August 27th, 2011
Do you know the top 10 business litigation mistakes?
- Using Your Corporate or Personal Lawyer for Business Disputes. All lawyers are qualified to handle business disputes, right? Wrong! A business litigator is someone experienced in prosecuting and defending civil lawsuits for businesses, managers and owners. The first lawyer every business needs is a corporate and transactional lawyer to create and register the business entity, draft operating agreements, issue shares, etc. Do not hire this lawyer – or the one who drafted your will – if you’ve been sued or if you have a dispute that may turn into a lawsuit. Ask a trusted advisor to recommend a lawyer whose practice is 100% devoted to business litigation. Just as in medicine, the days of the generalist lawyer are over.
- Hiring a Lawyer without Trial Experience. More than 90% of business lawsuits are resolved through mediation or negotiation. Only a small number go to trial and verdict. As a result, most lawyers – even high-priced ones – have little or no experience representing clients in front of a judge and jury. Most cases should settle, but some need to be tried. These cases include “bet the company” cases – if you lose, you’re out of business. Don’t invest time and money in your legal defense only to find out that your lawyer lacks the skills and experience needed to represent you effectively at trial.
- Not Taking a Lawsuit Seriously. You know you did nothing wrong, so why should you spend money on lawyers? Because if you don’t spend now, you will spend more later. It takes time and money in the early stages of a lawsuit to gather documents, interview witnesses, and develop a winning strategy. Without this foundation, you will lack leverage to bring the lawsuit to an early and favorable resolution. A frivolous lawsuit inflicts pain in the form of defense costs. But the pain will be much worse if you ignore it because you are confident that you are right. When it comes to business litigation, the familiar adage is true: the best defense is a good offense.
- Keeping the “Bad Facts” From Your Lawyer/Not Keeping Your Lawyer in the Loop. Reveal all the information, even if it may not be in your favor. Cooperate fully. Inform him or her about all the facts of your case as accurately and honestly as you can, and report any new developments right away. By doing this, you allow the lawyer to develop strategies to counter “bad facts.” You don’t want your lawyer caught unaware in court!
- “I’d Rather Pay My Lawyer Than The Liar/Thief/Good-for-nothing on the other side.” This mistake also goes by the name “It’s not the money, it’s the principle.” Such positions work fine for Microsoft, Warren Buffet, and their army of lawyers on retainer. But even these business giants know that it’s sometimes better to pay an undeserving opponent than to get mired in costly litigation. For business owners, litigation is personal. But don’t let your emotions create an inflexible attitude towards resolving a lawsuit. Discuss mediation, arbitration and settlement early with your lawyer.
- Being Too Eager to Settle. Though less common than Mistake No. 5, it can also be a mistake to be too eager to settle. Maybe you feel did something wrong and the other side is in the right. That doesn’t mean you can’t benefit from a vigorous defense. Sometimes a “win” means paying less than you otherwise might when you’ve done something wrong.
- Not Preparing With Your Lawyer For Your Deposition. Depositions (the testimony of witnesses under oath recorded by a court stenographer) affect the outcome of every business lawsuit. If your lawyer doesn’t meet with you before your deposition, how will you be prepared for the tough questions? Your deposition preparation session should help you identify and understand your case themes, the strong/weak points of your case and how to address issues that might arise during the deposition. You may practice answering questions and prepare for a video deposition. Don’t scrimp on deposition preparation.
- Failing to Document Your Case. The temptation for any business is to avoid unnecessary expense and effort. However, business litigation requires extra diligence in maintaining records. Make sure to maintain important documents, including electronic mail, so that you have a record of all communication with the adverse party in your case. A business litigator will advise you on document and evidence preservation, including electronic records.
- Not Telling a Credible and Simple Story. In order to persuade the judge and jury, you must convey the facts in a clear and credible manner. One key to success is distilling these facts into a few simple themes. If your case involves technical or difficult issues, a business litigator will help you translate them into understandable terms. If there are gaps in your evidence, explain those as well. A good business litigator can present your story in a way that makes the trier of fact want to believe you and rule in your favor.
- Letting Your Emotions Get the Best of You. If a claim is asserted against your business, you likely will be angry. A good business litigator will help you stay shrewd and unemotional. Since you must be able to consider your options with a clear head, strong emotions are your worst enemy. Be objective, cooperate with your attorney, understand the costs of litigating versus paying the claim, and develop your strategy accordingly.
