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Articles
Managing Corporate Litigation
The JLG Counsel Facilitated Follow Up Option for Anonymous Whistleblowers
Preparing Your Katrina Business Interruption Claim: An Overview of the Issus and Immediate Steps to be Taken
A Basic Framework for Considering the Legal Risks of an Early Stage Business
Managing Corporate Litigation:
Its About Good Judgment
Studies show that litigation fees typically account for about seventy-five percent of what law departments spend on law firms. Every company wants to control and reduce litigation costs. However, achieving the goal tends to be elusive for companies, large and small. Various tools and techniques are offered as means to control costs. These include budgeting, early case evaluations, unbundling services, the use of ADR and competitive bidding for the work. These tools can certainly have value. However, they are only tools, and, like all tools, if they are not employed with skill they may not work well.
For example, a litigation budget provides a cost estimate and may flag waste that can be eliminated to reduce costs. However, if the budget does not focus on the order in which steps are to be taken in order to maximize the potential for achieving an acceptable settlement when first reasonably possible, the budget may not help guide the case to early resolution. The assumption
may be that as long as the budget was not exceeded, the case was handled efficiently. However, if the case strategy and handling was not designed to minimize costs before settlement, merely staying under budget simply masks inefficiencies. Likewise, a litigation plan may appear legally sound and logical. However, if the plan does not reflect what other strategies are available and the basis for the decision to follow a given course, the plan may not reflect a thorough analysis of the options.
Ultimately, the critical requirement for handling litigation effectively and efficiently is good judgment. The term good judgment is used here to mean acting in a manner that focuses on enhancing the probability that a satisfactory resolution, by either settlement or trial, can reasonably be expected to be achieved as promptly and at as low a cost as possible.
If the exercise of good judgment is critical for the effective and efficient handling of litigation, then good litigation management must focus on assessing and encouraging good judgment. Tools, such as budgets and case plans, must be used as means of promoting and tracking the exercise of good judgment. This paper will provide an overview of how judgment focused litigation management can be implemented.
Defining Satisfactory Resolution
The first job of the litigation manager is to understand the true goals of the litigation. The goals in business litigation can be complex. There may be business relationships involved that need to be preserved despite the litigation. The goal may be to dissuade the filing of similar suits, or the objective may be simply to recover or defend a claim for damages.
The process of defining the goals of the litigation begins with getting input from the appropriate business and management personnel. These are the individuals who will provide the essential business objectives at stake in the litigation.
While the business objectives are central to setting the goals of the litigation, the business objectives need to be melded with legal considerations in defining the satisfactory resolution. The business objective may simply not be legally obtainable. For example, management may want to vigorously enforce a covenant not-to-compete in the contract of a departed executive, but recent case law may make portions of the covenant unenforceable.
Even before outside counsel is asked to provide a litigation budget, the likely litigation costs should be estimated internally and weighed against the pure business goals in defining the satisfactory outcome for the litigation. The business client may initially express a desire to litigate to the end, regardless of cost, but that position may not be factoring in a reasonable estimate of the cost of litigation. When costs are factored into the equation, the business objective may moderate.
When legal and cost considerations are factored into the business goals, the result should be a definition of a satisfactory resolution to the litigation. The acceptable resolution should be defined as a range of outcomes. For example, a company that feels that it has been damaged may, naturally, want to recover all of its losses. However, complete victories are not the rule in litigation and settlements by definition involve compromise, so the satisfactory resolution might be defined as recovering 50% to 70% of the calculated loss.
Since setting the initial definition of a satisfactory resolution is done without the benefit of discovery and, in many cases, without a comprehensive legal analysis, it should be recognized that the range of satisfactory outcomes may change. However, it is important that the company start with its own reasoned preliminary definition of a satisfactory resolution at the outset of the litigation. This will give a benchmark for setting a plan and budget, as well as for analyzing changes to the definition of an acceptable outcome.
