Last month we talked about how establishing goals for litigation “wins” requires taking emotion out of litigation, and clear communication between lawyer and client.  We also talked about the need to re-evaluate litigation goals as the facts and issues develop.  This month we’re going to discuss the hidden costs of litigation, and the benefits of early resolution.
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Last month I talked about how litigation “wins” don’t always require a jury finding in your favor.  This month we continue talking about reaching litigation “wins” through early communication and objectivity. If I got $100 for every time a client told me during an initial consultation that they wanted to extract a pound of flesh from the other side, I’d probably living the island life right now.  These clients aren’t individuals looking to sue some international conglomerate; most are entrepreneurs or business executives.  And I guarantee you that I am not alone.  Most lawyers would tell you they hear the same thing from clients during their initial consultation.  Sometimes clients continue that mantra for several months.  Some even go so far as to say something like, “I don’t care what it costs.  I want justice!”  I get it too.  When a client first contacts a lawyer about litigation, it’s because the client believes: (1) somebody did something that hurt the client (physically, emotionally or economically); or (2) somebody brought a bogus lawsuit against them. 
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Days ago, engineer Anthony Levandowski was indicted on criminal charges accusing him of stealing information from Google-owned Waymo and taking it to Uber. While the indictment alleges he downloaded 14,000 documents containing trade secrets before he left Google, Levandowski insists the downloads were his. An arbitration panel ordered Levandowski to pay Google $127 million. After firing Levandowski – who repeatedly asserted his constitutional right against self-incrimination before the trial – his new employer, Uber, paid $245 million to settle its own civil lawsuit with Google.  The sitting federal judge recommended a criminal probe into a possible theft – now an indictment. Everybody does it, right? Who pays the $372 million? Does Uber have to protect Levandowski? Can Levandowski claim ownership of his ideas? Can Levandowski go to jail?
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Does a “win” in litigation require a final judgment in your favor?  Not necessarily.  Litigation “wins” are defined by the circumstances facing a party at the outset of litigation, and how those circumstances change as litigation progresses.  Over the next few months we will dive deeper into this topic, and talk about issues such as:

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My last article pointed out a situation where parties conflate contractual indemnity and damages clauses.  The standard language in Dunce’s Caps’ contract provided for an indemnification of “any and all losses arising from any breach of any representation or warranty in the agreement” and capped those losses at the price of the order. When Dunce’s failed to deliver the promised 100,000 hats, Flat Backs filed an arbitration action seeking recovery of an alleged $4 million in damages, even though the purchase order price was only $500,000. Ignoring Dunce’s damages cap argument, the arbitrator Terry B.L. Judge awarded Flat Backs the full $4 million. Arguing that Judge was not permitted to award Flat Backs more than $500,000, Dunce’s appealed to the state court seeking to overturn the arbitration award because Judge exceeded his jurisdictional limits. Did Dunce’s contractual indemnification provision operate as a cap on the damages that Flat Backs could recover for Dunce’s breach of contract?
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Nifty Counsel, Dunce’s Caps in-house lawyer, came up with what he thought was a brilliant way to minimize the company’s liability to its customers.  Nifty added arbitration provisions to Dunce’s customer purchase order agreements, and included language that the customer agreed the arbitrator could not award the customer damages exceeding the price of the order.  Flat Backs, a major retail hat company, filed an arbitration action against Dunce’s after Dunce’s failed to deliver 100,000 Auburn Tigers 2019 NCAA Men’s Basketball Champions hats.[1]  The demand for arbitration alleged $4 million in damages, even though the purchase order price was only $500,000.  Terry B.L. Judge, the arbitrator, ignored Dunce’s arguments that the purchase order’s arbitration clause prohibited Judge from awarding Flat Backs more than $500,000, and awarded Flat Backs the requested $4 million.  Dunce’s then asked a court to overturn the arbitration award for the same reason – Judge exceeded his jurisdictional limits.    
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After several months of telling family and friends that his wedding venue business on Big Bux Ranch was for sale, Jeff Bux is contacted by his biggest competitor Hustler Plentee who also owns a wedding venue in the next town south of Buxboro. Hustler asks if Jeff will tote-the-note because his credit is maxed out at Buxboro State Bank, which is owned by Ernest “Big Daddy” Bux. Wanting to avoid a broker’s fee and an attorney’s time, and hoping that he might be able to get a job at the Bank, Jeff – uncharacteristically – asks his father for advice to help him sell it himself. Can Jeff sell his own business? If you were Big Daddy what would you say?
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Seeing the bottom line awash with red ink yet again, Susie Sears reluctantly decided to shut down her family-owned Widgets-R-Us.  Pressured by thinning margins, a weakening labor pool and increasing competition from foreign markets, Widgets-R-Us is leveraged to the hilt and profits are insufficient to pay even her secured debt. With no viable assets or business, there’s nothing to mortgage or to sell. How can Susie and her fellow company officers walk away without becoming personally liable?

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