US Business Litigation Risks

Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi

About the author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv

Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxi
Commercial litigation avoidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxii
Effective management of business litigation . . . . . . . . . . . . . . . . . . . . . . . . xxiv
Foreign companies facing US litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxvi
A California emphasis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxvii
A litigator's unique perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xxviii
Assumptions and audiences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxix

Part one: Understanding why companies are ensnared in costly litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Chapter 1: The five Cs of business litigation risks . . . . . . . . . . . . . . . . . . . . . 3
Creating a business litigation risk profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The closely related regulatory risk profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Assessing commercial litigation risks - a five-part framework . . . . . . . . 11

Part two: Corporate governance litigation risks- claims from shareholders and other constituents of the business . . . . . . . . . . . . . . . . . . . . . 17

Chapter 2: Basics of corporate governance litigation . . . . . . . . . . . . . . . . . . 19
Understanding shareholder litigation - a useful metaphor . . . . . . . . . . 20
Four recurring themes of corporate governance litigation . . . . . . . . . . . 25
Seven legal concepts useful to understanding corporate governance litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Chapter 3: Ten sources of corporate governance lawsuits . . . . . . . . . . . . . 39
1. Irreconcilable differences between ill-suited business partners . . . 39
2. Failing to maintain the formalities and other best practices . . . . . . 42
3. Giving employees equity interests resulting in dual sets of obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4. Disputes over informational rights of shareholders, members and partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5. Misleading constituents through fraudulent statements or omissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6. Breach of fiduciary duty claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7. Failing to make reasonable inquiries concerning risks to the company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8. Failure to implement a code of ethics and an effective corporate compliance program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9. Commingling and other separateness issues . . . . . . . . . . . . . . . . . . . . . 59
10. Dealing with creditors and facing insolvency . . . . . . . . . . . . . . . . . . . . . 60

Part three: Litigation risks from commercial contract disputes . . . 65

Chapter 4: Core issues in breach of contract litigation . . . . . . . . . . . . . . . . 67
Navigating troubled waters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Is there an enforceable contract? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
How and where is this dispute going to be resolved? . . . . . . . . . . . . . . . . . 79
What are the substantive contract terms? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Are there statutory overrides for the contract or specific terms? . . . . . 84
Were the contractual duties performed or excused (breach)? . . . . . . . . . 88
What are the remedies for a breach of contractual duties? . . . . . . . . . . . 91

Chapter 5: Strategies for managing litigation risks arising from commercial contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
1. Manage the contracting and approval process . . . . . . . . . . . . . . . . . . . . 97
2. Formalize informal agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
3. Be aware of the risk of preliminary agreements and agreements to agree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
4. Scrutinize the scope of express indemnity provisions . . . . . . . . . . . . 101
5. Address termination scenarios and the risk of precipitous terminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
6. Specify which contract terms survive termination . . . . . . . . . . . . . . . . 104
7. Craft time limits and cure provisions that are appropriate . . . . . . . 105
8. Consider how joint venture duties arise . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
9. Include an effective integration clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
10.Guard against claims that a contract was fraudulently induced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
11. Prevent claims that a contract was modified by subsequent conduct and effectively modify written agreements . . . . . . . . . . . . . . 110
12. Preclude claims for extraordinary damages . . . . . . . . . . . . . . . . . . . . . . . 112
13. Control where the battle will be fought and jurisdictional waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
14. Ensure favorable law will be applied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
15. Consider the pros and cons of arbitration . . . . . . . . . . . . . . . . . . . . . . . . . 117
16. Decide whether an attorney fee provision is beneficial . . . . . . . . . . . 126
17. Determine whether there are strategic benefits to waiving a jury trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

Chapter 6: Lawsuits arising from negotiations and implied obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Liability for bad faith during contract negotiations . . . . . . . . . . . . . . . . . . 141
Misuse of confidential information obtained in negotiations . . . . . . . . 145
Coercive negotiations constituting economic duress . . . . . . . . . . . . . . . . . 147
Six practical ways to reduce the risks of claims arising from contract negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
Avoiding claims for breach of the implied covenant of good faith and fair dealing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153

Part four: Customer claims including consumer protection class actions, product liability, and breach of warranty claims . . . . . . . . . . . . 161

Chapter 7: Customers presenting consumer protection and class action risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
US class actions - a tough pill to swallow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
Overview of US class actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
Basic requirements of a class action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
The history and policies behind federal and state consumer protection statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
The role and duties of class action lawyers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
How class action lawyers make their millions . . . . . . . . . . . . . . . . . . . . . . . . 171
Why class counsel fee awards are exorbitant . . . . . . . . . . . . . . . . . . . . . . . . . 172
How class actions are settled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
The rise in pre-filing settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
The California class action framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
The interrelationship between state consumer protection claims and federal regulations . . . . . . . . . . . . . . . . . . . . . . . . 183

Chapter 8: A framework for identifying consumer class action risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189
What is said about the product or service? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190
What is not said about the product or service? . . . . . . . . . . . . . . . . . . . . . . . 198
Facts pertinent to health and safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200
What is said about the price, including fees and charges? . . . . . . . . . . . . 200
What is said about competitors or the market? . . . . . . . . . . . . . . . . . . . . . . . 204
What is said about the transaction? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206
FTC's "Click to Cancel" rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209
How are the advertising statements conveyed? . . . . . . . . . . . . . . . . . . . . . . . 210

