Today, companies of all sizes must be ready for the unimaginable crisis and its inevitable aftermath: high-stakes litigation. Recent studies show bet-the-company cases are on the rise because crises are no longer rare occurrences—and we all know there is no such thing as a small catastrophe. These suits create multiple sub-crises that must be managed at the same time: public relations for the outside world (the public, clients, vendors, insurance carriers, financial lenders); internal relations (management, in-house legal departments, board members, employees, shareholders); legal matters (lawsuits, damages, costs); and potential government investigations (regulatory agencies and authorities).
Proper coordination is particularly important because, with omnipresent social media, the events will likely unfold at breakneck speeds in real time, and under the watchful eyes of conflicting groups. The sub-crises create unique challenges and there is little margin for error. One small misstep could lead to financial ruin as a crisis evolves into an existential threat in which the very survival of the company is at stake.
A successful response depends on a centralized and cohesive approach, with a focused strategy executed by a highly professional team. This team should be composed of senior management, lawyers (in-house and outside), and public relations and consulting experts who are in constant communication with other necessary parties, including insurance carriers, to ensure that everyone is on the same page at all times.
What Is a Bet-the-Company Case?
Bet-the-company litigation (BTCL) can be any legal action that threatens the existence of a company or major line of business, whether or not the case goes to trial. BTCL is especially prevalent in commercial cases involving banking, financial services, health care, and telecom. However, there is a wide variety of casualty events—such as natural disasters, mass shootings, or terrorist attacks—that could put any company’s existence at risk without warning.
For many companies, bringing and/or defending civil suits is a part of doing business, and it is usually handled without any severe impact on the company’s model or ability to succeed. However, some lawsuits are potentially catastrophic and can cause irreparable damage to the company’s structure and reputation.
Early resolution of a BTCL can be a win, but how do you get there? Successful BTCL defense requires a strong team in place, coordination and frequent communication, and positioning the litigation for resolution.
Create a Defense Team
Immediately after a major event occurs, if a strategic plan is not already in place, then a cohesive crisis management team must be assembled as events will be moving very quickly.
The team should be tailor-made to handle all sub-crises spawned from a catastrophic event. Specifically, it should comprise:
• Selected company management.
• The company’s in-house legal department, a lead outside law firm, and possibly local counsel in the geographic location of the event.
• A public relations firm.
• Consulting experts in the fields required to assist in an investigation of the cause and origin of the crisis and to provide guidance on next steps.
The law firm, public relations firm, and retained experts should all have the depth of experience to handle high-exposure catastrophic events and litigation.
Develop a Working Legal Strategy
The lead law firm and in-house legal team should coordinate the various team members and synchronize the moving parts, all under the auspices of the attorney-client and work-product privileges. The team should quickly create a strategic plan to handle, coordinate, and manage the crisis and each sub-crisis. The strategic plan will be the touchstone of the defense.
The public relations team must be ready to mobilize and message the company’s position to shape public opinion consistent with the strategic plan before the plaintiffs’ lawyers intervene. Time is critical; waiting even 24 hours may be too long for a meaningful response before the public rushes to judgment. Furthermore, each day that the crisis continues drains the company of valuable resources.
The plan will no doubt be constantly revised as facts unfold, but the sooner a plan is created, the better. The entire team should be on the same page and adopt the plan before it is executed. In addition, as soon as practicable, the plan should be communicated to the insurance tower so the individual carriers are aware of it and not surprised at any point. Additionally, regular tower updates on developments should be scheduled.
Early Evaluation
The availability of critical information about an event on social and news media can be overwhelming. Not long ago, we would never have expected the day when everything we hope to get from a deposition is already out there for the taking. What people put on social media about themselves is often shocking—and fertile ground for discovery. This is not to say that you won’t take depositions and put people under oath, but sometimes it is not necessary.
Social media sources can also help you evaluate the case and move forward with it. This is free discovery and, in many cases, comes directly from the plaintiffs.
Having paralegals search the internet and gather social media content is cost-effective and valuable in assessing and developing a damages model to determine potential exposure. Also, technology tools are available to help defense lawyers prepare their cases by gathering key information, especially in a mass-casualty situation. The point is that you have to evaluate this aspect of the case as soon as possible, and continuously monitor and adjust your evaluation.
