down between neighbors and friends.  Those resales and hand-me-downs represent keep defective products in circulation longer than necessary, representing a continuing risk of injury to the children of the parents that use them.  Of course, they also represent a lost new product sales opportunity for companies like Toys R Us.  What a wonderful way to combine good corporate citizenship with a chance for boosting sales.

2.  The second tip of my legal literacy hat goes to Georgetown Cupcake, a specialty bakery in the Washington, D.C.  A recent article in the Washington Post extolled the virtues of cupcakedom – an upscale treat for our downscaled economy. 

What particularly caught my eye was the discussion of Georgetown Cupcake, a start-up business that opened their doors on Valentines Day 2008.  Even though they were newbies, they were savvy enough to require employees to sign nondisclosure agreements and noncompete agreements.  They not only recognize the value of the human and intellectual capital and the central role it played in protecting their cupcake secrets and business model, they took active steps to protect it.

Bravo to both of these fine examples of business leadership.