Chapter 9: Additional litigation risks specific to product sales and distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223
Breach of warranty claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225
Express warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226
Implied warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
Modifications and disclaimers of warranties . . . . . . . . . . . . . . . . . . . . . . . . . 228
Overview of the Magnuson-Moss Warranty Act . . . . . . . . . . . . . . . . . . . . . . 230
Song-Beverly Consumer Warranty Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234
The New Jersey pitfall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235
Product liability claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236
Chemical exposures in products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243
How Prop 65 works . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243
Prop 65 litigation claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244
The problems presented by Prop 65 claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 245
Avoiding a Prop 65 claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246

Chapter 10: Strategies for mitigating specific customer litigation risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255
1. Identify and prioritize the greatest customer litigation risks . . . . . 256
2. Re-examine regulations that may buttress customer claims . . . . . 256
3. Monitor regulatory activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257
4. Become familiar with relevant litigation trends . . . . . . . . . . . . . . . . . . . 257
5. Review insurance policies and exclusions . . . . . . . . . . . . . . . . . . . . . . . . . 258
6. Explore indemnity rights and obligations . . . . . . . . . . . . . . . . . . . . . . . . 259
7. Consider SRO guidance, industry, and voluntary standards . . . . . . . 260
8. Assess documentation relating to products or services advertised, distributed, or sold to customers . . . . . . . . . . . . . . . . . . . . . . 261
9. Consider and utilize customer service data . . . . . . . . . . . . . . . . . . . . . . . 261
10. Confirm effective assent to contract terms . . . . . . . . . . . . . . . . . . . . . . . 262
The rise in consumer class action waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266
The other risk - mass arbitrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268
The period in which to reject non-conforming goods . . . . . . . . . . . . . . . . 269
The period in which to bring a lawsuit (contractual statute of limitations) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270
11. Limit liabilities and remedies to the extent permitted . . . . . . . . . . . . 271
12. Consider product recall issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272
13. Consider disproportionate liabilities that arise from incorporating component parts or ingredients in a product . . . . . . 274
14. Negotiate acceptable quality limits and failure rate provisions for large volume sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274

Chapter 11: Claims relating to data privacy and cybersecurity . . . . . . . . 279
History and origins of privacy protections . . . . . . . . . . . . . . . . . . . . . . . . . . . 282
A "cradle-to-grave" approach to privacy liabilities . . . . . . . . . . . . . . . . . . . . 283
1. The collection of consumer data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283
2. Uses and sharing of consumer data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288
3. Disclosures to the consumer regarding their data . . . . . . . . . . . . . . . . 294
4. Responses to consumers' requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299
5. The protection of consumer data from a breach . . . . . . . . . . . . . . . . . . 300
6. The required notices relating to a data breach . . . . . . . . . . . . . . . . . . . . 303
7. The disposal of consumer data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304
Privacy regulations applicable to particular industries and contexts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305
The ten questions to ask in evaluating risks of data privacy claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307

Part five: Competitor lawsuits including misappropriation, interference, intellectual property, and antitrust claims . . . . . . . . . . 317

Chapter 12: Litigation risks relating to competitors . . . . . . . . . . . . . . . . . . . 319
The eight most common litigation theories asserted between competitors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320
1. Misappropriation of trade secrets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324
2. Other litigation claims relating to employee mobility . . . . . . . . . . . . 333
3. Registrable intellectual property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338
4. Other Lanham Act claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342
5. Trade disparagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343
6. Antitrust violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346
7. California's Unfair Competition Law and Unfair Practices Act . . . . 351
8. Common law interference claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352
Things to consider before suing a competitor . . . . . . . . . . . . . . . . . . . . . . . . 354

Part six: Crewmember litigation - claims brought by, because of, or against employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365
Chapter 13: Crewmember claims and other liabilities relating to employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367
The most common claims by employees against employers . . . . . . . . . 368
Preventing and reducing employment claims . . . . . . . . . . . . . . . . . . . . . . . . 392
Claims arising from employees' tortious actions . . . . . . . . . . . . . . . . . . . . . 398
Unethical or corrupt practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399

Part seven: Litigation management after a lawsuit is filed . . . . . . . . 413

Chapter 14: Essentials of managing the six stages of commercial litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 415
Stage 1: Pre-litigation communications and demands . . . . . . . . . . . . . . . . 417
Stage 2: Pleading and initial forum fights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423
Stage 3: Discovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 429
Stage 4: Pre-trial merits determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 432
Stage 5: Trials and arbitration hearings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 433
Stage 6: Post-trial motions, appeals, and enforcement of judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 437

Chapter 15: Foundational litigation management decisions . . . . . . . . . . 445
Selecting the right flight crew . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445
The economics of litigation management . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449
Working through the preflight checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 453
Triangulated litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 456
Revisiting the flight plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459
Controlling litigation costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 460

Chapter 16: Further tips for navigating the litigation process to a successful conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 469
Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 469
Depositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 475
1. Know the ground rules - the "blocking and tackling" of depositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477
2. Know the issues in the case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 478
3. Know the unpleasant surprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 478
4. Know what you don't know . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 478
5. Know what you should know . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 479
The three problem deponents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480
Expert witnesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 481
The landing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 483
Private mediations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 484
Court officers and settlement conferences . . . . . . . . . . . . . . . . . . . . . . . . . . . 484
Timing of settlement (the 80/20 rule) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 485
A company's evolving position on settlement . . . . . . . . . . . . . . . . . . . . . . . . 486
Business solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 487
Alternatives to settlement or trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 488
Stipulated judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 489
Closing thoughts on commercial litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 489

About Globe Law and Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495

Este título pertence ao(s) assunto(s) indicados(s). Para ver outros títulos clique no assunto desejado.

• Direito comercial da empresa, e da concorrência
• Advocacia: geral
• Vocações e práticas legais

Litigation risks, Litigation strategy, US litigation, Commercial litigation; Dispute resolution, Privacy litigation, Litigation prevention