Evaluate Risk-Spreading and Cost-Sharing Opportunities
When evaluating a case early on, it is critical to explore other parties to which you can spread the risk and share in the costs. This includes parties known and unknown at the time of the evaluation. Have all the players been extended an invitation to the party? Are there parties to which you can tender? Can indemnification and/or contribution claims be exercised?
Be sure to evaluate these potential other parties for such opportunities and pursue them as early as possible. This will preserve arguments so you might be able to shift costs under certain situations in the future.
Create Leverage
Obviously, the defense wants to win. But with BTCL, you do not necessarily have to win at trial. A “win” is containing the risk through resolution and bringing the litigation to an end as soon as practicable.
This is one of the key aspects of handling BTCL: You want to get the legal issues resolved right away. The best way for the defense to resolve BTCL is through leverage. You must think creatively and consider non-traditional strategies, such as filing your own claims for declaratory judgment on key legal issues. Sometimes filing a motion for summary judgment right before mediation will give you leverage. Inserting certain arguments that play to the mindset of your judge can result in your argument being taken under advisement and settlement negotiations continuing.
Again, using what you know about the players to your advantage is important—and be sure to use mock jury trials and focus groups. Those are very useful tools if you are taking a huge case to trial.
Think Resolution
The earlier you can resolve BTCL, the better. Some of our most successful stories recount the resolution of high-profile, high-exposure cases before discovery kicks off or before that complaint is filed. It is important to all players involved to achieve finality and avoid PR issues. So, to the extent that you can resolve a case early, do not hesitate. Again, with social media, sometimes you do not even need formal discovery to get what you need to evaluate your case. Be sure you make the most of what you have.
Use your resources—investigators, paralegals, and other groups previously discussed—to help determine what you can do to help strategize and advance a case toward resolution.
Early resolution is possible—you do not have to wait until you are up against a trial date to get to the mediation table. With that said, when you do go to mediation, make sure you select a mediator that both sides agree on and respect. Most effective are judges, retired judges, and private mediators who will tell both sides the way it is—and who can handle a difficult client. Often, it will be plaintiffs’ counsel that is having control issues with their clients, and an effective mediator can help bridge gaps to bring a case to resolution.
Resolution does not happen overnight; it takes time. Most important, you have to get the parties to agree to lay down their weapons and avoid war. You need to show that everyone benefits more from resolution now versus later. The best way to do that is to exercise the leverage you gained early on.
Next, you need to give the other side something they want. It does not have to be everything they want or even exactly the way they want it, but you need to know what it is they want and find the best way to deliver it—be creative and use all resources available to make it work. This means making sure all decision makers, clients, insurers, and relevant parties are involved in the strategy and its execution from the outset.
Equally important, you need to know exactly what the client wants—what is negotiable and what is not. To save the company, you need to understand not only the numbers central to the survival of the company, but also what the company values.
Alternatives to a Jury
Trial is not the only path to a settlement. Consider offering a non-binding summary jury trial, which is an abbreviated version of a full-blown trial. You have a jury and you follow the trial process, but the conclusion is non-binding. It is meant to be instructive, advisory, and a way to determine what a jury is likely to do with the facts, providing each side with clues to the strengths and weaknesses of their case. Summary jury trials can be followed by a mediation.
Another option is to propose an arbitration, which can help manage the risk. Set up an arbitration with the appropriate rules and structure, choose one to four arbitrators from the usual sources—JAMS, AAA, or retired judges—and try the case before this panel of arbitrators, introducing the damage range you want from a defense standpoint. Be prepared to negotiate a high/low situation with the plaintiff’s lawyers that brackets numbers far more reasonably than the demands, even if the higher number is reached by the arbitrators.
This can be an appropriate alternative if the numbers are much less than the crazy demands and the potential for a nuclear verdict is removed. It is a novel approach: Plaintiffs often need the money, so it can help bring the case down to a more manageable level. Importantly, it removes the hype of a jury trial and it is confidential. It is a way to give the plaintiff something quickly that also manages the risk in a really bad case. There is no appeal, and the payment date is certain.
BTCL requires a counterintuitive mindset and nontraditional defense strategies. The goal is not to take the litigation to trial; it is to assess quickly, create leverage to position for resolution, and foster a suitable environment for ending the crisis through mediation or reasonable terms that save the company. Avoiding the prolonged crisis is a win.