Smart Business spoke to William Walker at Greenberg Glusker Fields Claman & Machtinger LLP about how to navigate the legal system in other countries and use it to your advantage.
I have been called many times by clients located in the United States who have been sued overseas. In addition to being unhappy about being sued at all, the prospect of litigating in a foreign country can be intimidating and daunting. Fears of the unknown, and of being “home towned,” are common, and understandable, initial reactions. In some fora, they are very real problems.
However, foreign litigation is often nothing to fear. In fact, depending on the country, foreign courts can often be much better fora for litigation than U.S. courts, even for U.S. companies. There are many reasons why.
First, the speed and efficiency of foreign courts can be impressive. At Greenberg Glusker, and at my previous firm, I worked on many litigations in Europe, particularly in Germany. Lawsuits there are often completed, from the filing of the complaint to the date of judgment, in only six to eight months.
And, the process of getting to judgment involves much less expense. In Germany, there is no pre-trial discovery. That means no depositions, no interrogatories, no requests for admissions. The parties do not produce their documents to each other. There is no “e-discovery,” and thus no related “e-vendor” expenses. Although a party may move the court to order an opponent to produce documents, such motions are rarely granted.
Instead, the parties proceed with the information they have in their possession and use it in their complaint, answer and any replies to set forth the legal and factual arguments as to why they should win. Witnesses whose testimony is relevant to particular arguments are also listed. If the parties think that expert witness opinions would support a claim or defense, they also state that in the complaint or answer. It is up to the court to decide whether it wants an expert opinion at all. If it does, it will appoint a neutral expert.
Once those pleadings are filed, the court sets a hearing date and time. Typically, one hour is allocated. At that hearing, the merits of the case will be considered. The courts often do not hear witnesses. Instead, they rely on the written submissions discussed above, and on the oral arguments of counsel at the hearing. Frequently, the court issues a judgment a few weeks after the hearing.
That sometimes takes American parties by surprise. Familiar with the American system, in which the initial hearing is a simple status conference, they fail to include all of their arguments in their papers and are unprepared to fully argue the case at the hearing, with negative consequences.
But with proper advice from counsel with knowledge of both the foreign and U.S. legal systems, those misunderstandings can be avoided and significant tactical and strategic benefits can be obtained.
For example, the absence of pre-trial discovery creates tremendous savings in attorneys’ fees and costs. That is particularly so in the era of “e-discovery,” which in the U.S. leads to substantial attorneys’ fees, disruption to a client’s business, and massive vendor bills that can dwarf the attorneys’ fees.
Juries are not used in the expeditious hearing process described above, which creates further substantial savings of time and money. If a party would rather proceed in front of judges instead of a jury, this is a significant advantage.
Punitive damages are also not available in Germany and in most other civil law countries.
And, perhaps most importantly, a good foreign forum may present excellent opportunities to seize the initiative from litigation opponents and knock them back on their heels, sometimes decisively. A party threatened with litigation in the U.S. can go to court overseas either before being sued in the U.S., or even sometimes after.
U.S. plaintiffs rarely expect to be sued overseas by the defendant. A foreign lawsuit brought by a defendant, or someone who has been threatened with a lawsuit in the U.S., means that the battle will not be fought solely on terrain chosen by the plaintiff.
Even better, the speed of some foreign fora can force the U.S. plaintiff to assert its claims in the foreign forum in the form of counter-claims. That is because if the U.S. plaintiff does not do so, then the U.S. plaintiff runs the risk of a foreign judgment being rendered only for the claims in the defendant’s foreign lawsuit. The defendant can then bring any foreign judgment to the U.S. and move the U.S. court for recognition of the foreign judgment under U.S. law and a ruling that, based on the foreign judgment, the U.S. case is res judicata and should be dismissed. Most U.S. states have statutes that provide for the recognition of foreign judgments, for example, the Uniform Foreign-Country Money Judgments Recognition Act, California Civil Procedure Code Section 1713 et seq.
Strategically, even an adverse foreign judgment might sometimes be preferable to the prospect of defending a lengthy and costly litigation in the U.S. In the event of an adverse foreign judgment, in any res judicata motion brought in the U.S., the U.S. defendant can argue that the plaintiff has already obtained relief through the foreign judgment, and that there is thus no need for the U.S. case to proceed. If the defendant is overseas, a foreign judgment allows the defendant to argue in the foreign court that a later U.S. judgment on the same, or similar, claims should not be enforced in the face of the foreign judgment.
The potential advantages are not limited to defendants. Plaintiffs usually have the same interests in limiting expenses and achieving a quicker result. Sometimes the prospect of lengthy and costly litigation deters plaintiffs from bringing otherwise meritorious claims. In such circumstances, the right foreign forum can provide a good alternative.
