If attorneys have provided their clients some general counseling about what to do when litigation threatens, the clients may find themselves in a much better position to settle the dispute themselves, or to have the dispute resolved in some form of alternative dispute resolution. Often, after a dispute has arisen, such counseling may be too late. The best opportunities for the parties to resolve the dispute themselves may have been lost. Worse, the clients may have thoughtlessly taken actions that will later frustrate resolution either by ADR or in court.
A modicum of general legal counseling provided in the absence of conflict may later be of great benefit when a dispute actually arises. The goals of such counseling could be two: First, the goal is to help the client resolve the dispute on a business basis in order to avoid the expense of formal legal assistance or trial. Second, attorneys want to counsel clients against any actions that will aggravate the conflict, reduce the likelihood of effective ADR or make courtroom resolution more difficult.
Consider the following subjects when counseling a client about what to do when and if litigation threatens. The advice presumes that the client is a company, but the core issues apply to all types of clients.
Designating a point person. Advise the client that as soon as litigation threatens, the company should select a “point” person to deal with the dispute and to coordinate with legal counsel. The point person can focus the company”s efforts to use ADR or, alternatively, to prepare for trial. The point person should also be responsible for communicating with the potential opponent, where possible. Using a single person to communicate during a dispute enhances settlement and ADR prospects by simplifying communications and eliminating unnecessary conflict. Moreover, if settlement fails, the concentration of decision-making and communication with one person can simplify the presentation of the company”s evidence at trial.
Handling files when litigation threatens. The point person can also deal with the company”s files. The client should know that in trials, arbitrations and some forms of ADP, the company”s files regarding the dispute will likely be produced to the opposing party. Therefore, counsel the client against the creation of “trial exhibits” after a dispute has arisen. Such “trial exhibits” may include internal file memos or electronic-mail messages that poorly or ineffectively characterize-events.
Often, a well-intentioned officer or employee thinks that a summary of key events and explanations will be useful later. Yet such memos and e-mails are often incomplete, inaccurate and damaging to the company”s litigation position. Consequently, once litigation is threatened, the client is best-advised not to create new documents concerning the disputed matter unless requested by, and addressed to, their legal counsel.
Another precaution pertaining to company files is the creation of a separate file concerning the dispute – created as soon as the dispute emerges. That file (perhaps appropriately labeled as “Jones Dispute” file) can be used to segregate dispute-related files from the documents created in the normal course of the company”s business. The early creation of such a file can simplify the later production of documents, and help identify which documents are bona fide business records.
Also, counsel the company about the dangers and ethical issues regarding the destruction or disposal of any documents or evidence regarding the dispute. Whether harmful, no documents should be lost. Any such loss of evidence, even innocently caused, may be viewed as unethical, illegal – and it may create adverse courtroom presumptions. This subject is best conveyed to clients prior to any dispute, rather than as part of damage-control effort after counsel learn that documents or evidence relating to a dispute have been discarded or destroyed.
Discussing the dispute internally. In the calm before any litigation is threatened, attorneys may be well-advised to remind the client to minimize internal conferences concerning threatened litigation against the company. However enticing such discussions may be to the company”s personnel, the company is not well-served by “lunch room” or “coffee pot” conferences about the threatened litigation. Therefore, clients should know that internal discussions concerning the dispute (where legal counsel is not present) will be likely subjects for depositions.
Similarly, the client should be careful about discussing the threatened litigation in the notes of informal meetings or in the minutes of shareholder meetings. Often the informal characterization of the dispute, however innocently undertaken, can later be difficult to explain to a finder-of-fact.
For-parallel reasons, consider advising the company to minimize the number of persons who are responsible for working on a disputed matter. As the number of persons working on a disputed matter increases, the company may merely provide opposing counsel, in subsequent litigation, with an opportunity to find “inconsistencies” in their viewpoints or prior statements. The selection and use of a point person helps in this regard.
Communicating with a potential adversary. Remind the client that any statements made to the potential adversary may likely be considered admissions at trial. Accordingly, the client needs to take care in telephone communications, faxes and letters. Those documents will likely be admitted into evidence if settlement or ADR efforts fail. Additionally, caution the client that cute or “colorful” language (that may seem light-hearted at the moment) might later be quite harmful in litigation.
Advising the client about settlement initiatives. There are two important points to discuss with clients concerning settlement initiatives. First the client should know about the protection afforded to settlement discussions in the event that a trial ultimately is required. Second, to preserve the protection (particularly where business representatives are proceeding with settlement negotiations without the direct assistance of legal counsel), the client should be cautioned to inform the potential adversary that the discussion about to occur is intended to be protected as a set demerit negotiation. To avoid confusion, advise the company that it should not combine settlement discussions with other business communications with the potential adversary.
Making early settlement initiatives. Notwithstanding the caution expressed above, advise the client as to the benefits of making early and candid settlement initiatives. The extension of the “olive branch” from one side of a dispute can have a dramatic effect on the potential adversary. Consequently, although attorneys also seek to protect the client”s interests at trial, they also need to inform the client of the benefits of candid and early settlement initiatives. Such discussions, particularly when thoughtfully undertaken and planned, may diffuse the threatened litigation and permit full resolution of the matter between business representatives.
Additionally, if attorneys have adequately counseled the client”s representative, that person will be in a position to propose conciliation, mediation or other ADR options. Even if not promptly undertaken, the company”s suggestion of ADR alternatives may later increase the likelihood that a potential adversary will later accept the use of ADR as a means of resolving the business dispute.
Discussing these topics with the client, when completed in the calm before any litigation, may go a long way toward facilitating more effective settlement or ADR. Moreover, the suggestion that the client select and use a point person for threatened litigation may let the attorney focus counseling on that person.
Originally published in the Colorado Journal, September 22, 1999