Leave for a moment cases that don’t have a real plaintiff: mass torts or securities fraud class actions, for example. Someone is called the plaintiff in these cases, but that person is largely irrelevant; plaintiffs’ attorneys call the shots.
Put aside for a moment the lawsuits between individuals and corporations when someone tripped and fell in a chain store parking lot or a corporation breached a product warranty. It’s a routine lawsuit that usually gets little attention.
Instead, think of a corporate vs. corporate lawsuit: BigCo is suing GiantCo for doing something wrong. And let’s assume it’s not an intellectual property dispute where the game might work differently.
Think about the internal politics of this corporate situation.
In the beginning, the situation is relatively rare; large corporations tend to be on the bad side of “v.”
Now suppose that the end of the year is approaching.
Your law firm tells you at the end of every year that this is the worst year (in terms of profitability) in the history of the world. The sky is falling! It is imperative that each partner attempt to obtain all prices due to the firm by December 31st. You must do it! This is the worst year in the history of the world!
Of course you heard the same thing last year, and you’ll hear the same thing next year, and the year after that, and the year after that, and so on until the end of time.
That’s the nature of law firms.
Corporations are the same: this quarter is the worst quarter in the history of the world! What can we do to collect every cent we are owed?
The end of the year is always especially bad: this fourth quarter is the worst fourth quarter in the history of the world! And this year will be the worst in the history of the world! (I know we told you the same thing last year, but we were kidding then. This year is truly the worst year in the history of the world. Trust me.)
So, everyone is sitting in the executives’ rooms puzzling over how to bring money into the joint. One company says it can speed up collection a bit. Another business will try to close a deal that wasn’t supposed to close until next year.
And what can a general counsel do for a team whose department only wastes money?
Well, there is one case on the plaintiff’s side that we are handling.
What does it cost?
This is a big deal. I figure if we let it go through there’s a 60% chance it will cost us $100 million three years from now, so I’m putting the case at about $60 million.
Suppose you settle by the end of this year, thus bringing in money this year? (And remember, this year is the worst year in the history of the world!)
We would not have received very much for the case – maybe 5 million dollars.
Five million? It’s wonderful! We could really use $5 million this year! In fact, we could use $3 million. I am giving you the authority to settle a case worth over $3 million by the end of the year.
$60 million case settled for $4 million.
Why are corporate vs. corporate lawsuits often underestimated?
Just think about how corporations work.
Mark German spent 17 years as a partner in a leading international law firm and is now Deputy General Counsel at a major international company. He is the author The Curmudgeon’s Guide to the Practice of Law and Drug and Device Liability Litigation Strategyin (affiliate links). You can contact him by email at firstname.lastname@example.org.