This is obviously a very general discussion, and each case has its own complexities. However, I have seen the foreign litigation strategy work many times in seemingly intractable disputes. For parties seeking better alternatives than years of expensive and disruptive litigation in the U.S., litigating overseas can often offer substantial advantages that really are “Smart Business.”
William “Bill” Walker’s practice focuses on representing entertainment companies and domestic and overseas corporations in all aspects of business and commercial litigation, including in California state and federal courts, domestic and international arbitrations, and assisting representation with respect to overseas litigations and transactions, especially in Germany and Greater China. He can be reached at WWalker@greenbergglusker.com or (310) 201-7482.
The process of discovery — when the parties involved in litigation exchange information relevant to the case — has adapted to fit the way business is done today. Is your company ready for e-discovery?
“Times have changed,” says Melissa Evans, an attorney with Jackson Lewis LLP. “We are not living in a paper world any longer. Instead of office memos, you have e-mail. External communications that once would have been sent by U.S. mail are transmitted by e-mail. Even the fax has taken a backseat to e-mail.”
Traditionally, discovery in litigation entailed consulting paper documents that typically were segregated into labeled folders and file drawers. With electronic information, particularly e-mail communications, that level of file organization is rarely found. The combination of an increased volume of data with a failure to establish an organized system for file maintenance can potentially lead to problems if a company is faced with litigation.
Smart Business spoke with Evans about the challenges of e-discovery and what employers can do to prepare themselves for a potential lawsuit.
How is e-discovery different from traditional discovery?
The critical difference between traditional and e-discovery is volume. We retain information electronically in far greater volume than we ever would dream of doing with paper. This includes a substantial amount of information that is of no value to the business or to any litigation involving the business, such as e-mails announcing employee birthdays.
These files often continue to linger on your system. Electronic information is not like a piece of paper that you can toss in the trash. Just because you hit ‘delete’ on your keyboard doesn’t mean the file is gone. Another difference is the ease with which electronically stored information can be altered, which makes it difficult to maintain its integrity.
What can an employer do to prepare for e-discovery?
Every organization should have a standing document retention policy that governs how long documents are maintained and how they are maintained. Most policies address the former, but not always the latter. How the documents are maintained can become critical if the organization is taken to court.
Organizations keep information for their own purposes. But when you hold on to information longer than required by law or necessary to business functions, you create an ongoing ordeal for yourself if you should ever be sued. The costs of e-discovery can overwhelm litigation budgets. The best way to streamline the process is by having a document retention policy and enforcing it. Depending on which federal, state and local laws it must comply with, every organization faces certain obligations with respect to the preservation and retention of information. There are statutes of limitations on how long certain documents have to be retained, and those should form the basis upon which a company implements a document retention or document preservation and destruction process.
How can employers determine what information should be retained?
In an ideal world, electronically stored information (ESI) would be labeled and stored with the same precision traditionally applied to paper records. So if you send an e-mail, the subject line should be used not only to notify the recipient but also as a label for that information so it can be sorted and stored appropriately, creating a virtual filing cabinet.
ESI is a big problem because it is not until you are served with a complaint that you know with certainty that litigation is coming. The obligation to preserve potentially relevant information, both ESI and paper, is triggered when litigation is ‘reasonably foreseeable.’ This creates a subjective assessment of when the duty to preserve arises. For example, if your business manufactures a mechanical pump and you receive calls from people saying your pumps are exploding, a court might say it was reasonably foreseeable at that point that a products liability claim was coming. However, it is more likely that the duty would be triggered after a formal complaint is filed, but not necessarily a court complaint. Once you get notice from a federal or state agency that a claim has been made, your duty to preserve is likely triggered.
What consequences do employers face if potentially important evidence is unavailable for e-discovery?
While a reasonable document retention policy will protect an organization from sanctions for spoliation — the term for destruction of evidence — the failure to suspend document destruction after litigation commences can lead to a host of issues, including entry of judgment against the defendant. Thus, if the defendant is found to have willfully spoliated evidence, the courts can decide the case without the presentation of evidence by the defendant and an adverse judgment may be entered.
How can employers avoid that outcome?
When an organization receives notification it has been sued, the first step is to notify the IT department so that attempts can be made to avoid loss of information. Many organizations have set up an automatic purge of e-mails. The computer designates information for destruction based on the date it was received. There is no human eye assessing the value of the data, or if it is very important for the business or for potential litigation. As a result, you need to suspend those automatic purge functions if you receive a lawsuit, or even just the threat of a lawsuit.
