You have been named in class-action lawsuit.

• Author: Ferrara, Ralph
• Position: Tips on appropriate responses

'Never give in'? Or, a willingness to settle? How are you prepared to respond?

If your company is in the service industry or engaged in the manufacture or sale of consumer products, a major class-action lawsuit can be the most significant piece of litigation you will ever see. It can involve the company's entire customer base, the worst kind of publicity, and enormous liability.

If you glance down the agenda for your next board meeting and see an unexpected entry, "New Class-Action Litigation" are you prepared to respond?

Why You Should Fight

No matter what the company, no matter what the product, no matter what the allegations raised, when a major class action lawsuit arrives, there will be those in senior management who bar the doors, pound the tables and quote Churchill: "Never give in. Never give in. Never. Never. Never." For them, settlement is no less than surrender on the battlefield.

They have their reasons; the risks of settlement are real:

* The attendant publicity can be grave. People will confuse settling allegations with admitting allegations.

* Your competition can be counted on to construe and publicize your settlement as a sign of weakness.

* You do not want to identify yourself as an easy mark for new lawsuits.

Sometimes you have no choice but to muster all available firepower, strap on your helmet and hunker down for the duration. Even when you have a choice, however, it is essential to assert a powerful defense from the outset:

* The early stages of litigation buy you time to conduct a preliminary internal investigation. In litigation or settlement, your company's documents will be produced. If there is dirty laundry, you want to know about it.

* Vigorous denial of the charges can be valuable to key constituencies.

* You want to preserve the option of litigating.

Why You Should Settle

There are times when the spiraling costs of litigation, the uncertainty of outcome at trial, and the occasional absurdity of the legal sparring that transpires in advance of trial - have you ever seen a Reply to a Motion for an Extension of Time to Move for Reconsideration of a Denial of a Motion for an Extension of Time? - together suggest the value of exploring settlement.

Under the right circumstances, settlement of a major class action can be a business opportunity, allowing you to:

* Cap your liability.

* Provide substantial relief to class members at a manageable cost.

* Obtain a comprehensive release.

A decision to settle may also...