ABOUT NEWDORF LEGAL
Newdorf Legal is the go-to small firm for big problems. When business executives and public officials face complex legal challenges, they turn to David Newdorf for advice and representation. The firm’s lawyers have significant experience in the private and public sectors handling high-profile litigation.
Newdorf Legal provides business and public entity clients expert advice and representation in
- commercial disputes
- contract claims
- business torts/interference with contract
- real property litigation
- joint venture/partnership issues
- investor lawsuits
- fraud and other civil actions.
To obtain single or multiple printed copies of this article in a high-quality color brochure, contact Newdorf Legal.
Call David Newdorf at 415-357-1234 of the Newdorf Legal law firm for all of your San Francisco Bay Area business litigation questions.
August 20th, 2011
The Bar Association of San Francisco is sponsoring a seminar Sept. 28, 2011, on the effects of the recent California Supreme Court decision in Howell v. Hamilton Meats on personal injury litigation.
• The implications of the California Supreme Court decision in Howell v. Hamilton Meats for valuing medical damages in personal injury cases;
• How the Howell decision affects the selection and use of medical damages experts and changes settlement and trial strategies for plaintiffs and defendants;
• Substantive and procedural questions left unanswered by Howell;
• Analysis of Howell within the broader context of “negotiated rate differentials,” the collateral source rule and differential billing for the insured, uninsured and recipients of Medicare/Medicaid.
Walkup, Melodia, Kelly &Schoenberger
Lieff, Cabraser, Heimann & Bernstein, LLP
Horvitz & Levy LLP
Chapman, Popik & White, LLP
For more information, follow the link to the BASF seminar flier and sign-up form.
May 18th, 2009
“Law Firm Management & Marketing For Tough Economic Times”
A live Webinar sponsored by the Litigation Section of the California State Bar.
Date: May 20, 2009
Time: 12:15 to 1:15 p.m. (Pacific Time)
SIGN UP AT www.tinyurl.com/cal-bar-webinar
In the current economic down turn, lawyers must focus more than ever on the fundamentals of their business. Whether you work at a law firm or practice as a solo, smart management and marketing is vital to surviving today and laying the foundation to thrive tomorrow. Many law firms are cutting back their marketing efforts and budgets, which creates an opportunity for others to advance and stand out.
If you seek direction to focus your management and marketing efforts and set goals, this is the webinar for you. Our panelists include: a top litigator and long-time law firm manager; a pioneering law firm consultant; and the Chief Marketing Officer of a major national law firm.
This webinar will cover the following topics:
MANAGEMENT & CLIENT RELATIONSHIPS
Five Steps Any Size Firm Can Take Tomorrow For Better Management
Rate concessions or alternatives to the hourly rate as a strategy for client retention and attraction
The Client Satisfaction and Feedback Interview – when, why and how to do it.
Getting Your Firm’s Lawyers Involved in Marketing and Business Development
Does the World Really Need Another Lawyer Blog? Yes, and Why It’s Not Too Late To Join the Blogosphere
Using LinkedIn and other social networking sites for marketing
ARTHUR J. SHARTSIS, SHARTSIS FREISE LLP, SAN FRANCISCO
Mr. Shartsis co-founded the San Francisco law firm Shartsis Friese LLP in 1975. He has been the senior manager of the firm from its inception. He is an active trial lawyer specializing in complex litigation. He has tried cases in state and federal courts and appeared in both federal and state appellate courts, including the California Supreme Court. He has also represented major law firms, federal and state court judges, California Constitutional Officers (including Governor Arnold Schwarzenegger), and the States of California and Hawaii.
Mr. Shartsis is the founding President of the Association of Business Trial Lawyers of Northern California, an organization of 1,600 lawyers specializing in business litigation and trials. Mr. Shartsis has lectured widely on legal matters, having appeared on programs sponsored by PLI, CEB, The Rutter Group, CLE International, the California Judges Association, the Special Practice Institute of the Litigation Section of the American Bar Association, the American Bar Association Annual Meeting, the Association of Business Trial Lawyers and the Construction Superconference. Mr. Shartsis is the featured speaker in the Rutter Group’s bi-annual Northern California program on trial preparation and tactics. Mr. Shartsis has performed trial demonstrations, lectured on presenting and deposing expert witnesses, presented a program to judges on “cutting edge” evidence, and lectured on developments in alternative dispute resolution.
