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Holmes, How … Do I Resolve Customer Complaints and Minimize Legal Liability?

customer dispute resolution and release

Customer complaints are a reality of doing business. When they arise, is an apology sufficient? If not, what’s an appropriate settlement amount, and when should you obtain a release? Having a pragmatic plan to address grievances can help retain your valued customers and mitigate the risk of disruptive legal disputes. Let’s get started.

  1. Are you Listening? – Often customers simply want to be heard. The only cost is your time and empathy. However, be mindful that “I Hear You” is different from “Mea Culpa”. To your customer, the former is likely disarming. As an attorney, the latter is potentially alarming, because admission of wrongdoing could be used against you in a legal dispute. A reasonable alternative is to genuinely apologize for a customer’s dissatisfaction with your product or service, while not specifically agreeing to any fault. This is especially important if you’ve not yet had an opportunity to fully investigate the matter.

  2. Get it in Writing – If acknowledgment of a customer’s concern is insufficient appeasement, take the lead to evaluate an appropriate resolution. Do you have a form (whether physical or digital) ready to collect the patron’s narrative? If you maintain a customer care department, your representatives may document the initial complaint. Then, follow up to request the customer’s written complaint, along with any relevant evidence such as photos of damage, receipts, medical bills, etc. Provide guidance for the information that will help you evaluate their claim. While some may balk at the necessity to follow this process, others could be pleased that you have a means for fair assessment of criticism. Completing your written form provides the customer an important opportunity to think in detail about what happened. Likewise, it provides you, as the business owner, with the relevant facts and dates to take measure of the complaint. Did the customer follow the product’s label instructions? Is their expectation within the scope of your service contract? Do you need any further information to reach a sound conclusion?

  3. Release Me! – Once you have evaluated the customer’s statement and related materials, it’s time to assess an appropriate resolution. If denying the claim, briefly explain your basis in writing. However, if the claim is merited, or you simply make a business decision that settlement is more pragmatic and cost effective than potentially defending a lawsuit, then before issuing any recompense, be sure to obtain a written release from liability. This release should be sufficiently broad to cover any ancillary complaints related to the grievance. The necessary release language may vary by state, so it’s good practice to check with local counsel to ensure that your document is enforceable.

  4. Make an Offer They Shouldn’t Refuse – Ground rules – no horse head deliveries to your customer’s bed (my Godfather fans will get that one!). But, how much compensation should you offer in exchange for a release? Again, having receipts and invoices for the asserted damage is helpful because it provides a basis for evaluating your customer’s actual out of pocket costs. Also consider the potential expense for defending litigation. This includes not only attorney’s fees and court costs, but also the expense of distraction from your core business and the redirection of resources to address discovery and deposition demands. (Real litigation is very different from TV series litigation!) Further, consider the potential damage to your brand on social media. A single bad Yelp review can have protracted effect on your business reputation. Likewise, potential investors and business partners may monitor your professional standing in determining whether to conduct business with you. Ultimately, the value of a settlement and release is a commercial decision that will include consideration of multiple variables. Whether offering a product/service replacement or cash, it may be wise to leave some room for negotiation in the event that your first offer is not acceptable to the customer.

Finally, if a consistent pattern of customer complaints develops, there’s an opportunity to adapt and improve. That said, if you don’t use the knowledge from your customers for that purpose, the documented history of customer complaints could become litigation fodder. Word to the wise - if a customer’s attorney contacts you, it’s a good idea to retain your own counsel early enough to help navigate the dispute, and avert mistakes with your defense. An ounce of prevention? Well-drafted contracts can help avoid disputes by clearly explaining everyone’s expectations up front. Informed customers are hopefully happy ones.

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JoAnn Holmes ("Jo") is the founder of HOLMES@LAW, LLC. She serves as Outside General Counsel to select, intimate management teams for midsize companies. Likewise, Jo provides strategic support for lean law departments.

Jo founded HOLMES@LAW to provide agile, result-driven legal solutions. Beyond risk management, we help identify opportunities. The firm's focus areas are business law and strategy, commercial contracts and global intellectual property management. We build long-term relationships as trusted collaborators, and our flexibility consistently yields great value for clients.

HOLMES@LAW is also committed to service work, including through supporting local schools and leadership groups, as well as domestic and international charities. Since its founding, the firm has dedicated more than 200 hours to community service.

Contact Us to discuss how we can work together for your business success. HOLMES@LAW - Your Business Ally™.

Holmes, How … about the Disclaimers?

Information shared by JoAnn Holmes and/or HOLMES@LAW, LLC ("We or Us") is for educational purposes only. It is not legal advice. Each situation is unique, so the information We share may not be relevant to your circumstance. Until you enter a formal engagement agreement with Us, We are not your legal counsel, and no attorney-client relationship exists. So, please do not share any confidential information with Us, and please only interact with Us if you agree to these ground rules. Thanks!

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