Defending Bet the Company litigation

Andrew Kasnetz (left) and W. Perry Brandt

By Andrew Kasnetz and W. Perry Brandt, Sandberg Phoenix

Artificial Intelligence (AI) defines Bet the Company Litigation as referring to “high stakes legal cases where the outcome can significantly impact a company’s financial stability, future, or even its survival.  These are cases where the company risks major financial losses, reputational damage, or even potential bankruptcy.”  The vast majority of businesses are involved in routine litigation, and many are involved in complex litigation; however, for a variety of reasons, in recent years a growing number of companies are faced with these extremely serious “bet the company” lawsuits.  They can take the form of various types of class actions (securities, antitrust, ERISA and consumer cases, for example); mass tort and product liability litigation; patent, trademark and copyright litigation; trade secret and business tort litigation; and even regulatory and governmental proceedings.  The potential risks are very real: huge jury verdicts (especially in certain jurisdictions), catastrophic injunctions, losses of intellectual property, bankruptcy or other litigation, and of course large defense costs.

Companies should, of course, undertake precautionary measures to avoid or mitigate bet the company litigation.  First and foremost, businesses should make sure that they and their officers and directors are adequately insured.  Second, businesses should avoid business practices that might lead to large scale litigation, and should always be thinking about the potential plaintiffs’ lawyer looking over their shoulders.   Third, businesses should monitor compliance issues closely and look for patterns which might lead to litigation.

When faced with a bet the company lawsuit or lawsuits, a company must act with the seriousness of the proceeding in mind.  The first priority is to assemble the defense team, with emphasis on word team: although the adage “clients hire lawyers, not law firms” is true, it is equally the case that lawyers must have adequate resources to tackle such important matters.  The selection of lead counsel is critical – there must be one individual who is involved in all key decisions and strategies and truly leads the team, and the client, the court and the jury must perceive that reality as well.  Generally the team will consist of a fairly senior lawyer, a younger partner, a senior associate, a junior associate and a paralegal, and each must know his or her role.  The lead counsel then should plan on taking the lead at trial, including jury selection, opening statement and closing argument, and examination of key witnesses, and then also delegate other roles to the rest of the team.  Delegation is very important to insure that skill sets match the work to be performed, and that work is being performed efficiently and on a cost effective basis.

To the extent that there is insurance which may cover the matter, the carrier(s) should be put on notice immediately and the defense is tendered, even where there is a reservation of rights.  In these cases it is important for the company to negotiate the choice of counsel, and one option is to pay the difference in hourly rates while all fees still apply to any self insured retention.

In such cases it is important to know the jurisdiction, the judge, and the potential jury panel well.  It can be a good idea to hire a jury consultant early on, and also it is helpful to seek out and retain expert witnesses at an early stage as well.   In addition, pretrial motions such as motions to dismiss and motions for summary judgment can be successful, or at least can narrow the issues.

It is also helpful to determine whether bet the company litigation can be resolved, through mediation or otherwise.  In this regard it can be important to maintain a professional relationship with opposing counsel (to the extent possible), and also to be up front about the company’s finances and ability to satisfy a large potential verdict.  Searching for non-monetary solutions also can be helpful.

If a bet the company case in fact makes it to trial, lead counsel and the tram must follow some important rules.  Furst, the lawyers must be relatable to the judge and jury, and cannot be arrogant or obnoxious.  People skills are critical!  Also, given the possibility of juror bias against corporations, it is critical to “humanize” the client and its employees; after all, “corporations are people too.”  Then, counsel should spend considerable time and effort on jury selection and opening statement, as many jurors have made up their minds by those stages and use confirmation bias to evaluate the evidence thereafter.  It also is important to strategize the sequence of witnesses – start strong and finish strong!

Bet the company litigation can be daunting, but it need not be a source of panic.  Hopefully the foregoing will be helpful in planning for such a possibility.

BridgeTower Media newsroom and editorial staff were not involved in the creation of this content.