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United States companies have experienced a steady rise in litigation that challenges their litigation budgets, particularly in today's leaner business environment. Some measures, however, can minimize litigation costs, both before and during litigation. Careful contract drafting, education of employees and proactive litigation management, for example, provide opportunities for cost control and more favorable rulings.

Arbitration, Limitations, Indemnity and Insurance Procurement Clauses: Is Your Agreement Enforceable?

Although arbitration, contractual limitations, indemnity and insurance procurement clauses provide well-known avenues for attempting to minimize litigation costs and liability, these provisions must be enforceable to provide any benefit, of course. Ambiguities in contract language and varying state laws can impede enforcement, and contracts warrant careful drafting and knowledge of the laws of the jurisdiction. In particular:

  • Arbitration provisions must be clear and unambiguous as to which disputes they govern and must comply with the jurisdiction's specific legal requirements for enforceable arbitration clauses.
  • An indemnity provision that is perfectly legal and enforceable in one state may be unenforceable and even subject to civil penalty in another state.
  • Contractual limitations periods should be consistent with statutes and public policy under the state or, where applicable, federal law governing the dispute.
  • Indemnity clauses are fertile ground for drafting ambiguities and omissions that may render indemnities unenforceable; an indemnity clause should clearly identify all claims for which the indemnitee is being indemnified and meet "conspicuous language" and other state law requirements and limitations if appropriate.
  • Delivery of an insurance certificate under an insurance procurement clause naming you as an additional insured is often overlooked; a compliance checklist can ensure that the other party delivers the certificate of insurance evidencing you as an additional insured.

Help Your Employees Help You: Good Practices for Better Discovery

In the discovery phase of litigation, relevant company documents and witnesses are made available to the other side. During that process, an innocent but poorly drafted document in the company's files or testimony of a poorly prepared witness in deposition may have an unintended construction in the litigation and play right into your adversary's theory of the case, creating unnecessary exposure for the company. Additionally, opposing counsel may unearth inappropriately withheld documents, potentially subjecting the company to serious court-ordered sanctions. To avoid such situations:

  • Train employees to think twice before sending (or forwarding) inappropriate or ambiguous e-mails.
  • Train employees to be cautious about "cutting-and-pasting" into correspondence and other documents.
  • Allow employees sufficient time with counsel to prepare for deposition testimony.
  • Advise employees to read and verify their personal knowledge and the accuracy of the statements in any affidavits before signing.
  • Be proactive in locating and collecting all requested documents from employees and make sure they understand the costs, sanctions and adverse inferences that may result from incomplete efforts.

Protecting the Attorney-Client Privilege in Pre-Litigation Investigations: Put Your Hat On

Sometimes in-house counsel investigates an incident prior to litigation and later, during litigation, a third party seeks discovery and questions whether the investigation is protected by the attorney-client privilege. In some courts, the attorney's investigation may be privileged if the company can show that the attorney was wearing his or her "attorney hat." In other words, if the investigation was conducted in order to provide legal advice in response to a duly authorized request, then the privilege should apply. The request should be in writing to substantiate the privilege in any subsequent litigation.

Managing Cost-Effective Litigation: Sooner Rather Than Later

The costs of defending or prosecuting a case to conclusion are unpredictable, driven by the behavior and strategies of opposing counsel, the court's management of the case, the facts revealed in discovery and/or the attitude and wherewithal of the opposing party. Under the right circumstances, however, some strategies can reduce costly discovery disputes, streamline the process for developing legal theories and strategies in the case, and even resolve the case prior to costly trial and trial preparation expenses. Indeed, sooner rather than later:

  • Consider whether it is appropriate and advantageous in a particular case to file in federal court (if a plaintiff) or remove the case to federal court within 30 days of service (if a defendant).
  • Provide litigation counsel with all anticipated relevant documents and make the key witnesses available for interview, allowing counsel to understand the facts as early in the case as possible.
  • Evaluate attendance at depositions in multi-party litigation and consider less-expensive alternatives to attending some out-of-state depositions, such as telephone or video-taped conference.
  • Evaluate and prepare your case for dispositive motion and invest the time and money to prepare the best motion possible, in the interest of an early favorable resolution.
  • Assess whether mediation may be helpful in resolving the dispute.
  • When in federal court, consider utilizing a court's settlement conference program to avoid mediator fees.

Settlement at Mediation: Inking the Deal

Often at the end of a long day of mediation a mediator comes in and says, "we've got a deal" and asks the parties to sign off on a generic one-page agreement with the settlement amount and some general release language. Yet, many other provisions enter into the formal settlement agreement and release. If the parties do not address these provisions in the agreement signed at mediation, the entire agreement may fall apart over those terms. To avoid this pitfall, ask yourself the following questions about the agreement presented at the mediation:

  • Are all necessary persons and entities being released, including subsidiaries, officers and directors?
  • Are the parties bound to confidentiality?
  • Are there indemnification provisions, if appropriate?
  • Does the agreement obligate the parties to execute a more formal release and settlement agreement and dismissal papers?
  • Does it adequately address the final exchange of the settlement check for an executed formal release and W-9, and specify all necessary conditions to be met?
  • Are there any other provisions or conditions that your client customarily includes in a release, or will require under these particular circumstances? If parties address these terms in advance at mediation, the agreement is more likely to yield a permanent resolution.

Conclusion

Careful drafting, advance planning, employee training, updated corporate policies and effective strategies can help a company manage the course of a lawsuit proactively and mitigate costs of litigation.

A Modern Managed Care and Health Care Litigation Practice

Read, watch or follow today's top news and you will undoubtedly find stories about the "next big thing"—flashy new technologies, services and opportunities sure to make an economic splash. But when you get down to brass tacks, the truth is that retirement plans have come to hold an increasing proportion of the nation's wealth and employee benefit plans constitute one the largest sources of equity capital— and undisclosed corporate liabilities—in the world. While they may seem traditional, such plans and their inherent risks and benefits have and continue to evolve dramatically. For more than 20 years, the managed care trial group at Andrews Kurth has monitored, mastered and effectively influenced how managed care and ERISA cases are decided by the courts. Representing managed care companies, insurance companies and plan administrators, Andrews Kurth lawyers have been at the forefront of this rapidly expanding industry, securing precedent-setting results for our clients.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.