Hulk Hogan's Sex Tape: The Importance of Proactive Legal Measures
What Hulk Hogan’s Sex Tape Teaches us About the Importance of Proactive Legal Measures
(Pool photo via Reuters)
Even for the world’s largest and most successful companies, lawsuits can present serious and potentially costly issues. For small businesses and startups, the burdens posed by legal battles are particularly onerous, as legal fees and other associated expenses can force these smaller, less capitalized organizations to close up shop, even in instances when a case results in a favorable verdict. The fact of the matter is that protracted legal struggles will almost always result in businesses expending a great deal of financial resources and human capital, so it is always best to avoid them when possible.
In severe cases, legal action can pose existential threats to otherwise stable businesses and there are plenty of examples throughout history of lawsuits that have forced companies into insolvency and bankruptcy. Perhaps the most infamous recent example of a fatal lawsuit being brought against a business occurred in 2016, when a case filed against Gawker Media forced the formerly successful digital publisher into bankruptcy after a jury issued a $140 million judgement against the company for publishing explicit videos of professional wrestler Terry Bollea (better known as Hulk Hogan) engaging in sexual acts with the wife of his best friend- South Florida radio DJ “Bubba the Love Sponge.” While most legal cases do not result in the media firestorm and nine-figure judgement that Bollea vs Gawker generated, there are proactive measures that all businesses (particularly smaller, more vulnerable ones) can take to help them avoid similarly “sticky” legal entanglements. Below is a list of techniques that all entrepreneurs should employ to avoid suffering a Gawker-like fate.
Proactive Legal Counsel: Not surprisingly, the first and most effective way to stay out of court and avoid lawsuits is to find legal counsel that understand your business’s vulnerabilities and potential legal exposure. Do you own the underlying IP on which your company was built? What legal structures have you used to protect yourself from liability? Has anyone in your organization recently posted videos of one of the WWE’s most prominent personalities engaging in cuckoldry and racist diatribes? All entrepreneurs and small business owners should know the answers to these questions when trying to assess their potential legal exposure.
Effective Contracts: A second effective measure that businesses can take to protect themselves is to make sure that all of their financial agreements are backed by clear and unambiguous contracts. Handshake agreements, can be appealing for small, lean organizations that are looking to grow and maneuver quickly, but they also open businesses up to potential legal action when disagreements between parties inevitably arise.
Establish a Strong Legal Position: In legal proceedings, as in pro wrestling, it is essential to maneuver from a position of strength. For businesses, building a strong legal position typically means that intellectual property is protected, partnerships are established using contracts, and appropriate liability protections have been established.
Clear Communication: Whether you are entering into a limited liability partnership or a Bubba The Love Sponge-esque polyamorous relationship, effective communication is absolutely essential. Being transparent about your intentions and providing a detailed framework for all partnerships can help to prevent disagreement and legal actions.