Introspection through litigation.

Author:Schwartz, Joanna C.
Position:Organizational behavioral change due to lawsuits
 
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ABSTRACT

This Article contends that there is a bright side to being sued: organizational defendants can learn valuable information about their own behavior from lawsuits brought against them. Complaints describe allegations of wrongdoing. The discovery process unearths documents and testimony regarding plaintiffs' allegations. And in summary judgment briefs, expert reports, pretrial orders, and trial, parties marshal the evidence to support their claims. Each of these aspects of civil litigation can bring to the surface information that an organization does not have or has not previously identified, collected, or recognized as valuable. This information, placed in the hands of an organization's leaders as the result of litigation, can be used to improve systems and personnel.

This Article considers the information generated by litigation, the gaps lawsuit data can fill in the information otherwise available to organizations, and possible reasons some organizations may gather and analyze litigation data more frequently than others. To illustrate these concepts, I draw on original research of police departments and hospitals and evidence from other organizational settings.

INTRODUCTION

No organization relishes the prospect of being sued. Lawsuits are costly and time consuming to defend against and can lead to negative publicity, increased government oversight, and other woes. But some organizations also see a bright side to being sued: through litigation, organizations can learn about their own behavior. These organizations review information developed during the course of litigation--complaints, depositions, documents exchanged in discovery, expert reports, briefs, and trial transcripts--to better understand weaknesses (1) in personnel, training, management, and policies. The process of organizational learning through information generated in lawsuits is what I call introspection through litigation.

Although introspection through litigation has not received sustained attention by scholars, (2) it operates at the intersection of two well-established concepts. The first is that organizations must understand their strengths and weaknesses in order to operate effectively and improve--a process that has been referred to as "organizational introspection." (3) Organizations may gather information about their own performance (4) but also often seek out information from outsiders through customer surveys, audits, and management consultants. (5) Outsiders are believed to offer valuable insights because they have fresh perspectives, are disengaged from organizations' internal politics, and are not predisposed in favor of existing personnel and practices. (6)

The second is that lawsuits can unearth information about misconduct that organizations have hidden from regulators and the public at large. (7) Outside auditors or regulators may not have the authority, tools, or motivation to pry the information from corporate executives' white-knuckled grip. (8) But plaintiffs' attorneys, unencumbered by allegiances to the industry and driven by the financial and other associated benefits of a win, are highly motivated to seek out information supporting their claims. Liberal discovery rules, including rules empowering courts to compel production of evidence and sanction those who do not comply, pressure defendants to turn over information that they would prefer to keep secret.

Introspection through litigation combines the recognized value of organizational introspection with the observed power of litigation to unearth information. For organizations interested in learning about their performance, lawsuits are, in essence, unsolicited audits by deeply dissatisfied customers who are highly motivated to describe their claims in the strongest terms, uncover all evidence relevant to their case, and present that evidence in the most compelling light. Hearing from a deeply dissatisfied, highly motivated customer may be an unpleasant experience, but it can also be illuminating. (9) Just as lawsuits can publicly reveal information hidden by corporate executives from outsiders, lawsuits can surface information that employees have purposefully or negligently failed to provide to management.

In prior work, I have studied the ways in which police departments and hospitals gather and analyze information from lawsuits brought against them and what both types of organizations learn from litigation data. (10) This Article draws on my studies of police departments and hospitals--as well as evidence about information generated through litigation against airlines, auto manufacturers, correctional facilities, and the Catholic Church--to offer generalizable observations about this phenomenon.

Part I considers what organizations can learn from the lawsuits brought against them. Although organizations gather information about their performance from multiple sources, lawsuits can surface information that has fallen through the cracks of organizations' other information systems. Complaints may describe allegations of wrongdoing that employees never reported to their supervisors. During discovery, lawyers may unearth details about the plaintiff's allegations that other investigators did not have the time or fortitude to seek out. And in complaints, summary judgment briefs, expert reports, pretrial orders, and trial itself, parties marshal the evidence--meaning they interpret, organize, and present information to support their claims--in ways that may prove illuminating. Each of these aspects of civil litigation can draw attention to previously unknown or underappreciated information and insights that organizations can use to identify and correct weaknesses in personnel, training, management, and policies.

To be sure, information generated during the course of litigation is flawed in several respects. Because very few people who have been harmed ever sue and damages awards are calculated based on the severity of the plaintiff's injury rather than the degree of the defendant's wrongdoing, lawsuit filings and outcomes are a poor indicator of the frequency and severity of organizational misconduct. (11) The adversarial nature of litigation can also cause parties to overclaim or shade the truth in their pleadings, briefs, and testimony. (12) These flaws do not, however, disqualify lawsuits as a source of useful information. All information is impacted by the manner in which it is produced, the interests of those producing the information, and its intended use. Organizations that engage in introspection through litigation do so in ways that take account of these limitations while still benefitting from the insights lawsuits can provide. (13)

Organizations that review lawsuits for lessons have learned about personnel and policy weaknesses and have used that information to prevent similar events from recurring in the future. Yet some organizations do not take advantage of the litigation information at their disposal. In my research, I found that most hospitals make some effort to learn from the lawsuits brought against them, but few police departments do so. Part II considers why some organizations might engage in introspection through litigation more often than others. It seems reasonable to assume that an organization will engage in introspection through litigation only if the organization wants to understand and improve its performance, views lawsuits as a source of valuable information about organizational errors and weaknesses, and has the infrastructure and personnel in place to analyze lawsuits for lessons. Hospitals generally meet each of these conditions, as do the few law enforcement agencies that analyze information from lawsuits. Most other law enforcement agencies, it seems, do not have the incentives, personnel, or favorable view of lawsuits as a source of information that would lead to introspection through litigation. By comparing the incentives and systems in place in hospitals and police departments, this Article identifies a variety of ways in which regulatory mandates, financial incentives, personnel, and evidentiary rules might be used to encourage police departments and other organizations to pay closer attention to the information in lawsuits.

  1. WHAT ORGANIZATIONS CAN LEARN FROM LAWSUITS

    The notion that an organization could learn anything about its behavior through the litigation process may be counterintuitive. After all, the organization, through its employees, engaged in the alleged misconduct and organizational leaders will, one presumes, have access to the documents and witnesses that may prove revelatory. But that presumption ignores the facts of institutional life.

    In complex organizations, information is decentralized and held by a number of different people and entities. It is the low- and mid-level employees who often have the most direct and immediate exposure to valuable information. (14) Police officers or their direct supervisors may be the first to learn of an allegation of excessive force. (15) Nurses attending to their patients may be the first to learn of medical errors. (16) Store managers may be the first to learn of customer reactions to new products. (17) In these settings, claims of possible wrongdoing will not come to a decisionmaker's attention unless she is somehow informed. (18) Complex organizations may fashion systems to carry critical information from these front-line employees to higher levels of management, but gaps in design and implementation can frustrate information collection efforts. (19) For any number of reasons, those at the highest levels of governance may not learn about incidents of wrongdoing or critical details of those incidents.

    Lawsuits produce three types of information that can fill the gaps in organizations' other information systems. First, plaintiffs' complaints may announce allegations of wrongdoing that internal reporting systems did not collect. Second, during discovery...

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