
US Business Litigation Risks
A Comprehensive Handbook for Business Owners and the Attorneys Who Advise Them, Second Edition
Published: 2025
Pages: 495
eBook: 9781837230488
This book, now in its second edition, answers those two weighty questions. Written for a diverse audience, US Business Litigation Risks will be useful for anyone whose responsibilities include managing US litigation risks.
This book, now in its second edition, answers those two weighty questions. The central premise of the work is that costly and protracted lawsuits in the US are often traceable to unforced errors companies make time and again. By better understanding the sources of commercial litigation, including the various legal theories of plaintiff’s lawyers and current litigation trends, preventive steps can be implemented, reducing these risks and saving the company millions in legal fees and liabilities.
Kent Schmidt draws on over twenty-five years 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 companies can create a unique litigation risk profile to identify and address their primary litigation vulnerabilities. The second part of the book outlines how companies embroiled in US litigation can manage the process, from the filing of the lawsuit, expensive discovery, trial or arbitration and various dispute resolving opportunities along the way.
The book is written for a diverse audience. Attorneys, whether in-house or outside counsel, will find it a useful desk-reference for quickly accessing relevant information and issue-spotting for their clients. The book is equally accessible to non-lawyers – anyone 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 or expand to US markets.
The second edition includes a number of key updates: tracking litigation trends, new US regulations emerging public policies, particularly in the area of ESG-driven lawsuits, privacy litigation, enhanced mandatory disclosures protecting consumers, new employee liabilities, and a host of other cutting edge litigation risks.
Table of Contents
Cover | Cover | |
---|---|---|
Title Page | i | |
Copyright | ii | |
Contents | iii | |
Executive summary | xi | |
About the author | xv | |
Acknowledgements | xvii | |
Introduction | xxi | |
Commercial litigation avoidance | xxii | |
Effective management of business litigation | xxiv | |
Foreign companies facing US litigation | xxvi | |
A California emphasis | xxvii | |
A litigator’s unique perspective | xxviii | |
Assumptions and audiences | xxix | |
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 | 11 | |
Part two: Corporate governance litigation risks – claims from shareholders and other constituents of the business | 17 | |
Chapter 2: Basics of corporate governance litigation | 19 | |
Understanding shareholder litigation – a useful metaphor | 20 | |
Four recurring themes of corporate governance litigation | 25 | |
Seven legal concepts useful to understanding corporate governance litigation | 30 | |
Chapter 3: Ten sources of corporate governance lawsuits | 39 | |
1. Irreconcilable differences between ill-suited business partners | 39 | |
2. Failing to maintain the formalities and other best practices | 42 | |
3. Giving employees equity interests resulting in dual sets of obligations | 43 | |
4. Disputes over informational rights of shareholders, members and partners | 45 | |
5. Misleading constituents through fraudulent statements or omissions | 47 | |
6. Breach of fiduciary duty claims | 49 | |
7. Failing to make reasonable inquiries concerning risks to the company | 55 | |
8. Failure to implement a code of ethics and an effective corporate compliance program | 56 | |
9. Commingling and other separateness issues | 59 | |
10. Dealing with creditors and facing insolvency | 60 | |
Part three: Litigation risks from commercial contract disputes | 65 | |
Chapter 4: Core issues in breach of contract litigation | 67 | |
Navigating troubled waters | 74 | |
Is there an enforceable contract? | 76 | |
How and where is this dispute going to be resolved? | 79 | |
What are the substantive contract terms? | 80 | |
Are there statutory overrides for the contract or specific terms? | 84 | |
Were the contractual duties performed or excused (breach)? | 88 | |
What are the remedies for a breach of contractual duties? | 91 | |
