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Book
Avoiding and Managing US Business Litigation Risks
A Comprehensive Guide for Business Owners and the Attorneys Who Advise Them
Published: 2021
Pages: 483
eBook: 9781787425231
Why are companies so frequently sued in the United States, and how might these business litigation liabilities be avoided through preventative measures and more effectively managed? This book answers those two weighty questions. The central premise of the work is that many costly and protracted lawsuits in the US are traceable to unforced errors companies make time and again. By better understanding the sources of commercial litigation, preventive steps can be implemented, reducing these risks. The author draws on two decades of experience defending companies throughout the US in almost every conceivable type of commercial litigation. He applies a “lessons-learned” approach from these experiences, to examine how corporate defendants can avoid claims by developing and enhancing their litigation risk profile.
Why are companies so frequently sued in the United States, and how might these business litigation liabilities be avoided through preventative measures and more effectively managed? This book answers those two weighty questions. The central premise of the work is that many costly and protracted lawsuits in the US are traceable to unforced errors companies make time and again. By better understanding the sources of commercial litigation, preventive steps can be implemented, reducing these risks. The author draws on two decades of experience defending companies throughout the US in almost every conceivable type of commercial litigation. He applies a "lessons-learned" approach from these experiences, to examine how corporate defendants can avoid claims by developing and enhancing their litigation risk profile.
The book is written for a diverse audience. The primary intended audience is attorneys who may find it useful as desk-reference for quickly accessing relevant information and issue-spotting for their clients. But the book will also interest any person - lawyer or non-lawyer - whose responsibilities include managing US litigation risks. These persons include those in venture capital, CFOs and other members of management, risk management and compliance professionals, and entrepreneurs seeking to implement best practices as they launch a start-up. Whether as an initial overview of the subject matter or a useful desk-reference, Avoiding and Managing US Business Litigation Risks is an invaluable resource for individuals tasked with addressing this challenging topic.
The book is written for a diverse audience. The primary intended audience is attorneys who may find it useful as desk-reference for quickly accessing relevant information and issue-spotting for their clients. But the book will also interest any person - lawyer or non-lawyer - whose responsibilities include managing US litigation risks. These persons include those in venture capital, CFOs and other members of management, risk management and compliance professionals, and entrepreneurs seeking to implement best practices as they launch a start-up. Whether as an initial overview of the subject matter or a useful desk-reference, Avoiding and Managing US Business Litigation Risks is an invaluable resource for individuals tasked with addressing this challenging topic.
Table of Contents
| Cover | Cover | |
|---|---|---|
| Title page\r | i | |
| Copyright page\r | ii | |
| Contents | iii | |
| Executive summary | ix | |
| About the author | xiii | |
| Acknowledgements | xv | |
| Introduction | xix | |
| PART ONE: UNDERSTANDING WHY COMPANIES ARE ENSNARED IN COSTLY LITIGATION | 1 | |
| Chapter 1: The Five Cs of Business Litigation Risks | 3 | |
| Creating a business litigation risk profile | 4 | |
| The closely-related regulatory risk profile | 8 | |
| Assessing commercial litigation risks – a five-part framework | 10 | |
| PART TWO: CORPORATE GOVERNANCE LITIGATION RISKS – CLAIMS FROM SHAREH OLDERS ANDOTHER CONSTITUENTS OF THE BUSINESS | 15 | |
| Chapter 2: Basics of Corporate Governance Litigation | 17 | |
| Understanding shareholder litigation – a useful metaphor | 18 | |
