Juanita Brooks, a principal at Fish and Richardson, says people see Microsoft, a client, ‘as an ATM machine.’ Thirty-five suits against the company are pending around the country. (photo/alandeckerphoto.com)

In a highly litigious society, news that “we’re being sued” may not be shocking, but is still alarming and requires immediate attention. The lawyer retained by a business may be one they hired when making the deal, typically called a transactional lawyer. The transactional lawyer is going to know the terms of the deal and that’s why he’s a witness. Now the business is going to have to trust the firm’s litigators, or if the firm can’t handle it, trust the firm to make a wise referral.

It is comforting to know that managers of firms that defend businesses and their top-flight courtroom warriors are not fazed by the mere threat of legal action. Ask Juanita Brooks, a principal at Fish and Richardson. One of her clients is a well known software company known as Mr. Softy (stock symbol: MSFT). With 35 suits against her software client pending around the country, Brooks has to decide whether it is better to “pay protection money” to be rid of a suit or “make a statement” that the client won’t be taken advantage of.

“People see Microsoft as an ATM machine,” she explains.

The potential value of those 35 cases is in the billions, Brooks says. A business can pay plaintiffs to go away, but “now it’s out on the street, which encourages more suits. Any company needs to make a business determination whether they’re willing to get a reputation that they’re easy money or a reputation that you’ll have to pay dearly for it.”

When the call comes in, it’s a firm’s litigation manager who has to decide which litigator will receive the assignment, and form a strategy to settle or fight.

One of the first things Seltzer Caplan’s Jerry McMahon wants to know is “who’s on the other side? Is this a very solid attorney who has a very busy practice and has a choice of cases or is this an attorney who needs this case?” McMahon says more than 90 percent of all civil litigation cases are settled before a full trial, but getting there means maximizing the client’s leverage. “There’s a lot of judgment and psychology involved,” McMahon says.

Jerry McMahon of Seltzer Caplan says more than 90 percent of all civil litigation cases are settled before a full trial. (photo/alandeckerphoto.com)

It is a dynamic situation that can change daily. “As the threat of trial comes closer, there’s more pressure to settle and cases are dynamic,” McMahon says. “With some cases, you pick up the file and the case gets better, there’s more information, the client presents well, the law is favorable, the other side sees that your client is good, they don’t present well, they’re shading the truth, your leverage gets better and chances of settlement are increasing. Some cases you pick up the file and it’s getting worse.”

George Berger, partner and chair of litigation for the San Diego office of Allen Matkins, has more than 30 years of litigation experience. Like McMahon, he’s interested in who represents the plaintiff.

“There have been cases where a case can be down the road a ways and the firm finds out it’s litigating against a former client,” Berger says. “Although I’ve never experienced it, I’ve heard of cases where the lawyers show up in court and the opponent is a partner in the same firm from another office. They might have an office in L.A. and another in Sacramento and the case is in Bakersfield and when they get to court, lo and behold, they’re from the same firm.”

Don’t forget the clock is running, Berger says. “If you have an affirmative claim for money, the question you have to ask is, when did it happen, because commercial statutes of limitation can be as short as two years or as long as four years perhaps from the discovery of a problem and it could be a long drawn-out commercial dispute.”

The role of the transactional lawyer in the pending suit also may come up. “One has to watch out that the transactional lawyer might be an important witness in the dispute,” Berger explains. “There’s nothing legally wrong with a lawyer being a witness as long as the client consents, but you have to watch that the jury might say that the testifying lawyer isn’t going to be as honest because he’s from the same firm that is litigating the case—it can be awkward.”

Berger then has to decide how much of the firm’s resources to devote to the case. “There are cases that are sensibly assigned to one lawyer, and other cases where there might be a lawyer and a paralegal,” he explains. “Other cases require layers of lawyers and a paralegal; on large cases, you could have a team of lawyers and paralegals.”

Is The Prize Worth The Fight?

Although the image of the courtroom lawyer who can litigate any kind of case persists, deciding who in the firm handles the litigation is increasingly a matter of specialty, says Bill Grauer, chairman of the litigation department at Cooley Godward.

“In today’s market, an increasing number of litigators have specialties,” Grauer says. “There are still a number of litigators who are more general, trial lawyers in the old-fashioned sense, but there are also specialists in trademarks, patents or securities, where all they might do is securities litigation.”

Because Cooley specializes in securities litigation, it is not uncommon for their lawyers to meet clients for the first time when they’re being sued. “We get called when the (securities) litigation is filed,” Grauer says. “In most securities litigation, you have a stock drop and there’s a reason for it, so you’re going in there to peel the onion and figure out why that problem occurred. The client would meet with our litigation people and we would develop a plan for how to achieve their objective. We try to avoid going into litigation with a preconceived notion – we want to know the business objective of the client.”

Financial considerations are an important part of the equation. “If they ask for $250,000 and you can knock it down to $125,000, do you risk going to court? Is the prize worth the fight?” Grauer asks.

“The litigation system that exists today is dysfunctional when it comes to small disputes because the cost of litigation is so high,” Grauer explains. “That’s why some commercial attorneys put arbitration and mediation clauses in their contracts; an arbitration clause may prohibit discovery which is a big expense.”

Sometimes, not even money can buy peace. “You can never look at litigation in a vacuum,” Grauer says. “The plaintiff may ask for only $100,000, but what if there are a thousand other people just like him? That’s where you run into a problem. If you pay, will people come out of the woodwork? So you have to evaluate the financial component, the intellectual property component and practical impact. It may cost more to defend the lawsuit than the particular plaintiff is seeking but the long-term impact could be catastrophic for the client.”

Sometimes the demand isn’t for money, but for injunctive relief. “You have to think about how you’re churning the water for the rest of the sharks,” Brooks says. “If you’re the little guy, it’s tough to be magnanimous when they want to put you out of business.”