Momentum Podcast: 413
The Truth About Lawsuits
by Alex Charfen
One of the most draining, the most difficult things you will do as an entrepreneur is either pursue or defend a lawsuit. Every time someone says something to me like, “Well, I'm just going to talk to my attorneys”, I always wonder if they have any clue what that really means. Lawsuits are ridiculous. Here's the truth.
I'm Alex Charfen, and this is the Momentum Podcast, made for empire builders, game changers, trailblazers, shot takers, record breakers, world makers, and creators of all kinds, those among us who can't turn it off, and don't know why anyone would want to.
Lawsuits are ridiculous. Here's the truth… If you're pushing limits as an entrepreneur, sooner or later you're probably going to end up in some sort of legal conflict. When you get into a legal conflict, no matter what the official outcome, my contention is that everyone loses. Do not take legal conflicts lightly. Lawsuits are a huge financial, emotional, and energetic drain in any business. At the end of the day, no-one wins.
Full Audio Transcript
Alex Charfen: One of the most draining, the most difficult things you will do as an entrepreneur is either pursue or defend a lawsuit. Every time someone says something to me like, "Well, I'm just going to talk to my attorneys", I always wonder if they have any clue what that really means. Lawsuits are ridiculous. Here's the truth. I'm Alex Charfen, and this is the Momentum Podcast, made for empire builders, game changers, trailblazers, shot takers, record breakers, world makers, and creators of all kinds, those among us who can't turn it off, and don't know why anyone would want to.
We challenge complacency, destroy apathy, and we are obsessed with creating momentum so we can roll over bureaucracy and make our greatest contribution. Sure, we pay attention to their rules, but only so that we can bend them, break them, then rewrite them around our own will. We don't accept our destiny, we define it. We don't understand defeat because you only lose if you stop, and we don't know how. While the rest of the world strives for average and clings desperately to the status quo, we are the minority, the few who are willing to hallucinate there could be a better future, and instead of just daydreaming of what could be, we endure the vulnerability and exposure it takes to make it real.
We are the evolutionary hunters, clearly the most important people in the world, because entrepreneurs are the only source of consistent, positive human evolution, and we always will be. It's an unfortunate fact of being an entrepreneur. If you are pushing limits, if you are pursuing big outcomes, and you are working with other people, sooner or later, you're going to end up in legal conflict, and lawsuits are one of the most draining, demoralizing, frustrating things you can do as an entrepreneur. In fact, when you get into a lawsuit, when you get into a legal conflict, my contention is, almost always everyone loses, and most entrepreneurs have no clue what they're committing to when they threaten someone legally. Lawsuits are a huge financial, emotional, and energetic drain in any business. I've been in business for over 25 years, over ...
Yeah. Now, it's approaching 30. Every time I say something like that, I realize just how much it ages me. One of the things that has been a constant in my career is legal conflicts, legal challenges, lawsuits, and having to be involved in all of those. I've been in depositions, I've been a witness in cases, I've been called on to testify multiple times, I've been through multiple different arbitrations, and tons of legal issues. I've been to a two-year federal prosecution, where somebody end up in federal prison for embezzling from us.
The legal system, dealing with lawyers, dealing with legal conflict is not something that I'm unaccustomed to. In fact, when it comes to lawsuits, I typically am giving our attorneys the strategy, and when it comes to lawsuits, more than once, I've been called on to consult with or to work with entrepreneurs who are in lawsuits to help provide legal strategy, because once you've been through a bunch of them, you start to see patterns, and you start to see opportunities, and you start to see how lawsuit should really work. However, these days, you hear all the time from entrepreneurs, "Well, I'm just going to call my attorney", or, "I'm just going to get my attorneys involved", and let's be honest. I mean, let's be really real. Most of the time, entrepreneurs who say something like that don't really have an attorney.
Maybe they know an attorney, maybe they're related to one, but they don't have an attorney with the specialty that they're threatening, and most of the time, that type of a statement indicates to me the person really doesn't understand what's going on. Lawsuits are absolutely brutal. I'll share a couple of ours with you. A few years ago, we had a company. Harris Real Estate University in Las Vegas started using one of our trademarks. We had the CDPE designation, Certified Distressed Property Expert, and they created the Certified Distressed Property Designation, so the CDPD Designation.
However, when they used our designation verbally on their webinars and their presentations, they actually said CDPE, so they were intentionally trying to mislead the market, they were intentionally using our trademark, and they were doing everything they can to present themselves as our product so that they could sell people, and what I would say is a non-integral way and a really frustrating legal way, and so we sent them a cease and desist. Well, what happened was Tim Harris jumped on social media and read our cease and desist letter. He actually shared it with people. He said, "Here's what they're doing. They're coming after us. They don't stand a chance", and so what we did was simple.
We hired attorneys, where they were in Las Vegas. We sued them in Las Vegas. It actually made the newspaper in Las Vegas, so it went from them posting on social media to a short while later, them paying our attorney's fees, paying a penalty to us, writing us a check, and making the commitment that if they ever used any of our designations again, that they would end up writing us a substantial check. I can't remember what the settlement said, but I think it was either 100,000 or 250,000. In that case, it was a lawsuit, or a lawsuit or legal conflict that we actually won.