PETER ZEUGHAUSER, THE ZEUGHAUSER GROUP, NEWPORT BEACH
Mr. Zeughauser advises law firms on mergers and combinations, firm-wide strategic business planning, and devising strategies for increasing revenues and profitability and strengthening firm values and culture. He also works with firms to develop and align practice group and office growth strategies with firm-wide strategy, and to craft client strategies that promote long-term relationships.
Mr. Zeughauser launched the Zeughauser Group in 1995. He works with law firms, corporate law departments, and corporations doing business in the legal sector. A former chairman of the American Corporate Counsel Association (ACCA, now the Association of General Counsel), he practiced law for twenty years, including over a decade as senior vice president and general counsel of The Irvine Company. Under his leadership, the company’s legal department was ranked in a 1995 National Law Journal survey as one of the country’s top ten and cited for being in the vanguard of a powerful client-led legal industry reform movement.
Mr. Zeughauser is the author of Lawyers Are From Mercury, Clients Are From Pluto (1999). His writings on the business of law have been widely published and he is often quoted in business and legal publications. He is a frequent speaker at legal and business forums.
VICTORIA SPANG, SHEPPARD MULLIN, LOS ANGELES
Ms. Spang is the Chief Marketing Officer of Sheppard Mullin Richter & Hampton LLP, an AmLaw 100 firm based in California. She has spearheaded Sheppard Mullin’s internet strategy, which includes one dozen legal blogs. She has worked in marketing at California law firms since 1993, and was previously Director of Marketing at Bingham McCutchen and, before that, Pettit & Martin in San Francisco. She has been widely quoted on marketing in legal publications and is a frequent speaker for lawyers and legal marketing groups.
Ms. Spang is a former President of the Legal Marketing Association/Bay Area Chapter, which awarded her the Rella Lossy Lifetime Achievement Award for Professionalism. She holds an MBA from Golden Gate University.
MODERATOR: DAVID B. NEWDORF, NEWDORF LEGAL, SAN FRANCISCO
Mr. Newdorf has been a civil litigator and trial lawyer in San Francisco since 1994, working at a major national law firm, the San Francisco City Attorney’s Office and his own solo law firm, Newdorf Legal. He is the author of several legal blogs and a former newspaper reporter. He is currently a member of the Executive Committee of the Litigation Section of the State Bar of California.
April 30th, 2009
What are the “Do’s and Don’ts” of jury selection when dealing with issues of technology?
Whether you are a technology lawyer or a general business litigator, you may enjoy and benefit from this 1.5 hour MCLE program at noon on May 7, 2009 at the Bar Association of San Francisco.
- Honorable Marla Miller
San Francisco Superior Court
- Honorable Mary Wiss
San Francisco Superior Court
- David Newdorf
- David Weinberg
Farella Braun + Martel
- Learn from a leading jury consultant how to pick a favorable jury in cases where technology plays a centrol role
- Get tips from an experienced practitioner on how to approach voir dire and jury selection when your case turns on decisions about technology or technology issues
- Hear guidance from the bench on voir dire and exercising challenges in today’s fast paced, high tech trial environment
BASF Conference Center
301 Battery Street
San Francisco, CA 94111
MCLE Registration: 11:30 a.m. – 12:00 p.m.
Lunch and Program: 12:00 – 1:30 p.m.
Section Member $40.00
BASF Member $50.00
Register on line at the Bar Association website.
October 14th, 2008
Do your business contracts have an attorneys’ fee provision awarding reasonable fees and costs to the prevailing party? Many do. The common view on these provisions is that they promote fair outcomes (loser pays) and may deter lengthy ltigitation, since each side wants to avoid having to pay the other side’s attorneys. I haven’t seen any empirical evidence to back this up. I recently obtained $3.4 million in attorneys’ fees for a client, pursuant to a contract, and the case highlights some of the risks involved in attorney fee provisions. (For details of the case, read The Recorder article about the Duane Morris case posted on this website.)
Consider at least two situations in which the fee provision may drive unnecessary litigation: consumer contracts and complex transactions. Most consumers, including those who enter into residential leases, obtain legal representation on a contingency basis. The economics of paying hourly attorneys fees doesn’t work for most consumers involved in contract disputes.
The existence of an attorney’s fee provision in a consumer contract/lease does two things. First, it makes it easier for the consumer to retain counsel on a contingency basis, even for a small case, since counsel will be paid a reasonable hourly rate if the consumer plaintiff prevails. Second, it encourages many counsel to over-lawyer a case. That is because a “reasonable fee” is based on a loadstar calculation: the number of hours worked times the market hourly rate. The loadstar in many cases will turn out to be more than the amount at issue in the lawsuit. For example, it’s not unusual to see a $10,000 fee award (or more) in a case resulting in a $1,000 judgment for the prevailing party.