Chapter 5: Strategies for managing litigation risks arising from commercial contracts | 97 | |
1. Manage the contracting and approval process | 97 | |
2. Formalize informal agreements | 99 | |
3. Be aware of the risk of preliminary agreements and agreements to agree | 100 | |
4. Scrutinize the scope of express indemnity provisions | 101 | |
5. Address termination scenarios and the risk of precipitous terminations | 102 | |
6. Specify which contract terms survive termination | 104 | |
7. Craft time limits and cure provisions that are appropriate | 105 | |
8. Consider how joint venture duties arise | 105 | |
9. Include an effective integration clause | 106 | |
10. Guard against claims that a contract was fraudulently induced | 107 | |
11. Prevent claims that a contract was modified by subsequent conduct and effectively modify written agreements | 110 | |
12. Preclude claims for extraordinary damages | 112 | |
13. Control where the battle will be fought and jurisdictional waivers | 115 | |
14. Ensure favorable law will be applied | 116 | |
15. Consider the pros and cons of arbitration | 117 | |
16. Decide whether an attorney fee provision is beneficial | 126 | |
17. Determine whether there are strategic benefits to waiving a jury trial | 127 | |
Chapter 6: Lawsuits arising from negotiations and implied obligations | 133 | |
Liability for bad faith during contract negotiations | 141 | |
Misuse of confidential information obtained in negotiations | 145 | |
Coercive negotiations constituting economic duress | 147 | |
Six practical ways to reduce the risks of claims arising from contract negotiations | 149 | |
Avoiding claims for breach of the implied covenant of good faith and fair dealing | 153 | |
Part four: Customer claims including consumer protection class actions, product liability, and breach of warranty claims | 161 | |
Chapter 7: Customers presenting consumer protection and class action risks | 163 | |
US class actions – a tough pill to swallow | 165 | |
Overview of US class actions | 167 | |
Basic requirements of a class action | 168 | |
The history and policies behind federal and state consumer protection statutes | 168 | |
The role and duties of class action lawyers | 170 | |
How class action lawyers make their millions | 171 | |
Why class counsel fee awards are exorbitant | 172 | |
How class actions are settled | 174 | |
The rise in pre-filing settlements | 175 | |
The California class action framework | 176 | |
The interrelationship between state consumer protection claims and federal regulations | 183 | |
Chapter 8: A framework for identifying consumer class action risks | 189 | |
What is said about the product or service? | 190 | |
What is not said about the product or service? | 198 | |
Facts pertinent to health and safety | 200 | |
What is said about the price, including fees and charges? | 200 | |
What is said about competitors or the market? | 204 | |
What is said about the transaction? | 206 | |
FTC’s “Click to Cancel” rule | 209 | |
How are the advertising statements conveyed? | 210 | |
Chapter 9: Additional litigation risks specific to product sales and distribution | 223 | |
Breach of warranty claims | 225 | |
Express warranties | 226 | |
Implied warranties | 227 | |
Modifications and disclaimers of warranties | 228 | |
Overview of the Magnuson-Moss Warranty Act | 230 | |
Song-Beverly Consumer Warranty Act | 234 | |
The New Jersey pitfall | 235 | |
Product liability claims | 236 | |
Chemical exposures in products | 243 | |
How Prop 65 works | 243 | |
Prop 65 litigation claims | 244 | |
The problems presented by Prop 65 claims | 245 | |
Avoiding a Prop 65 claim | 246 | |
Chapter 10: Strategies for mitigating specific customer litigation risks | 255 | |
1. Identify and prioritize the greatest customer litigation risks | 256 | |
2. Re-examine regulations that may buttress customer claims | 256 | |
3. Monitor regulatory activity | 257 | |
4. Become familiar with relevant litigation trends | 257 | |
5. Review insurance policies and exclusions | 258 | |
6. Explore indemnity rights and obligations | 259 | |
7. Consider SRO guidance, industry, and voluntary standards | 260 | |
8. Assess documentation relating to products or services advertised, distributed, or sold to customers | 261 | |
9. Consider and utilize customer service data | 261 | |
