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Litigation has become a fact of life in modern day business. By its very nature, litigation brings risk and uncertainty, interferes with business operations and customer relationships, and disrupts a company\u2019s ability to plan for the long term. However, litigation, and in particular the type of commercial disputes that commercial litigation law firms handle, does not occur in a vacuum. Rather, it typically stems from some underlying business dispute or other issue that parties often have tried to resolve without success. Whatever the background of the dispute, the decision to bring in outside counsel provides the company with a valuable opportunity to consider the dispute, how it will proceed going forward, and the company\u2019s ultimate goals in resolving the dispute.<\/p>\n
To paraphrase a commonly used military phrase, commercial litigation can often be viewed as a business negotiation through other means. That means, however, that the ultimate \u201csuccess\u201d of litigation should be evaluated in light of the company\u2019s business aims and objectives. Outside counsel can play an invaluable role in helping the company obtain those aims and objectives, but two things are essential for that to occur\u2014(1) early and frank communication between the company and its outside counsel, and (2) an objective and thorough early case assessment as to the risks and probable outcomes of litigation.<\/p>\n
Communication Between the Company and Outside Counsel<\/h2>\n
Effective communication between the company and its outside counsel, as early in a dispute as possible, is critical to ensuring that a dispute is efficiently and effectively resolved. Besides the basic facts of the underlying dispute, there are several issues that a company should discuss with its outside counsel.<\/p>\n
First, it is important for the company and its counsel to be on the same page as to what constitutes a \u201cwin\u201d in litigation. Events in litigation are too often viewed in binary terms\u2014was a claim filed, was a motion granted, did the jury decide in a party\u2019s favor, was a settlement reached, etc. All of these events, however, occur against the backdrop of some larger commercial context, and the point of litigation is not simply to \u201cwin\u201d in an abstract sense, but rather to help the client advance its interests. So, for example, the company and its counsel should discuss:<\/p>\n
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- What is the company\u2019s relationship with its adversary? Is the company in a dispute with an important customer? A competitor? A former customer with which the client will no longer be doing business?<\/li>\n
- What is optimal resolution of the dispute? Is the company looking for a quick settlement that involves a continuation (if not enhancement) of existing business terms, or does the company need to engage in protracted litigation to achieve its ends?<\/li>\n
- How important is this dispute to the company? Is it critical to the company\u2019s business (including any future business plans) or is the company looking to be more cost conscious in litigating the dispute?<\/li>\n
- How aggressive does the company want to be? Are there relationships or issues that the company wishes to preserve or otherwise avoid?<\/li>\n
- If litigation is being pursued, do the company\u2019s key employees support the decision? Do the relevant witnesses still work for the company? If they have left its employ, are they still available and willing to assist? Did they leave on friendly terms or are key witnesses likely to be adverse to the company?<\/li>\n
- Is there a way to resolve the dispute short of active litigation? Does the company wish to pursue that option? If not, how can litigation help position the company to resolve the dispute short of a trial?<\/li>\n<\/ul>\n
Additionally, open communication early in the case helps to level set expectations, ensure that all relevant decision makers are on the same page, and to try to minimize unnecessary surprises as litigation progresses. To that end, there are several issues that should be considered:<\/p>\n
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- Does the company and its relevant employees understand the litigation process, and understand that, even in the best of circumstances, it will be disruptive to the business?<\/li>\n
- Does the company understand that it is often difficult to have a claim dismissed?<\/li>\n
- Does the company understand that if the claim is not dismissed, the opposing party will be entitled to discovery, which is extremely broad in US litigation? This is particularly important when representing foreign companies, which may be based in countries that have significantly more restrictive rules of discovery, if discovery is provided at all.<\/li>\n
- Does the company understand that litigation is public and that it may not be able to keep embarrassing or harmful facts out of the public and the press?<\/li>\n
- Does the company understand that litigation can stretch on for years? Is the company prepared to provide the necessary resources to litigate the case, including employees who may be taken away from their actual work to assist, by providing information, collecting documents, being deposed, and ultimately serving as witnesses at trial if need be?<\/li>\n<\/ul>\n
The company also should understand that litigation is expensive, and that the cost of litigation should be taken into account in considering what constitutes a \u201cwin\u201d in litigation. Does the company want to spend the money to research every issue, look under every rock, depose every witness, and pursue every angle? Or does the company want to focus on the key issues and witnesses and perhaps bypass some less critical issues that are less likely to help resolve the case? Is the dispute going to require expert evidence, and if so what type of expert(s)? What is the client\u2019s financial position and how does that impact on litigation strategy? There is no \u201cright\u201d or \u201cwrong\u201d answer to any of these questions. Rather, the important thing is that the company and its counsel discuss them, and counsel provide the company not only with its options, but also with guidance on how best to achieve the aims and objectives that the company and counsel has discussed.<\/p>\n
Early Case Assessment<\/h2>\n
An early case assessment provides significant benefit to a company contemplating or facing potential litigation. This assessment should be objective\u2014in deciding how to proceed, the company should understand whether litigation is likely to succeed. While there may be reasons to pursue litigation that may be difficult to win, at a minimum the company should be aware of its chances of success.<\/p>\n
Conducting a narrow, focused analysis of issues that will arise if litigation occurs helps to determine the long-term strategy of the case. Among other things, this should include:<\/p>\n
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- What are the themes that would guide the company\u2019s case in litigation?<\/li>\n
- Where has the litigation been filed (or is likely to be filed), what judge has been assigned, what is our prior experience with that judge, and how does that factor into the company\u2019s strategy?<\/li>\n
- Who are the key witnesses to the dispute and do they support the company\u2019s position? Are those witnesses likely to be good witnesses?<\/li>\n
- What are the key documents to the dispute, and do they support the company\u2019s position? Among other things, it is important to review any agreements governing the dispute and any communications between the company and its adversary, as well as internally between the key witnesses on the dispute. Depending on the dispute, this may require some searching of email or other electronic documents. While this adds some cost up front, these documents would almost certainly have to be collected, reviewed and likely produced in litigation in any event.<\/li>\n
- What are the key legal and factual issues that will govern the dispute?<\/li>\n
- What are the best and worst facts for the company\u2019s position?<\/li>\n
- Are there any issues that will require experts? Who are the most likely candidates and what will they likely cost?<\/li>\n
- What is the likely outcome of the litigation vs. the cost to the company in litigating?<\/li>\n
- Are there potential options to resolving the dispute short of litigation?<\/li>\n<\/ul>\n
While this type of assessment involves additional cost early in a dispute, it enables outside counsel to provide the company with a concrete view of the risks and potential benefits of litigation, and to best assist the company in making a decision about how ultimately to proceed. Additionally, this assessment should be updated and supplemented as facts develop and the initial assessment changes. The ultimate goal of outside counsel is to enable the company to achieve its business objectives, despite the risk and disruption of litigation. Frank and open communication and an early and thorough case assessment are two critical ways to provide that service to our clients.<\/p>\n
Kevin F. Meade<\/strong> is counsel at Weil, Gotshal & Manges.<\/em><\/p>\n<\/p><\/div>\n
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