The same thing can occur in complex commercial cases. Though business entities involved in large scale litigtation can ususally afford to hire hourly counsel, where there is a fee provision, hourly counsel may agree to work on a contingency basis. In these cases, multiple the numbers above by one thousand and you can predict the result: the law firm will very soon have a larger stake in the litigation than the client. Cases that might otherwise have settled or resolved between entities may be driven to trial by lawyers chasing a fee.
Attorneys and their clients should evaluate their contracts and experience with past disputes and decide whether the client may be better served by the default American rule: each side pays its own attorneys.
September 11th, 2008
Chart Explaining The Parole Evidence Rule
Most lawyers don’t think about graphics until they’re preparing for mediation, arbitration or trial. But many pre-trial motions and issues involve ideas that are hard to explain with text but easy to show graphically: organization charts, process flow charts, and time lines (especially for statute of limitations motions). Even complex legal analysis can in some cases be reduced to an easy-to-use decision tree. Still, most judges and lawyers cling to the outdated notion that only juries benefit from graphics.
Here’s an example of how I used graphics in the law-and-motion department. All lawyers remember the phrase “Parole Evidence Rule” from law school. But like the “Rule Against Perpetuities” (which I forgot shortly after taking the bar exam) or the “Battle of the Forms” from the Uniform Commercial Code, you could read cases applying the Parole Evidence Rule all day long without attaining a state of clarity.
The seemingly simple rule (“You cannot use extrinsic evidence to change the meaning of a contract”) has so many exceptions that it sometimes seems turned on its head (closer to “You can always use extrinsic evidence to explain or interpret the meaning of a contract”).
While noodling over the meaning of the rule as applied to an “exclusive negotiations” contract between a developer and a public entity, a colleague and I grabbed a butcher-paper flip chart and Magic Marker and started scribbling boxes, arrows and case names like mad. After balling up and discarding several sheets, we finally distilled the holdings of nearly a dozen cases into a single, unified chart. Eureka!
We sent the chart off to a graphic artist who “prettified” it, adding cool colors, subtle shading and shadow effects and selecting an easy-to-read type face. This is the chart we all wish we’d had in law school. (Students, see below on how you can get yours.)
Using text narrative, you can state the rule and list the exceptions. But you’d need dozens of pages to describe all the possible combinations that could apply to a given case. As the saying goes, a picture’s worth a thousand words. We attached the finished product to our brief. I can’t say it made the difference, but the judge adopted our view of the law over the opponent’s.
What does the future hold? Trial graphics have gone beyond static images on a board to video animation projected on a screen. In patent cases, lawyers routinely prepare animations to explain and simplify technology. It won’t be long before video makes its way into routine motion practice.
With the spread of electronic filing, some courts (such as the Ninth Circuit U.S. Court of Appeals) are experimenting with e-briefs that allow lawyers to hyperlink to cases and record pages. Though I haven’t heard of it, no doubt some trial courts already accepted video deposition clips into a motion record.
Imagine this in your brief: Instead of the ho-hum response “I followed routine company policy,” the court can watch the deponent mopping his sweaty brow, whispering into his lawyer’s ear, the lawyer whispering back, and the nervous witness stuttering as he utters this testimony. Now that’s a picture worth a million words!
The thumbnail image with this article is a low-resolution version of my Parole Evidence Rule chart (a.k.a., The Parole Evidence Rule Made Easy). I’m happy to send law students, lawyers and others a free full-size Adobe Acrobat PDF file of the chart. Use it to get ideas for your own case.
For details on this free offer, click here to visit the “Think Visual” page.
Credits: Co-author of the chart: San Francisco Deputy City Attorney Warren Metlitzky (a guy who can’t do anything without a chart); Graphic Artist: David Rosenthal of LegalVision (a guy who can make a chart for anything).
August 26th, 2008
What follows is the introduction from my law review comment written in the aftermath of the Savings and Loan crisis. The title is: “Inside Fraud, Outside Negligence and the Savings & Loan Crisis: When Does Management Wrongdoing Excuse Professional Malpractice?” (26 Loy. L.A. L.Rev. 1165 [June 1993].) With a steady stream of corporate scandal, from Enron to the mortgage meltdown, the subject remains timely. Regulators and class action lawyers still go after the lawyers and accountants. But can they be held to account to investors and creditors for concealed management fraud? Read on.
