Legal Briefs

Avoidance Behavior

Learn to resolve disputes before they occur.

By Thomas E. Gibbs, JD |

Mediation, arbitration, and other forms of alternative dispute resolution have become a favorable choice in today’s commercial real estate market. While ADR can be helpful, the involved parties often don’t realize the expectations of the process, which can make it a very expensive course of action for commercial real estate disputes. An alternative approach is dispute avoidance, which is essentially the art of avoiding a dispute before it arises.

In real estate litigation, the involved parties can usually identify actions that, if managed differently, would have avoided or lessened the litigation. For example, poorly chosen terms in a letter of intent or a verbal promise that goes undocumented can quickly lead to misunderstandings, disputes, or even legal action between two parties. After the fact, the basis of the conflict may be easy to recognize, but recognizing these issues as they occur is the essence of dispute avoidance.

The dispute avoidance approach is novel yet practical: Commercial real estate professionals should approach everyday business dealings with an eye toward building a strong case. The concept is based on a seeming paradox— by acting to build a strong case, you can avoid a dispute in the first place. Understanding and implementing this approach does not require a legal education; rather it simply requires a basic understanding of how litigation works and what makes a successful case.

Building a Winning Case

At its most fundamental level, success in litigation depends on the ability to persuade a third party, whether it is a judge or a jury. The persuasive winning case has four elements. First, the story — or your version of the facts — must be cohesive and believable. Second, you must be perceived as reasonable and in the right. If a jury perceives that you are trying to take advantage of the other party, even the most favorable facts may not save your case. Third, you and your witnesses must be honest and credible. If you are caught in a lie or half-truth, your entire case may be harmed. Finally, thorough documentation is critical. Documents created before the dispute arises that support your case are the most persuasive of all.

Trial lawyers often win cases by using these four elements to put together the most persuasive story. Attorneys evaluate cases using these elements to determine how solid a case or defense is. The stronger these elements are, the more likely the other party’s counsel will advise against suing or, if a lawsuit is filed, the sooner the case will be resolved to your advantage. Ultimately, these elements create leveragethat can lead to a faster and better resolution in your favor.

Techniques to Try

How can a commercial real estate party build a case before a dispute arises? First, learn the dynamics of a winning case so that all of your actions and documents are believable, honest, and verifiable to avoid disputes. Second, learn and use the many tools that create a winning case. The following steps can assist in building a winning case.

• Ensure that purchase agreements, leases, or other contracts are clear and comprehensive. If contracts are drafted in this way, the other party generally cannot create a dispute, even if it becomes dissatisfied with the deal.

• Know and comply with the terms of the contract to avoid breaching its terms and to be aware if the other party breaches the contract.

• Never use verbal agreements, understandings, or representations. All agreements should be documented in writing before taking any action.

• Make effective use of clarification or confirmation letters and e-mails. A prompt e-mail clarifying a misunderstanding or stating there is no agreement until all the terms are delivered in an executed writing helps to build a winning case. It is very difficult to credibly testify to facts that are different from those stated in a contemporaneous document. It is equally important to promptly correct in writing any misstatements made in letters or e-mails received from the other party.

• Conduct daily business with an eye toward how a third party, such as a judge or jury, would view the conduct. Do not misrepresent or overstate. Do not take actions that would not be deemed ethical. Do not take undue advantage of a situation.

Real estate deals and projects can be fraught with dispute minefields. The dispute avoidance approach can help parties in a transaction prevent disputes, and in situations where disputes occur, parties can actively use tools to build a strong case. When managed strategically, real estate disputes can be resolved, whether pre-litigation or in litigation, in your favor.

Thomas E. Gibbs, JD, is an attorney with Allen Matkins Leck Gamble Mallory & Natsis LLP in Orange County, Calif. Contact him at tgibbs@allenmatkins.com.