| Four recurring themes of corporate governance litigation | 23 | |
| Seven legal concepts useful to understanding corporate governance litigation | 27 | |
| Chapter 3: Ten Sources of Corporate Governance Lawsuits | 37 | |
| 1. Irreconcilable differences between ill-suited business partners | 37 | |
| 2. Failing to maintain the formalities and other best practices | 39 | |
| 3. Giving employees equity interests resulting in dual sets of obligations | 41 | |
| 4. Disputes over informational rights of shareholders, members and partners | 42 | |
| 5. Misleading constituents through fraudulent statements or omissions | 44 | |
| 6. Breach of fiduciary duty claims | 47 | |
| 7. Failing to make reasonable inquiries concerning risks to the company | 52 | |
| 8. Failing to implement a code of ethics and effective corporate compliance program | 53 | |
| 9. Commingling and other separateness issues | 55 | |
| 10. Dealing with creditors and facing insolvency | 56 | |
| PART THREE: LITIGATION RISKS FROM COMMERCIAL CONTRACT DISPUTES | 61 | |
| Chapter 4: Core Issues in Breach of Contract Litigation | 63 | |
| The six issues raised in contract-based litigation claims | 70 | |
| Conclusion | 89 | |
| Chapter 5: Strategies for Managing Litigation Risks Arising from Commercial Contracts | 93 | |
| 1. Manage the contracting and approval process | 93 | |
| 2. Formalize informal agreements | 95 | |
| 3. Be aware of the risk of preliminary agreements and agreements to agree | 96 | |
| 4. Scrutinize the scope of express indemnity provisions | 97 | |
| 5. Address termination scenarios and the risk of precipitous terminations | 98 | |
| 6. Specify which contract terms survive termination | 99 | |
| 7. Craft time limits and cure provisions that are appropriate | 100 | |
| 8. Consider how joint venture duties arise | 101 | |
| 9. Include an effective integration clause | 102 | |
| 10. Guard against claims that a contract was fraudulently induced | 103 | |
| 11. Prevent claims that a contract was modified by subsequent conduct and effectively modify written agreements | 104 | |
| 12. Preclude claims for extraordinary damages | 106 | |
| 13. Control where the battle will be fought and jurisdictional waivers | 109 | |
| 14. Ensure favorable law will be applied | 110 | |
| 15. Consider the pros and cons of arbitration | 111 | |
| 16. Decide whether an attorney fee provision is beneficial | 120 | |
| 17. Determine whether there are strategic benefits to waiving a jury trial | 121 | |
| Chapter 6: Lawsuits Arising from Negotiations and Implied Obligations | 125 | |
| Surprise contract formation | 128 | |
| Liability for bad faith during contract negotiations | 132 | |
| Misuse of confidential information obtained in negotiations | 137 | |
| Coercive negotiations constituting economic duress | 139 | |
| Practical ways to reduce the risks of claims arising from contract negotiations | 140 | |
| Avoiding claims for breach of the implied covenant of good faith and fair dealing | 145 | |
| PART FOUR: CUSTOMER CLAIMS INCLUDING CONSUMER PROTECTION CLASS ACTIONS, PRODUCT LIABILITY, AND BREACH OF WARRANTY CLAIMS | 151 | |
| Chapter 7: Customers Presenting Consumer Protection and Class Action Risks | 153 | |
| US class actions – a tough pill to swallow | 155 | |
| Overview of US class actions | 156 | |
| The rise in pre-filing settlements | 164 | |
| The California class action framework | 165 | |
| The interrelationship between state consumer protection claims and federal regulations | 171 | |
| Chapter 8: A Framework for Identifying Consumer Class Action Risks | 177 | |
| 1. What is said about the product or service? | 178 | |
| 2. What is not said about the product or service? | 186 | |
| 3. What is said about the price, including fees and charges? | 187 | |
| 4. What is said about competitors or the market? | 190 | |
| 5. What is said about the transaction? | 192 | |
| 6. How are the advertising statements conveyed? | 195 | |
| Chapter 9: Additional Litigation Risks Specific to Product Sales and Distribution | 207 | |
| Breach of warranty claims | 209 | |
| Product liability claims | 220 | |
| Prop 65 Claims | 227 | |