That is one of the best legal conflicts I've ever been through, because we were able to resolve it, we were able to get payment, we were able to move on, and we stopped the competitor from using our designation and from using our trademark. Now, that is about the best scenario, because I've also been in a lot of lawsuits that I won, but I would put win in air quotes like the two-year federal prosecution that we had against Michael Goldberg, who embezzled from us, was exhausting. It was emotionally draining. Every time my phone would ring from the secret service, or from an investigator, or from somebody else needing something, it just felt like the death of a thousand paper cuts the entire time we were going through it, and as an entrepreneur, if you're going to get involved in legal conflicts, you better really know what you're talking about and what you're doing. Initiating a lawsuit, you're looking at over $10,000 just to do the first few steps.
The retainers you're going to have to write if you get into a real lawsuit where you're actually going to court, you're writing checks for 50, 75, 100,000, and the numbers go up fast. Really fast. In fact, for most lawsuits, it's not going to be just one attorney working with you. It's going to be multiple, and the numbers go up even faster. Cadey and I have spent millions on legal fees in the time that we have been in business. In fact, we spend six figures on legal fees a year right now just for the other businesses we have, for some other legal conflicts that we have.
We're still resolving the embezzlement that went on, and so when entrepreneurs start talking about legal issues, I wonder like, "How well do you know what you're really talking about?", because even when you win a legal conflict, a lot of the time, you lose. In fact, a few years ago, there was another company that violated our trademarks and our copyrights. The company's name was Lionsgate Financial, and what they did was so egregious and so frustrating. We had a product, the same product, Certified Distressed Property Expert, and we had a package of resources that we created for the Certified Distressed Property Expert, and at the bottom of every one of them, it said, "Copyright", then the year Certified Distressed Property Institute. That was our company.
We created all of the resources. We wrote every word, so we copywrote them, and we got a copy of Lionsgate's resources, and they were exactly our resources. Like literally, no change, and what they had done is they didn't even do like a good job. They cut and paste like with paper a footer over our footer, and then made scans of our documents and used them as theirs, so they literally took exactly our documents and just replaced Distressed Property Institute with Copyright Lionsgate Financial. We had this company dead to rights, so I did exactly what I do when something like this happens.
We send out a cease and desist with a request for information to see how many people had been sold using our documentation because that money was ours, and so we ended up getting some static from Lionsgate Financial. They didn't answer us, so we initiated a lawsuit, and we took them to arbitration. I can remember the day we were in arbitration because it was distance arbitration. We did it through, I think GoToWebinar, Zoom or some platform like that, and we presented our case to the mediator. Lionsgate presented their case, and I sat there waiting, and 45 minutes later, the mediator got on the line with me and he said, or she said, "I want you to know you're right here."
"They violated copyright. They violated trademark. They have absolutely used your materials in a way that they shouldn't have. You rightfully should win here. However, here's the problem. We've talked to the owner of Lionsgate, and they have no money."
"They're actually very close to bankrupt. They believe they probably will go out of business, so they can't make any payment of damages to you whatsoever", and so our entire lawsuit, we chased a company that had spent all of the money they made using our materials, and then had nothing left. What ended up happening was the mediator ordered them to give us their database, and to give us their customer lists so that we had those things if we wanted to use them. I don't think we ever did, but we took it anyway, and then they were ordered to stop doing business in our category, to stop training in any way around the materials that we had put out there. Again, we won a lawsuit, and the mediator told us we were absolutely entitled to tens of thousands of dollars. We should have gotten a settlement out of them, but we won in a way that makes you lose because I spent a lot of money on legal, I spent a lot of time in the mediator with arbitration.
We spent a ton of time going over the the legal case, figuring out what we needed to put together, and then at the end of the day, all we did was speed up the company going out of business that was already going to go out of business for using our materials anyway, and it was exhausting. In fact, I can remember like it was yesterday. In 2011, we won the 21st fastest-growing company in the United States, and I was actually in the live mediation during the Inc. 500 conference, so I had to leave and miss several speakers to go sit in my room and go through this lawsuit, and "Win" in the worst way because what we really did was we won and we lost at the same time. Lawsuits are brutal, and when you understand how to navigate the legal system, when you understand how to use lawyers and the power of a lawsuit, the power of subpoena, when you know those things, you can be the 800-pound gorilla. I always joke with my friends that if you go into a club and there's a guy who's six-foot five and weighs 275 pounds, and he's jacked and he has cauliflower ears, so you know that he's been a wrestler and his nose is a little crooked, you can see that it's gotten broken, and he has a scar from a cut on his forehead, it's probably not somebody that you're going to mess with ever.