10. Confirm effective assent to contract terms | 262 | |
The rise in consumer class action waivers | 266 | |
The other risk – mass arbitrations | 268 | |
The period in which to reject non-conforming goods | 269 | |
The period in which to bring a lawsuit (contractual statute of limitations) | 270 | |
11. Limit liabilities and remedies to the extent permitted | 271 | |
12. Consider product recall issues | 272 | |
13. Consider disproportionate liabilities that arise from incorporating component parts or ingredients in a product | 274 | |
14. Negotiate acceptable quality limits and failure rate provisions for large volume sales | 274 | |
Chapter 11: Claims relating to data privacy and cybersecurity | 279 | |
History and origins of privacy protections | 282 | |
A “cradle-to-grave” approach to privacy liabilities | 283 | |
1. The collection of consumer data | 283 | |
2. Uses and sharing of consumer data | 288 | |
3. Disclosures to the consumer regarding their data | 294 | |
4. Responses to consumers’ requests | 299 | |
5. The protection of consumer data from a breach | 300 | |
6. The required notices relating to a data breach | 303 | |
7. The disposal of consumer data | 304 | |
Privacy regulations applicable to particular industries and contexts | 305 | |
The ten questions to ask in evaluating risks of data privacy claims | 307 | |
Part five: Competitor lawsuits including misappropriation, interference, intellectual property, and antitrust claims | 317 | |
Chapter 12: Litigation risks relating to competitors | 319 | |
The eight most common litigation theories asserted between competitors | 320 | |
1. Misappropriation of trade secrets | 324 | |
2. Other litigation claims relating to employee mobility | 333 | |
3. Registrable intellectual property | 338 | |
4. Other Lanham Act claims | 342 | |
5. Trade disparagement | 343 | |
6. Antitrust violations | 346 | |
7. California’s Unfair Competition Law and Unfair Practices Act | 351 | |
8. Common law interference claims | 352 | |
Things to consider before suing a competitor | 354 | |
Part six: Crewmember litigation – claims brought by, because of, or against employees | 365 | |
Chapter 13: Crewmember claims and other liabilities relating to employees | 367 | |
The most common claims by employees against employers | 368 | |
Preventing and reducing employment claims | 392 | |
Claims arising from employees’ tortious actions | 398 | |
Unethical or corrupt practices | 399 | |
Part seven: Litigation management after a lawsuit is filed | 413 | |
Chapter 14: Essentials of managing the six stages of commercial litigation | 415 | |
Stage 1: Pre-litigation communications and demands | 417 | |
Stage 2: Pleading and initial forum fights | 423 | |
Stage 3: Discovery | 429 | |
Stage 4: Pre-trial merits determination | 432 | |
Stage 5: Trials and arbitration hearings | 433 | |
Stage 6: Post-trial motions, appeals, and enforcement of judgments | 437 | |
Chapter 15: Foundational litigation management decisions | 445 | |
Triangulated litigation | 456 | |
Revisiting the flight plan | 459 | |
Controlling litigation costs | 460 | |
Selecting the right flight crew | 445 | |
The economics of litigation management | 449 | |
Working through the preflight checklist | 453 | |
Chapter 16: Further tips for navigating the litigation process to a successful conclusion | 469 | |
Documents | 469 | |
Depositions | 475 | |
1. Know the ground rules – the “blocking and tackling” of depositions | 477 | |
2. Know the issues in the case | 478 | |
3. Know the unpleasant surprises | 478 | |
4. Know what you don’t know | 478 | |
5. Know what you should know | 479 | |
The three problem deponents | 480 | |
Expert witnesses | 481 | |
The landing | 483 | |
Private mediations | 484 | |
Court officers and settlement conferences | 484 | |
Timing of settlement (the 80/20 rule) | 485 | |
A company’s evolving position on settlement | 486 | |
Business solutions | 487 | |
Alternatives to settlement or trial | 488 | |
Stipulated judgments | 489 | |
Closing thoughts on commercial litigation | 489 | |
About Globe Law and Business | 495 |
Kent Schmidt
https://www.linkedin.com/in/kentschmidt/
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 throughout the US and 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.