Avoid (or at least survive) bet-the-company litigation
We recently blogged about the rapid growth of bet-the-company litigation. Short version of that post: the number of companies involved in such cases is quadrupling. If you’re corporate counsel, you want to do your best to avoid such risky, resource-devouring litigation, and survive it when it’s inevitable.
If bet-the-company litigation is on your mind, here are some initial thoughts on steps you can take to reduce the chances you’ll be involved in it.
Provide exceptional service. Plaintiffs generally don’t sue unless they feel truly aggrieved. “If a customer or a vendor knows they are being heard, they are more likely to resolve an issue and less likely to hire a lawyer,” writes Mark A. Romance. “Address the issue head-on before it escalates.”
Take care with contracts. Make them specific, get them signed, and manage the signed documents carefully. “A great document is of no use when a dispute arises if you cannot locate your customer’s assent to the terms,” says Romance. “Having a clear, written agreement is key to avoiding litigation because all parties know what to expect from the relationship and what happens if something goes wrong. It is the uncertainty that usually drives litigation.”
Specify alternative dispute resolution. Going to court costs more, takes longer and typically does more damage to your brand than arbitration. “Contract clauses requiring the parties to mediate their claims before seeking relief in court – and limiting the remedies available to them if they do end up in litigation – can provide both the means and the motivation to reach out-of-court settlements that are swift, cost-effective, and private,” writes attorney Patrick C. Tinsley. “Likewise, binding arbitration clauses can expedite a final outcome by limiting discovery and appeal rights.”
Do your homework. Tinsley tells the story of a professional baseball team that passed on an elite player after a background check turned up a domestic dispute on his record. A second team failed to look, reached an agreement with the player, and then was mired in complexity later. “Contrary to what common sense would suggest,” says Tinsley, “businesses often proceed with care and caution where the stakes are comparatively low, while rushing headlong into decisions that involve significant company resources.” Don’t be that company.
And three things you can do to help you survive bet-the-company litigation.
Appoint a dream team. Key players include a lead litigator you can trust to manage the entire case and an internal discovery leader with IT experience who can manage that often unwieldy process. “Too [many] resources, time and money [are] often spent defending discovery battles over the adequacy of document collection and preservation efforts,” attorney James Bernard told Inside Counsel. “Having a person in-house who is dedicated to the task and who knows what they are doing is invaluable as the litigation progresses.”
Don’t spread yourself too thin. Parallel proceedings are common in bet-the-company cases. “Civil and administrative litigation that occurs simultaneously – and even worse, civil or administrative litigation during a grand jury investigation or criminal proceeding – may force a company to choose between pursuing its interests in one proceeding and prejudicing them in another,” writes Inside Counsel. Strategize creatively and use any conflicts to your advantage. Investigators in a criminal case, for example, are often happy to postpone civil case depositions.
Finally, talk to your insurer. If you’re being sued, you may be covered.
Bet-the-company litigation is a real concern for anyone who owns a company, runs one or works for one. Don’t let it happen to you, and if it does, do whatever it takes to end up on the right side of the result.