| Chapter 10: Strategies for Mitigating Specific Customer Litigation Risks | 237 | |
| Identify and prioritize the greatest customer litigation risks | 238 | |
| Re-examine regulations that may buttress customer claims | 238 | |
| Monitor regulatory activity | 239 | |
| Become familiar with relevant litigation trends | 239 | |
| Review insurance policies and exclusions | 240 | |
| Explore indemnity rights and obligations | 241 | |
| Consider SRO guidance, industry, and voluntary standards | 242 | |
| Assess documentation relating to products or services advertised, distributed, or sold to customers | 242 | |
| Utilize customer service data | 243 | |
| Confirm effective assent to contract terms | 244 | |
| Focus on integration clauses and contract modification rules | 246 | |
| Address arbitration clauses and an effective class action waiver | 247 | |
| Limit time periods to the extent permitted | 248 | |
| Disclaiming implied warranties to the extent permitted | 251 | |
| Limit liabilities and remedies to the extent permitted | 251 | |
| Consider product recall issues | 252 | |
| Consider disproportionate liabilities that arise from incorporating component parts or ingredients in a product | 253 | |
| Negotiate acceptable quality limits and failure rate provisions for large volume sales | 254 | |
| Chapter 11: Claims Relating to Data Privacy and Cybersecurity | 259 | |
| History and origins of privacy protections | 261 | |
| A “cradle-to-grave” approach to privacy liabilities | 262 | |
| Privacy regulations applicable to particular industries and contexts | 280 | |
| The ten questions to ask in evaluating risks of data privacy claims | 282 | |
| PART FIVE: COMPETITOR LAWSUITS INCLUDING MISAPPROPRIATION, INTERFERENCE, INTELLECTUAL PROPERTY, AND ANTITRUST CLAIMS | 291 | |
| Chapter 12: Litigation Risks Relating to Competitors | 293 | |
| The eight most common litigation theories asserted between competitors | 294 | |
| Things to consider before suing a competitor | 327 | |
| PART SIX: CREWMEMBER LITIGATION – CLAIMS BROUGHT BY, BECAUSE OF, OR AGAINST EMPLOYEES | 337 | |
| Chapter 13: Crewmember Claims and other Liabilities Relating to Employees | 339 | |
| The most common claims by employees against employers | 340 | |
| Preventing and reducing employment claims | 361 | |
| Claims arising from employees’ tortious actions | 367 | |
| When to sue an employee | 370 | |
| PART SEVEN: LITIGATION MANAGEMENT AFTER A LAWSUIT IS FILED | 381 | |
| Chapter 14: The Essentials of Commercial Litigation Management | 383 | |
| Litigation presents a complex set of problems for companies | 384 | |
| Complex problems require creative solutions | 385 | |
| 1. Pre-litigation communications and demands | 388 | |
| 2. Pleading stage and initial forum fights | 393 | |
| 3. Discovery | 399 | |
| 4. Pre-trial merits determination | 402 | |
| 5. Trials and arbitration hearings | 403 | |
| 6. Post-trial motions, appeals, and enforcement of judgments | 407 | |
| Chapter 15: Foundational Litigation Management Decisions | 413 | |
| Choosing and engaging the right flight crew | 413 | |
| Working through the preflight checklist | 421 | |
| Revisiting the flight plan | 427 | |
| Controlling litigation costs | 428 | |
| Chapter 16: Managing the Litigation Process from Discovery to the Conclusion of the Matter | 437 | |
| Managing the three most important aspects of discovery | 437 | |
| The landing | 450 | |
| Completing the circle | 455 |
Kent Schmidt
https://www.linkedin.com/in/kentschmidt/
https://www.litigationrisks.com/
Kent Schmidt is a partner at the international law firm of Dorsey & Whitney LLP, and is based in California. His practice includes virtually all types of business litigation, with an emphasis on unfair business practices, trade secret litigation, consumer class actions, product liability, securities litigation and enforcement, commercial disputes, and environmental claims. Having spent his entire legal career at Dorsey, Kent often collaborates with partners in other offices around the world. Besides his commercial litigation practice, Kent speaks to and advises companies on how to avoid litigation claims, develop compliance policies and strategies, and conduct internal investigations.