There are very few C-level executives who look forward to going to trial. It just does not happen. For most companies, litigation is a drain not only on financial resources, but also on time, focus and energy.
Yet, it is important for every company to understand that litigation is a fact of life in business. For successful companies, it can’t be ignored. There are circumstances that will push even the most litigation-averse board of directors into the courtroom. As such, it can be helpful for companies to set their own “line in the sand” beyond which litigation becomes a viable option.
Here are a few ways some companies set and approach this trigger point:
- Some companies will seek to avoid trial at all costs. Their fear of bad publicity affecting stock prices and shareholder confidence is usually the driving force behind this approach. While this is a valid strategy, it has a limited shelf life. Settlements beget more settlements, which beget more expensive settlements. Plaintiffs will escalate and the company is usually forced into the very litigation executives sought to avoid.
- A company may decide to pursue litigation to try to bring down costs. They first build a competent national team of trial lawyers. Then they develop a regional database for each jurisdiction to assess the likelihood of verdicts, verdict amounts, and plaintiff’s attorneys and their tendencies. This evidence is used by the company as a basis for their settlement offer, rather than the demands from plaintiffs’ lawyers.
- Another company facing large potential damages claims in difficult jurisdictions may run focus groups on the issues before mock juries to test out both plaintiffs’ claims and the company’s defenses. It’s important for the focus group to mirror as closely as possible the demographics of the jury the company is likely to get in a particular jurisdiction. Information gathered from a successful focus group can determine whether it will be most cost-effective to pay to resolve the case or go to trial.
- Some companies initially start out paying settlements but soon realize it would make more financial sense to pursue litigation. This is often because settlement values increase, and the company’s executives realize they will soon not be able to afford paying out unless they bring down the value of those cases. The company may not have to go all the way to a verdict. It might be enough to begin a trial, demonstrate to the plaintiffs’ lawyers the company has a strong case and is not afraid of litigation, and then seek a more reasonable settlement.
Whatever the situation, it is important for companies to communicate their goals to the trial lawyer — whether the company would like to start a trial with an eye toward settling or if the company is prepared to go all the way to verdict. The trial lawyer needs to know the preferred approach from the start as every interaction with plaintiff’s counsel becomes crucial to fulfilling the company’s objective.
It is practical to think that the new axiom for business is that the only certainties are taxes, regulation, and litigation. Companies that understand and incorporate litigation strategies into overall business plans can more easily control when and where they are drawn into court. A little planning and forethought can go a long way in taming the litigation beast.
This is for general information and is not intended to be and should not be taken as legal advice for any particular matter. It is not intended to and does not create any attorney-client relationship. The opinions expressed and any legal positions asserted in the article are those of the author and do not necessarily reflect the opinions or positions of Miles & Stockbridge P.C., its other lawyers, or InsideCounsel.