Avoiding and Managing US Business Litigation Risks
A Comprehensive Guide for Business Owners and the Attorneys Who Advise Them
1st Edition
Published on 31. July 2021
483 pages
978-1-78742-522-4 (ISBN)
Description
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.
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Kent Schmidt
Avoiding and Managing Us Business Litigation Risks
A Comprehensive Guide for Business Owners and the Attorneys Who Advise Them
Book
03/2021
1st Edition
Globe Law and Business Ltd
€94.28
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Content
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 SHAREHOLDERS AND OTHER 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
Contents
iv
Contents
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
v
Avoiding and Managing US Business Litigation Risks
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 in the market?. 190
vi
Contents
5. What is said about the transaction?. 192
6. How are the advertising statements conveyed?. 195
Chapter 9: Three 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
Consider and 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
vii
Avoiding and Managing US Business Litigation Risks
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. 362
Claims arising from employees' tortious actions. 368
When to sue an employee. 371
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
viii
Contents
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
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 SHAREHOLDERS AND OTHER 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
Contents
iv
Contents
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
v
Avoiding and Managing US Business Litigation Risks
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 in the market?. 190
vi
Contents
5. What is said about the transaction?. 192
6. How are the advertising statements conveyed?. 195
Chapter 9: Three 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
Consider and 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
vii
Avoiding and Managing US Business Litigation Risks
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. 362
Claims arising from employees' tortious actions. 368
When to sue an employee. 371
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
viii
Contents
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