I know somebody like that. I'm being very cautious around them, especially in a club. I always joke with my friends that I want to make us. Cadey and I looked that way when it comes to legal issues because we are that guy. When it comes to legal issues, when somebody has a conflict with us, it's very challenging for the other person because we've done this over, and over, and over again, and we know the process, but I've spent thousands of hours and hundreds of thousands of dollars learning it, and in retrospect, most of the legal conflicts that I've been in, especially a lot of the ones that I initiated, we could have just moved on and we would have probably ended up in the same place. A lot of times, the people that we went after didn't have any money anyway, didn't like Lionsgate.
That scenario played itself out over and over again in my career, where we went after somebody, we won, and there was nothing there, and so when it comes to lawsuits and legal issues, unless you really know what you're doing, be cautious. Unless you really understand the legal system, you don't want to get involved, and even when you have a two-year federal prosecution and you win, I can remember the day, and I've talked about this before on the podcast, I can remember the day that Michael Goldberg was sentenced to his time in prison, and we walked out of the Federal Courthouse in Downtown Austin. I can remember thinking that it was going to be this feeling of relief, and this feeling of victory, and this feeling of what should have happened happened, and what it really was was this hollow, empty feeling like nothing had really changed. I still felt violated. I still felt exposed.
I still felt shame that I let it happen to me, that I let myself get embezzled from. I was still embarrassed by it and I felt vulnerable, and all of those things were the exact same feelings right after he was sentenced, and we "Won". When he pled guilty, standing there in a prisoner's jumpsuit with shackles on, I thought I would feel some feeling of victory, and I didn't. In fact, I just felt frustration and I just felt the same vulnerability that I had felt this the whole time that we were pursuing him for stealing money from us, and so when it comes to legal issues, here's the truth. Lawsuits are incredibly difficult.
Rarely do they create any type of productivity, and if you don't know what you're doing, you can very quickly rack up massive fees, like I have in the past. I've made huge mistakes. There's been times where, because I was emotional, and because I was frustrated, and because I felt taken advantage of, I've racked up massive fees to go after people who had no chance of ever paying us anything. I've bankrupted both companies and individuals, thinking that it was going to make me feel better, and most of the time, it was just the hollow feeling of not really accomplishing anything more than spending a lot of money so that I change somebody else's status in the world. When it comes to lawsuits, if you're going to get into a legal conflict, if you are going to go head with somebody, be really sure that it's a conflict that you can win, it's a conflict that you know in advance what your outcome is going to be.
A lot of the legal issues that I've initiated, especially early in my career, I just knew that I wanted to go after somebody. I didn't really know what I wanted, and here's what attorneys love. When I was younger, I was an attorney's dream, because I was willing to initiate a lawsuit just to start the fight, just to let the other person know that I was irritated, but I didn't know what my outcome was. I didn't know what my budget was. I didn't know when to stop spending.
I just kept going and going and going, and as a result, I've spent way too much money on lawsuits that even though I could win, there was nothing to win, and even though I came out ahead, there was really nothing that it gave me, other than the feeling of knowing I was ahead, and at the end of the day, that is a lot of money, a lot of time, and a lot of energy to spend on something that really doesn't move you forward. Now, all that being said, I'm still the six-foot five guy who weighs 275 pounds, and is clearly somebody who's been in a lot of fights. If there is a legal issue, Cadey and I sit down these days, we come up with a legal strategy, we come up with a legal budget, we have a large legal emergency funds, so if there's ever an issue legally, we already have the money set aside to either defend or go on the attack, and we know in advance what our outcome is, and then we pull the trigger. If you follow that process, you won't end up where I've been more than once, "Winning the legal conflict", but if you look at the metrics and you look at what I got and you look at what happened, we really in the long run lost like crazy. Lawsuits are one of those things, it will take you out of awareness, it will separate mind-body connection, and will make you feel accelerated, frustrated, upset, vulnerable, and exposed, and all of those things will slow us down as entrepreneurs.
Remember, as entrepreneurial personality type, you are a physiologically sensitive, momentum-based being, so if you are in a conflict of any kind, one of the things you must remember and must make sure that you are doing is take care of yourself. Make sure that you are taking care of yourself in a way that increases mind-body connection, keeps you present, keeps you aware, and make certain that you have what you need to to make the decisions you're making. One of the biggest parts of this is staying hydrated, and I'm a coach who helps people grow and scale their businesses. I help entrepreneurs put their businesses into a completely different stratosphere of growth and exponential growth, but that also puts entrepreneurs in another level of stress, and one of the most consistent ways we have found to help entrepreneurs stay present, aware, and in momentum is to make sure that no matter what type of conflict you have, you are staying hydrated all day. When you are dehydrated, your body increases toxicity, it slows down metabolism, it slows down digestion.
There's a whole host of issues that you have when you're not staying fully hydrated, but when you do, you stay in momentum, present and aware. If you want to learn how to drink more water than you ever thought possible, go to Getthirstynow.com. We help people grow and scale multimillion-dollar businesses, take six-figure businesses to seven, and seven to eight and beyond. The first thing we start with with every client who joins our high-end coaching program is hydration. If you want the same information they get, go to Getthirstynow.com and join our 10-day Natural Thirst Challenge. Follow the strategies, and in just 10 days, you'll be drinking more water than you ever thought possible. Getthirstynow.com.