When we covered bet-the-company (BTC) litigation last time, the linked article had good ideas on how to handle these difficult cases.
As promised, a few ideas on avoiding BTC litigation in the first place:
— Analyzing for “lessons learned.” The military calls this an after action report, but the concept can be applied to litigation or other major dispute. There is a natural temptation to close the case file and ship the records to storage. But many large disputes stem from problems that can still recur, even if a settlement was reached.
— Seeking to “connect the dots.” Examine how some disputes may be linked together. It is said that good things happen in threes. In my experience, it is more common that bad results that lead to BTC litigation often result from a string of smaller problems that weren’t seen or dealt with on their own.
— Looking after the “crown jewels.” Most companies have a key product or service, critical suppliers or a primary regulatory agency. BTC litigation often stems from some breakdown in one of these areas. In-house counsel should be aware of major business initiatives in these areas and participate in planning for major changes or in advising on how to handle “disagreements” before they become actual disputes. Sometimes clients see their own interests very clearly, but cannot (or will not) see issues of a larger concern for the company. Taking on a key regulatory agency, for example, can sound decisive and proactive. But short-term victories can often prove illusory over time. The staff in the agency can have a long memory, and then when you really need a bit of slack later, it will be payback time.
In the third and final installment of BTC litigation on Wednesday, we’ll look at these three ideas as applied to a recent case–the litigation leading to the collapse of the Arthur Andersen firm.