* * *
The Federal Deposit Insurance Corporation (FDIC), seeking to make attorneys and accountants liable for losses at corrupt savings and loan associations (S & Ls or thrifts), has filed an unprecedented number of malpractice suits against these professionals. Many of these suits resemble the following hypothetical case of Charley K., a successful real-estate-developer-turned-savings-and-loan-kingpin.
In the early 1980s, Charley bought Jefferson Savings & Loan, a small thrift that until then had only made single-family home loans. Charley believed he could make more money by directly investing depositors’ funds in riskier ventures. Under Charley’s management, Jefferson S & L bought 100 acres of undeveloped land on the outskirts of a large city for $50 million. Unfortunately for Charley, the real estate market crashed, and the land value declined to $40 million. Because Jefferson S & L’s capital was only $10 million to start with, the $10 million loss wiped out all of Jefferson’s capital. The institution was–on paper, at least–worth nothing.
Charley should have reported Jefferson’s insolvency to the Federal Savings and Loan Insurance Corporation (FSLIC), which would have closed the thrift. Instead, Charley made a secret deal with speculator X, who owned land near Jefferson’s holdings. Charley, as an individual, would buy Ms. X’s land for $50 million (which was $10 million more than market value) if Ms. X would buy Jefferson’s land for $60 million (which was $20 million more than market value). Charley agreed that his S & L would make a $10 million nonrecourse loan to Ms. X to buy the land without putting any cash into the deal. Besides being an unsound business deal, the transaction violated federal law, and Charley knew it. First, Ms. X could not legally borrow $10 million from Jefferson S & L because that exceeded the maximum amount the thrift was allowed to lend to one person. Second, Charley intended to borrow money from Jefferson to buy Ms. X’s land. This not only exceeded the maximum that the S & L could lend to one borrower, but also would raise regulatory concerns about preferential insider lending. Charley covered up these problems by making the loans to Ms. X and himself through a handful of “dummy” corporations controlled by “straw” parties. The loan applications named neither Charley nor Ms. X.
Charley hired two prestigious law firms to handle the loan documentation. He paid more in fees to split the work, when one firm could have done the job more efficiently, so that neither firm would suspect the true nature of the overall transaction. If lawyers at either firm had scratched below the surface, they would have discovered the connections between the dummy corporations, Charley and Ms. X, but neither firm did. The land deals closed, resulting in a $10 million “profit” to Jefferson. Because the sale on paper appeared to be an arms-length transaction, Jefferson’s Big Six accounting firm approved the entire $10 million as profit–an overnight doubling of the thrift’s capital.
Charley’s scheme, however, could not last indefinitely. The slump in the real estate market worsened, forcing Charley and Ms. X to default on $60 million in loans from Jefferson S & L. By then, the two tracts of land were worth only $40 million together. The two bad loans wiped out Jefferson’s capital and left a $10 million negative net worth. The FSLIC paid off depositors and covered the deficit out of the S & L insurance fund.
Shortly after closing Jefferson S & L, FSLIC lawyers sued the two law firms and the accounting firm to recover $20 million in losses allegedly caused by the firms’ negligence. According to the FSLIC, the land deals were so obviously fraudulent that the professionals must have “looked the other way” to protect a client and their large fees. Because Charley was bankrupt, the well-insured professionals were the “deep pockets” to which the FSLIC looked for recovery. The accounting and law firms were shocked to discover their unwitting role in Charley’s and Ms. X’s fraud and embarrassed that they had not uncovered it. The firms, however, adamantly denied liability, even if they were negligent. The firms moved for summary judgment on the grounds that Charley’s insider fraud and concealment cut off any liability for mere negligence.
The alleged negligent omission of Jefferson’s attorneys and accountants was the failure to uncover the fraud and concealment by their client’s top management. Professionals in this situation have raised what this Comment refers to as the “insider fraud defense.” Part II of this Comment examines the role of attorneys and accountants in the S & L crisis and defines the “insider fraud defense.” Part III compares the facts, procedural background and reasoning of the two leading cases on the insider fraud defense: FDIC v. O’Melveny & Meyers [sic], which rejected the defense, and FDIC v. Ernst & Young, which allowed it. Part IV explores the bases in case law for the defense and applies the precedents to S & L fraud and professional malpractice. Finally, this Comment concludes that courts should allow the insider fraud defense when top management dominated the thrift and successfully concealed its wrongdoing from outside professionals.
You can find the entire article posted at www.bizlitigator.com/insider-fraud-defense