HOW SUSMAN GODFREY REDUCES RISK Columbia Law School January 30, 2014 I. The Shrinking Universe of Good Plaintiffs Cases A. For 30 years, elected officials have railed against frivolous lawsuits and have made the elimination of lawsuit abuse about the only thing both parties can agree upon. This week, in his State of the Union address, even President Obama urged Congress to pass a patent reform bill that allows our businesses to stay focused on innovation, not costly, needless litigation. When Republicans are asked what they would substitute for Obamacare, it is always starts, and usually ends, with the elimination of malpractice lawsuits. B. Whether infringement and malpractice suits survive, whether the new patent law will contain provisions 1
designed to make the loser pay or to require enhanced Twombly-like pleading, it is clear that the courthouse doors are almost closed and never again at least not in my lifetime will Congress pass laws creating private causes of action that empower private attorneys general. C. So enhanced pleading requirements, relaxed summary judgment requirements, Daubert motions, mandatory arbitration and removal of class actions to federal court where there are high barriers to class certification (either because of Comcast or, in the securities area, an expected adverse decision in Halliburton II) have all drastically reduced the universe of cases that pls lawyers are even willing to consider taking a risk on. 2
D. And that changes the calculus on evaluating a single case. 1. One way that our firm has minimized risk on the pls side is by not putting all our eggs in one basket by investing in enough contingent fee cases that we can afford to write off time in 50% of them because we have others where we will earn a substantial premium. 2. That strategy is obvious more challenging with fewer eggs to spread around II. Case Evaluation Our most important legal work A. Case Acceptance Procedures 1. The attorney, who originates a contingent or fixed fee case, prepares a case evaluation memo, not to exceed 10 pages, describing the legal 3
issues, the damages, the problems, the proposed fee and co-counsel arrangements and venue. 2. These are distributed Monday afternoon in preparation for a firm meeting of all attorneys at all offices on Weds. 3. The discussion is led by rotating panel of 5 partners who vote first, but all votes are counted the same. 97% of our attorneys clerked for federal judges and today, to get a job, a law graduate must have had a federal judicial clerkship. We highly value to ability to quickly evaluate a fact pattern. 4. It requires a 2/3ds vote if the firm is to pay expenses: the risk is not the amount of the expenses but a client without skin in the game 4
a) You must make sure that the client who promises to pay expenses can afford to do so because if he stops, withdrawal is not a good option b) Consider sending the client to a litigation funders. They have growing expertise in valuing litigation risk and lots of funds to invest. 5. When the case is over, we conduct a Lessons Learned where we dig out the Case Evaluation memo and see how close we came 6. Almost all cases depreciate over time, so our goal is to take on cases where we believe we have a 75% chance of success. B. The mechanics of evaluation 5
1. Clear conflicts before allowing potential client to disclose any non-public info 2. Ask whether client wants contingent or fixed fee arrangement and, if the former, whether the client can pay out-of-pocket expenses 3. Ask client to either complete a form questionnaire (see our Patent Infringement Questionnaire) or to provide a written chronology annotated with key documents highlighted and in chronological order. 4. Insist that client provide any analysis by other lawyers 5. Ask for deadline and exclusivity until then C. Some evaluation guidelines 1. Check all contracts for dispute resolution/choiceof-law clauses 6
2. Consider not only limitations issues, but explanations for delay in complaining/filing 3. Can we file in state court and keep the case there? 4. Can we allege a cause of action that doesn t require enhanced pleading? 5. Venue and the identify of the judge is important 6. Huge damages do not compensate for weak liability 7. Avoid cases where there are significant legal issues 8. Do we control the necessary witnesses? 9. Can the defendant afford to settle? 10. Can you control the client s expectations as to how much he will accept? As to how you will handle the case? 11. Have other lawyers evaluated the case? 7
12. Does the client have history of litigation; disputes with former counsel? 13. Was someone hurt enough to make the jury furious at the defendant? 14. Will client allow us to joint venture the case with other firms to spread our risk? III. Negotiating the Fee Agreement As Important as Selecting the Right Cases to Bet on A. One of the biggest risks of representing plaintiffs on a contingent fee basis is have the client try to stiff you if you are successful, so spend as much time preparing the fee agreement as you do evaluating the case. B. Use only form, jurisdiction-specific fee agreements that have been vetted by an ethics professor and require approval by firm General Counsel and 8
management of any changes: an unethical provision could result in forfeiture. C. I could teach an entire course on Ethics using our form fee agreements. IV. Handling Cases to Minimize Depreciation and Risk A. Risk is a function of how much time you must spend to get case ready for trial: most lawyers greatly exaggerate that. 1. For any task, use only one lawyer 2. Practice TrialbyAgreement.com 3. Avoid unnecessary disputes: 95% of what happens before trial is not outcome determinative B. Continuous Case Re-Evaluation C. Frequent re-evaluation of your case may lead to an early settlement 9
D. Preparation of a detailed written chronology of events, before a single deposition is taken, assists you in determining whether the facts support the story your client told you during case evaluation E. Preparing and constantly revising the Hardest Questions and Best Answers is essential for the preparation of your witnesses for deposition and trial and for focusing on where you really have a problem F. Early, and if necessary, repetitive mock trials tells you all you need to know to avoid the risks of an unnecessary trial or to improve your chances at an inevitable one. G. Our firm requires that the client be copied on all incoming and out-going emails and participate in weekly trial team calls. By keeping the client fully informed, you reduce the risk of client dissatisfaction, 10
and worse, discharge, nonpayment or claims of malpractice. H. Know when to fold them, so you don t throw good money after bad 11