Note: The is an 'oldie but goodie' blog post by zlien CEO Scott Wolfe originally published in May 2013.
Just look at recent news reports. The recent IRS scandal and scandal involving wire-tapping of the AP journalist is putting the problem under the spotlight. You may think these scandals are about politics or political perspective, but you would be wrong. The scandals are about law. Specifically it’s about what our laws mean, or unfortunately, whether they mean anything at all.
Let me introduce myself: My name is Scott Wolfe, and I’m an attorney. I have first hand knowledge about everything that is wrong with America’s legal system, but so do you. That’s because what’s wrong with the law is all around you.
This isn’t just a problem for our system of government, but it’s a problem for our entire economy. It’s a problem for your business. In this article, I’m going to tell you why the rule of law is broken and how it is costing your business — and specifically your credit department – money. Lots of money.
The Traditional Lawyer Is Dead
A friend of mine, Ernie Svenson, wrote an article on Laywerist last week titled “Going Out of Business, Bar Association Edition.” He wonders whether bar associations are the legal profession’s underlying problem and whether they will become “irrelevant to those who really want the profession to improve.” This is a common and growing sentiment among some in the legal community.
The Wall Street Journal’s Law Blog chimes in on this issue frequently, but most recently published “Do Lawyers Know Best?,” which covered an Emory Law Journal article written by Professor James E. Moliterno. The professor is quoted as saying that “the legal profession is ponderous, backward looking and self-preserving.” Also, I highly recommend reading Richard Susskind’s “The End of Lawyers?”
There are two things to say about this:
- This is all true, and perhaps both of these articles understate the problem; and
- The only people who will disagree are backward looking lawyers. No one in private enterprise will disagree with this.
When lawyers misbehave they are reviewed by other lawyers. When deciding on which rules apply to lawyers, it is the lawyers who make the rules and enforce the rules. The Securities and Exchange Commission do not review large billion dollar firms. The Federal Communications Commission does not review lawyer media communications and advertisements. It’s rare to get police departments to review potential lawyer fraud since they will leave this to the jurisdiction of the bar associations.
Certainly, the self-regulating system has been around for a long time, but that is no justification for its continuation. The world is more global, legal compliance issues are more complicated, the enterprise of law is enormous, and the nation has standards of transparency that the legal profession simply mocks.
While this may all seem like a technical lawyer regulation issue, the next section of this post explains how it translates into a concrete problem for the rule of law and justice.
Is The Law Uncertain, Unreliable And…Worthless?
Ask a lawyer whether you will win or lose your case and you’ll never get a straight answer. In fact, its an ethical violation for an attorney to tell you an answer, and that’s because it’s impossible to predict how the courts will interpret the law and rule upon your case. This is not simply because the law is ambiguous and subject to interpretation, but also because courts will rule inconsistently on the same legal and factual questions.
In fact, because of litigation uncertainties, attorneys are pretty uniform in their advice to accept a compromised settlement than to “roll the dice” in litigation. Even if you win, you’re likely to lose because it’s going to cost you a fortune (sometimes, improperly so), and it may be very difficult to collect on a judgment.
This begs the question: How does the “Rule of Law” mean anything if there is no consistency or reliability?
House Speaker John A. Boehner was widely quoted with his question about the IRS scandal: “Who’s going to jail over this scandal.” His question is hallow and will be met with eventual silence. The real question to be asked in response to the IRS and Justice Department scandals is the above question about the Rule of Law.
Congress will drag IRS Officials before hearing committees to pepper them with questions, but the truth is that there will be no accountability. The laws are too ambiguous and there’s an argument on every issue. Spin is not a political tool, it’s a legal tool, and the IRS officials and other relevant administrations will spin the issue until its reaches a complexity beyond the masses’ concern.
The same is true of the Justice Department and their wiretapping scandal, or of any scandal. It’s spin, ambiguity, details, law exceptions and confusion. It’s never justice. It’s never clarity.
The same thing repeats itself thousands of times each day across our civil and criminal courts. District court judges make decisions that significantly impact people’s lives and businesses, but they do it behind closed doors. Sure, everything they do is “public record,” but who is keeping track? And which watchdog group and media outlet is paying attention to the finer points of civil procedure rules or rules about contract interpretation?
The truth is that the courtroom has become a howling wilderness, just as our government has. And if you think the government is bad, just imagine how bad it is in civil and criminal courthouses where journalists rarely review or ask questions about pending cases, and even if they did, they wouldn’t understand the spun complex answers.
How This Is Costing Your Business Lots Of Money
Let’s say you are a credit professional working with a material supply company and you have a client refusing to pay. What do you do?
If the client refuses strongly enough, you’ll eventually be required to start litigation to enforce your right to the debt. But wait, if you’re going to get into litigation you better review your circumstances and make sure the juice will be worth the squeeze.
Is the debt less than $100,000? Well, many lawyers will pretty much laugh you out of their offices. That’s because the cost of litigation is going to rival six figures if it goes from start to finish. In other words, if you want a real lawyer to take and make a real case for you, you’re going to need to spend serious money. If your debt isn’t large enough, it just doesn’t make fiscal sense.
Do you need the money soon? If you need the money with any relative quickness you’re better off going ask for a loan. The reason is that litigation is likely to take months or years of time from start to finish, and that doesn’t count the time you’re going to spend in appeals and/or in chasing your tail to collect the judgment.
You may see where this is going.
First, the Rule of Law is so inconsistent and ambiguous that it’s impossible to make a reliable determination of whether you will or will not prevail in litigation. Second, litigation will take a very long time and will cost a lot of money. If you have a customer not paying you, and you’re like most small to mid-size businesses in America, it’s a losing proposition.
The legal system’s disfunction leaves the fate of your business to the chance that all of your customers will always pay you. This is why credit management and securing your receivables with lien rights is so very important. When confronted with a non-paying customer, being able to use the disruptive lien tool may be the only real chance you’ve got.