1) Don't be sloppy (and don't get emotional, because that'll make you sloppy);
2) Whenever you're dealing with a counter-party, try to understand where they're coming from.
There was clearly a mismatch between how the author saw Karen's position and how Karen saw it, one that was undoubtedly aggravated by the lack of documentation. Look at the situation from Karen's side. She started out running the business in the Philippines. Joe came in a year later and took over, effectively demoting her. After discussing the situation, the owners proposed an 80% pay-cut and 4-month leave of absence, something most reasonable people would interpret as a signal that they were being pushed out. Depending on Philippine law, this could have qualified as wrongful termination (most countries are not as employer-friendly with regards to terminations as the U.S.) When Karen sued, the author assumed it must have been some sort of shakedown, because he couldn't see how it could be a legitimate grievance. This established the paranoia that ultimately led them to ignoring calls from their own attorney.
If the authors had tried to empathize with Karen in the first place: 1) they could've taken actions to avoid the lawsuit; 2) realized that Karen had a pretty compelling case, and treated the suit with the seriousness it warranted. All this probably could have been avoided by some thinking and a severance payment that was less than the time and money wasted on the legal proceeding.