When Jose Ybarra, director of general business law at CPS Energy in San Antonio, found out about a wrongful death lawsuit filed against his company by a young, grieving widow, he knew that if the case ended up in court he would have little chance of settling.
"If we were part of the problem, causing the incident, no amount of discovery is going to change that," he says. "As a matter of fact, sometimes it gets worse as you go on."
So Ybarra asked if he could speak to the plaintiff with her lawyer present. The woman's attorney had told him there was little chance of settling the case, but Ybarra wanted the young widow to know that CPS was sorry for her loss, and that he would work to do whatever he could to rectify the situation. As he told the woman this, she remained silent, tears streaming down her face. But some time later, she agreed to settle, and her attorney told Ybarra that his conversation and the empathy he showed were the main reasons she decided against going to court.
"We created an atmosphere to allow it to happen, if it was going to happen," Ybarra says. "That in itself is not going to resolve the case. If you've put your best foot forward, you're on your way to a successful mediation simply because the other side feels that they can work with you."
Ybarra told this story at a recent Martindale-Hubbell Counsel to Counsel forum in Houston titled "Trends in Litigation Management and Dispute Resolution." Ybarra and a group of in-house counsel and law firm attorneys discussed the various techniques they use to keep cases out of court and outside counsel fees under control. They also talked about when it makes sense to avoid settling--no matter the financial risk involved.
Risky Business
Many of participants agreed the first step a GC should take to resolve a case early is ensuring the risk management department is on board from the very beginning. It's essential, they said, that all appropriate insurance carriers are notified of a suit as soon as it is filed.
But this isn't as easy as it sounds, especially when risk managers see a case from their own narrow viewpoint, according to Frank Vecella, associate general counsel for Ericsson Inc. and a participant at the forum.
"Don't just assume that risk management is looking at it from the same lens as you are," he says. "The risk management folks in my company aren't lawyers. They came to our industry from the insurance world where they were adjusters or claims handlers, and--as you might imagine--they consequently have more of an insurer's view when it comes to assessing coverage and interpreting insurance policies."
In addition, Vecella believes it's essential that GCs follow up on all tasks risk management undertakes. "I try not to step on their toes, but ask them to give me some preliminary assessment of whether they think there might be any type of coverage for this, be it a duty to defend, or a duty to indemnify," he says.
At the end of the day it's the legal department's responsibility to ensure the company has notified the appropriate carriers.
GCs also need to be aware of the potential conflicts of interest that can develop between risk managers and insurers. If executives are measuring, evaluating and compensating risk managers based on how cheaply they renew insurance polices every year, this could complicate their view of a case.
This type of complication arose when Vecella asked his risk managers to notify the company's insurance carrier about the preliminary stages of a lawsuit. He felt the risk managers' view was, "Why would we want to do that? We might upset our insurance company."
Wallace White, senior counsel at Akzo Nobel, believes that risk managers do the most good when they forge relationships with insurance carriers.
"Insurers are risk averse and at the end of the day, if the insured company is large enough and has any longevity, the company will ultimately be paying for all its risks anyway, over time," he says. "The relationship with insurers is more like a partnership and less arm's length, so we all have to work together very closely."
Keeping Costs Down
Other essential elements of early case assessment are decision trees and focus groups, which participants agreed in-house counsel sometimes overlook. These methods also are useful in bringing businesspeople up to speed during the initial planning stages.
Rosemarie Donnelly, a partner at Andrews Kurth, begins every case by building a list of relevant documents and starting a decision tree based on key events and testimony. In a decision tree, counsel examine all the possible outcomes of all the decisions that could be made in a case and then determine the financial consequences of each. This allows the parties involved to analyze the various litigation tactics and make objective decisions about which direction to take the case.
Donnelly then talks to in-house counsel about getting discovery under control and begins looking into a company's business plan for a solution to the legal problem. Finally, she conducts focus groups to determine what tactics will resonate with potential jurors.
"There's quite a bit of information that you can put before a group of mock jurors to get a feel for what people think of your case," she says. "It's a unique opportunity for the lawyer, and it doesn't have to be a big deal or expensive."
In assessing damages early on, John H. McDowell Jr., a partner at Hughes & Luce, believes that a damages model is the best way to quantify risk. "One thing that you never hear is, 'quantify your damages as quickly as possible,'" he says. "A lot of people look at a decision tree and don't think about damages. People have to keep in mind that the ultimate downside could be millions of dollars."
Even in complex cases, it's possible for in-house counsel to conduct such an assessment internally by examining company records and tapping into the company's knowledge of the market. Although some participants think it's a worthwhile investment to bring in a damage expert.
"Companies will say 'I really don't want to spend $100,000 on this now,' but you've got to convince them and I think it's extraordinarily important to get a grip on this part of it," McDowell says.
When in-house counsel have completed a case assessment, they then need to begin thinking about ways of reining in outside counsel expenses.
Jeff Carr, vice president, general counsel and secretary of FMC Technologies Inc., uses a risk-reward system. In the past, he also has used an online auction process where firms compete for work. He admits the process isn't always the best way to build long-term relationships with outside firms.
"We have a good partnering relationship with the firms," Carr said. "Sometimes it's contentious, but as the in-house counsel, you have to treat the firm fairly. We are the strategists, the law firms are the tacticians, and a budget is a budget. It does require communication, particularly if a development comes up that undermines the assumptions."
Saving Face
While the goal of any legal dispute is resolution, sometimes companies have to go to court to ensure they don't earn a reputation for being trial adverse.
"There's always going to be those who want to take advantage of the system," Ybarra says. Whenever a claim is brought against CPS, he tries to determine if the case is devoid of merit. If it is, he asks plaintiffs' attorneys to pinpoint the issue in question. If they can't, he files a motion for summary judgment.
"We've been very successful in knocking those out early," he says. "We let them know that we're not going to allow you to just file a lawsuit and expect to get compensated when we have absolutely no fault. So we try to send the message quickly in that type of situation."
If all else fails, GCs can get creative in working with plaintiffs to get a case settled. "If Billy Bob wants a bass boat, then let's go buy him that today and get it settled," Carr says. "It's a way to close the financial gap."