CHAPTER 3 METHODS TO EFFECTIVELY MANAGE COMPLEX MULTI-PARTY DISPUTES
| Jurisdiction | United States |
(Mar 1984)
METHODS TO EFFECTIVELY MANAGE COMPLEX MULTI-PARTY DISPUTES
Anderson Russell Kill & Olick
New York, New York
Present day American society is litigious.1 Litigation is looked upon as an appropriate channel for resolution of disputes. Whether this is because of the frontier heritage2 or the number of lawyers is unclear but Americans look to the courts to resolve disputes in greater number than any other country.
When an airplane crashes in the United States a lawsuit is brought by or on behalf of virtually every passenger3 and often by crew members.4 In Japan when a plane crashes an airline executive personally visits each home and apologizes; offers of settlement are made and few, if any, lawsuits result.
Complex cases can drag on interminably in court whether they are two-party actions such as United States v. International Business Machines 5 which was pending for 13
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years prior to its settlement or multi-party disputes such as complex antitrust cases, e.g., In Re Corrugated Container Corp.,6 product liability actions7 or conspiracy actions.8 Silkwood v. Kerr McGee.
Complex cases such as mineral law cases can clog the courts and delay resolution of the controversy.9 Although our judicial system traditionally has permitted these cases to become as complicated as any party desired, such complication is not necessary nor always beneficial to the parties. Of course, a defendant can calculate a worst case scenario and as long as its total legal fees are less than the advantage it retains from use of the money or property during the litigation it will be in that defendant's interest to protract the case as long as possible. Such a litigation plan would envision lots of discovery, motions and interlocutory appeals.
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Barring such economic incentive to protract litigation, most complex multi-party cases can be simplified and handled on a more efficient basis provided the parties are willing to be creative and possibly take some calculated risks.
Sharing of Counsel
In multi-party cases defendants are starting to share counsel. Sharing of counsel requires an agreement whether or not in writing that inter-defendant claims for contribution or indemnity will not be asserted in that case and will be waived or preserved for resolution either in a non judicial forum or in a separate case after the original dispute is resolved. This procedure is beneficial to the defendants as in many cases it is the internecine war amongst codefendants which proves the plaintiff's case.
With a complicated case it is usually the codefendant which individually and through its counsel is most sophisticated and knows where to look for "smoking gun" documents or how to puncture technical arguments. This is not by any means a suggestion that a defendant underestimate the plaintiffs' bar which is quite sophisticated but rather to suggest that one multinational company and its counsel are more likely to understand how another multinational company operates. When such companies agree to a joint defense and a
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mutual non aggression pact they are likely to save themselves a lot of headaches and legal fees. If they concentrate their efforts on defeating the plaintiff's case against both of them, they may find they have achieved a defense verdict and cross-claims, indemnity claims and contribution claims need not be resolved after all.
This type of cooperation requires creativity and courage from both the lawyers and the executives.
The Lawyers
Traditional legal practice mandates that "the best defense is an offense." When you represent a defendant you assert a counterclaim against the plaintiff, cross-claims against each of the other codefendants and serve a third-party complaint on anyone against whom you can possibly palm off some liability.10 This practice is encouraged by insurance companies and while it may work for automobile accidents when it is used in complex cases the results are often an exponential increase in legal fees and liability for all original and third-party defendants. Jurors' monetary reactions are different when there are three individuals involved in an intersection collision than when there are three Fortune 500 companies fighting among themselves.
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Lawyers may be reluctant to suggest another mode of procedure than laying off the blame on as many other companies as possible. It is a different approach and lawyers tend to be traditional. Will it subject the lawyer to malpractice if there is a big plaintiff's verdict and eight other companies were not brought in to share it? As claims for indemnity and contribution are separate and distinct in most jurisdictions11 , there is nothing to prevent the commencement of an indemnity and contribution action after an adverse verdict. Indeed, the statute of limitations usually does not begin to run on such an action until after an adverse verdict.12 Although in a few states, such as Texas, an action for contribution must be asserted at the time of the main action or it is lost.13
As long as the client is aware and agrees with the tactic of not asserting cross-claims or impleading third-party defendants, malpractice should not be a concern.
The Executives
The executive must also be creative, strong and secure enough in his/her position to be willing to try to litigate in a new way. The executive must be personally
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willing to try a new defense strategy and must have the ear of those in the corporate hierarchy who are necessary to approve the new strategy. The executive must also be secure enough to withstand Monday morning quarterbacking in the event of a multimillion dollar verdict and the concomitant newspaper publicity.14
If the lawyers and executives for the defendants in a multi-party action have these personal and political strengths a lot can be done to effectively manage complex multi-party litigation.
The decision to institute a group defense may come from the realization that if the total bottom line of the litigation, defense costs and indemnity payments, are lower it does not matter where the costs are saved and a small increase in one area could be tolerated against a substantial decrease in another. This may be particularly apt if the property is worked out or the product is no longer being manufactured.
There are many instances where such bottom line thinking does not make sense because the litigation bottom line is not the total bottom line. Thus, projected profits from the mineral property may be so great that it is worth spending substantial legal fees to protect the property.
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Similarly, where a product is highly profitable and widely sold, defendants' litigation budget may be unlimited. For example, the most successful defense in product liability action has been the tobacco companies. Despite fierce competition among brands the tobacco companies have been able to work together to defend product cases asserted against them. While they may spend more per case than other product liability defendants they are in the enviable position of having all victories and no defeats.15
This type of cooperation can be achieved by other industries and codefendants in multi-industry cases. It requires recognizing common interests and putting them ahead of individual disputes.16
Streamline the Cases and Learn Cooperation
The solution from the defendants' standpoint involve working together to adopt procedures which will streamline the litigation while providing sufficient information to fairly evaluate and try cases. Defendants could profit from recent examples of working together by plaintiffs' counsel.
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The plaintiff's bar through ATLA17 and economic self-interest have become increasingly well organized and are working together.18 Whether they charge new plaintiffs' attorneys for access to information already developed as in the Agent Orange cases19 or whether they permit free access to their information and sources as in the asbestos cases there is a lot of pooling of information and provision of help and assistance among those on the plaintiffs' side of the bar.
Defendants, unfortunately, are lightyears behind. They are still fighting each other and making their own lot more difficult. The Chem-Dyne20 hazardous waste site litigation is a good example of defendants in fighting. In August 1982 the United States government, later joined by the State of Ohio, brought a lawsuit against twenty-eight defendants alleging violation of the Comprehensive Environment Response Compensation and Liability Act of 1980 ("CERCLA")21 , the
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Resource Conservation and Recovery Act ("RCRA")22 and the common law. From August 1982 through December 1983 the parties engaged in massive discovery taking over 7,000 pages of deposition and producing over 100,000 documents. This sounds like fairly complicated litigation which is keeping all sides busy. Yet this was only the beginning. On January 26, 1984 twenty-four of the original Chem-Dyne defendants filed a third-party action adding 163 new third-party defendants.23 The third party complaint purports to seek indemnity and contribution. Applause must be given to four of the original defendants who did not join in this third-party action.
The result is that there are now approximately two hundred parties before the court. Even in the tightest run courtroom and with the use of liaison counsel, it is difficult to imagine that any defendant will be able to receive what traditionally would have been called justice. This is particularly true for defendants which may have sent one or two barrels of waste to the site.
There was no procedural necessity for the filing of this third-party complaint. Even if there is joint and several liability under CERCLA and RCRA, something which has not been definitively decided, further complicating an already
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