In this first of three installments of this series we explored how in-house counsel should prepare for when litigation happens. Later installments cover what to do when your company has been sued as well as in-house counsel’s role during trial.
One of the most critical tasks for in-house counsel to master is how to report to the C-Suite or the Board of Directors on material litigation the company is involved in. The better the reporting process, the easier it is to get decisions from them around strategy, settlement, budget, etc. Here is a checklist of what you should consider when reporting on litigation:
Describe the process
In-house lawyers tend to assume everyone knows the basics of the litigation process. They don’t and it’s a source of frustration and confusion for the CEO and the board. One of the first things you should do with material litigation is set up some time with the C-Suite (and the board if warranted) to walk them through the litigation process. You should plan on discussing:
- The complaint and the answer,
- the discovery process,
- expert witnesses,
- motions practice (including motions to dismiss, counterclaims, and summary judgment,
- the trial process (including motions in limine and jury selection),
- the appeal process,
- and estimated timelines for all of the above.
Introduce your outside counsel
Be prepared to explain to the CEO/board the reasons you selected the firm and always anticipate pushback. The board may want a different firm involved for their comfort. Do not be defensive about it if this occurs. It’s important that you can articulate why the firm you selected is the right firm for the job – though understand that you may have to give on this issue. It’s also a good idea to have your outside counsel meet the senior management (or the board if the case is significant enough) early on so they can get comfortable with the legal team.
Define Success
Whether you are a plaintiff or defendant, it’s critical to know what the company’s goals are for the litigation. Defining them involves working closely with the CEO and the board. Is the goal about money or a specific action, such as advancing or defending a strategic objective? Is it about preventing damage to your stock price or business reputation? Regardless of the goal, you (and outside counsel) must take the time to truly understand and agree with the business around defining success in the litigation. This way, everyone understands what winning and losing looks like.
Walk through the cost
A common area for surprises (and unhappiness) is the cost of litigation. Consequently, it’s important to spend time upfront – and every month – working on a realistic cost estimate and keeping senior management up to speed. Resist the urge to underestimate the cost (so things look a little better) and try to honestly set forth the cost of proceeding with or defending the case. If your company is the plaintiff, the cost can be a factor in determining whether to go forward or not. If you are the defendant, the cost may require adjustments in spending for other parts of the business so there is money to pay for the litigation. Be open and honest about the cost and be able to show that you are using best practices to proactively manage costs.
Consider using decision trees
At some point the CEO or the board will ask you “What are our chances here?” or “What is our realistic exposure?” I like decision trees because the business is used to them, and they allow you to change variables/assumptions/numbers as the case changes. They can be simple, or they can be complex. Your finance colleagues may even be able to help you create a decision tree spreadsheet. Seeing the analysis on paper gives the CEO and board added comfort that you are on top of the case.
Ensure they understand the time commitment of management
Everybody is gung-ho when litigation starts. But everyone soon starts to realize that material litigation is a slog and they begin to question why the company is involved in it in the first place. It is important to educate everyone on the time diversion they can expect as the litigation moves forward. There will likely need to be large commitments of time by the business leaders. Litigation will reach deep into the business and the company should prepare for and accept that many different and valuable people will be taken away from their day jobs to assist with the effort.
Explain that confidentiality is hard in litigation
Tell executives upfront that they must brace for seeing some (or potentially a lot of) company emails and documents made public during the litigation, even ones that seem to have little relevance to the legal issues and are otherwise embarrassing or “cringe-worthy.” Courts lean heavily in favor of making almost all case materials public. You must set straight anyone who believes that litigation is 100% confidential. It isn’t. Prepare your leaders for this problem upfront and report back to them regularly on “hot documents.” You can tell them that you will seek to file documents under seal, ask for protective orders, and file motions in limine before trial, but everyone should be realistic about the risk of “bad” documents leaking out.
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Managing Litigation Risk
Corporate legal departments must establish and maintain a litigation readiness plan that includes processes for preserving evidence, documenting potential issues, and ensuring that key personnel can respond swiftly to legal challenges. |
Note your limited control of the process
On television, most litigation wraps up in 60 minutes. In the real world, it takes years. Get ahead of this issue early. Most cases do not get to trial for two to three years. Appeals can add another 12 months or more to the process. Be frank about the fact that the pace of the litigation is not in your complete control. You can only control what your side does, you have no control over what the other side does or how the judge wishes to manage her calendar. Be sure to always note that dates in your timeline may be postponed due to scheduling conflicts, other cases on the court’s docket, illness, vacations, etc.
Report back regularly
For material litigation, you should report back to C-Suite and the board regularly with updates and assessments. Here are things to consider for such reports:
- Where the case is the timeline, what’s coming up, and any material changes in timing.
- Key motions that are pending or contemplated along with the risk/reward and (most importantly) the results.
- Deposition summaries of key witnesses.
- How the case is tracking to budget and any changes in assumptions or any unexpected changes in spending (good or bad).
- Update any decision trees.
- Identify any new documents that could significantly help or hurt the case and the plan to deal with them.
- Damages update: provide an update on the damages sought by either side, e.g., direct, consequential, punitive, injunctive, interest, and statutory.
- Settlement update.
- Report on any strategic decisions that need to be made.
It is also a good idea to have your outside counsel present during these updates.
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If your company is sued (or is contemplating suing another company) make sure the CEO and the board understand from the beginning what to expect during the litigation process. The fewer surprises and the more input they have into the case the more likely it is that they will feel comfortable and leave the day-to-day details to you and the legal department.
If you subscribe to Practical Law, you have an incredible array of resources to help you manage the litigation process.
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STERLING MILLER, HILGERS GRABEN PLLC
Sterling Miller is currently CEO and Senior Counsel at Hilgers Graben PLLC. He is a three-time General Counsel who spent almost 25 years in-house. He is the author of five books and writes the award-winning legal blog, Ten Things You Need to Know as In-House Counsel. Sterling is a regular contributor to Thomson Reuters as well as a sought-after speaker. He regularly consults with legal departments and coaches in-house lawyers. Sterling received his J.D., with honors, from Washington University in St. Louis.