Simply receiving a letter can be sufficient to trigger that ‘reasonably foreseeable’ clause. Waiting too long to suspend the policy allows documents to be lost because you didn’t take the appropriate steps to preserve them for e-discovery. The ultimate sanction is triggered by willful violation, but courts have given severe sanctions in several cases in which the loss of information was due to simple negligence.
Melissa Evans is an attorney with Jackson Lewis LLP. Reach her at (412) 232-0135 or Melissa.Evans@jacksonlewis.com.
Every business, no matter how well it is run, faces the possibility of a lawsuit.
But there are steps you can take before that happens to position your company to prevail, says Thomas M. Hanson, a member of Dykema Gossett PLLC and head of the firm’s Dallas office financial services litigation practice.
“If you’re in business, litigation is not necessarily inevitable, but it is certainly a possibility,” Hanson says. “Every company needs to prepare for it, just as you would prepare for other contingencies that might affect your business.”
Smart Business spoke with Hanson about the policies you need to have in place and if, despite your best efforts, you are sued, the steps to take to lessen the pain.
What everyday practices can help minimize litigation costs and potential liability?
In litigation, documents generally carry the day. Most businesses utilize some type of standard form contract, such as purchase orders, sales orders, or a standard form employee/consultant agreement. Businesses need to review those forms on a regular basis to ensure they clearly lay out the terms of the contract. A manufacturing company might think, for example, that its sales order gives the buyer ten days to inspect the goods. But review the contract from the perspective of a judge who has no understanding of your industry. Will she read it the same way? If not, you should clarify the language and potentially save yourself many thousands of dollars in litigation costs, not to mention potential liability.
Significant litigation expense can also be avoided if you have a standard document retention policy. Every company should have one, particularly given the proliferation of e-mail communication. Whatever your policy — if e-mails are deleted every six months, every five years or never — it should be written down. When you get into litigation, courts are more and more interested in finding out what happened to electronic documents. If you have a standard policy and can show that a key e-mail in the case was deleted according to a standard policy, you’ll be in much better shape than if you have no policy and it looks like e-mails were deleted haphazardly. Again, this simple practice can not only save you from attorneys’ fees but also from potential liability.
What other steps should businesses take to protect themselves?
Another issue with standard contract terms and conditions is making sure employees are using them. Too often, there is a two-page contract; the first page has a purchase order and page two is the standard terms and conditions. But your employees may not bother to send that second page. Suddenly, the case-winning provision you were relying on may not be part of your contract at all.
Finally, proper insurance coverage can be a lifesaver if your company is sued. If you have coverage, the insurance company is not only obligated to pay damages assessed, but, even more important, it is generally obligated to defend you and pay your lawyers. It makes cases infinitely more resolvable if you have a policy that will cover all or some of the cost.
If, despite its best efforts, a business is sued, how should it approach that suit?
Again, documents are key. In particular, courts are cracking down on what happens to electronic documents after litigation commences. If your servers automatically delete e-mails at a set time period, you need to have your IT personnel stop the automated delete function for any potentially relevant electronic documents.
Take steps to collect documents that might be relevant right at the beginning, and make sure, in writing, to instruct any employee who might have relevant documents not to delete anything — not e-mails, spreadsheets or documents stored on their hard drives. If you don’t, some courts may severely punish even the innocuous destruction or deletion of relevant documents. Real-life horror stories exist of courts ordering monetary sanctions of tens or hundreds of thousands of dollars or (even worse) issuing instructions allowing a jury to infer that the destroyed documents were harmful to the company’s case.
Should companies consider alternatives to fighting in court?
Absolutely. There are many ways of trying to resolve a suit without going through a trial, even without invoking a formal litigation process.
Arbitration, especially for smaller disputes among smaller companies, can be a great forum. You have much more limited discovery and, generally, you’ll have an arbitrator who is much more informal and will allow the parties more flexibility to try to work things out on a reasonable schedule. Also, decisions reached in arbitration can generally not be appealed, which lends more finality to a judgment that might be reached in court.
The downside is that you’ll have to pay for arbitration services, but a case that might be a two-week jury trial may only be three or four days in arbitration due to the informality and the lack of dealing with a jury.
Is settlement sometimes a better option than fighting a lawsuit?
Yes. Businesspeople often take a sound, rational, economic approach to business matters until they get sued, then the gloves are off and they don’t care about the expense and just want to fight it. When passion takes over and you’re lashing out at the other side not because there is any long-term benefit but because you are outraged that you’ve been sued, you have to ask if this is the right business decision for your company. But if the answer is yes, and a principled stance is the best approach for the company’s long-term success, then stick to your guns.
Thomas M. Hanson is a member at Dykema Gossett PLLC. Reach him at (214) 462-6420 or email@example.com.