The definition of a satisfactory outcome may not necessarily be communicated to outside counsel with the initial retention. The company may prefer to receive the analysis of outside counsel and their initial recommendation of what would constitute a satisfactory range of outcomes. Certainly, outside counsel needs to be informed of the business goals and issues so they have that information in developing their recommendations. However, the company may want to get the independent cost-benefit and legal analysis of counsel that is not swayed by the companys own preliminary internal analysis. Alternatively, the company may want outside counsel to accept the companys definition of a range of satisfactory outcomes and proceed accordingly with the litigation.
In either case, it is important that at the outset the company and outside counsel agree on the preliminary definition of satisfactory resolution, probably defined as a range. The process of managing the litigation then involves encouraging counsel to achieve that satisfactory outcome as efficiently and at as low a cost as reasonably possible.
The Objective of Judgment Based Litigation Management
The objective of judgment based litigation management is not to substitute or second guess the judgment of litigation counsel. Rather, the objective is to focus on and encourage the application of good judgment, as the term is used here by counsel, across all aspects of the litigation.
A company should not simply assume that its litigation counsel will apply good judgment in all aspects of the litigation process. This does not imply that the lawyer is negligent or incompetent. Rather, there are many pressures and demands in litigation that may result in a decision not best suited to achieving a satisfactory result as promptly and at as low a cost as reasonably possible.
Litigation is an adversarial process and the battle and desire to win can skew judgment. At the outset of litigation, clients often convey, because of emotion, a desire to be tough and not yield on any issue in the litigation. When the client says, I dont want to pay those scoundrels a nickel, litigation counsel may take the words as marching orders and design a scorched earth strategy. However, what the client really means, most often, is that he or she is upset, doesnt like the idea of paying anything, but wants the case to go away. This is why it is important that the business goals be vetted in the context of litigation costs and a definition of a satisfactory resolution be communicated to outside counsel. Counsel will not be in a position to exercise good judgment, as defined here, if there are mixed messages, or no message, as to what the realistic objectives are.
Law firms pressure partners to generate revenue and associates to bill hours. Such pressures, coupled with the desire to win the adversarial litigation arena, can cause lawyers to over litigate a case. The fear of missing something can also drive litigation counsel to excesses. Again, communication of expectations is critical. The client must convey that they desire counsel to exercise restraint and not literally turn over every stone. Once this is communicated and understood, outside counsel can point out steps of marginal value that were not taken in the exercise of good judgment. If the litigation manager observes in the billings or status reports evidence of over litigating the case, the litigation manager can point back to the initial understanding to exercise restraint and refocus counsel on managing costs.
The objective of judgment based litigation management is to encourage litigation counsel to maintain a focus on exercising good judgment across the entire process as a means of counteracting the pressures and distractions that can prolong and increase the cost of litigation. Good communication of expectations and goals is critical in order to establish benchmarks against which good judgment can be exercised and evaluated.
The Framework for Judgment Based Litigation Management
While it may be easy to recognize bad judgment, the concept of good judgment in litigation is not merely the absence of bad judgment. Good judgment is a proactive concept. It involves decisions focused on increasing the probability of attaining an acceptable resolution promptly and at as low a cost as can reasonably be achieved.
There are various processes in litigation such as drafting a cause of action, developing a legal of strategy, written discovery, depositions, motion practice and negotiations. With respect to each of the processes in litigation there are four potential areas where good judgment can be exercised, or missing. These general areas are:
- Legal
- Practical
- Cost
- Creative
Basic legal judgment involves the ability to correctly analyze the law and facts in order to present a reasonable legal position on behalf of the client. However, good legal judgment involves more. To qualify as good legal judgment, the legal position put forth should be calculated to reasonably enhance the probably that a satisfactory resolution can be reasonably expected to be achieved in a prompt and cost effective manner.
For example, lawyers often plead all potential legal theories and make aggressive claims for damages. While the positions may be sustainable, the evaluation focus should be on whether the broad, aggressive pleadings will encourage a prompt, cost effective resolution of the dispute. Broad, aggressive pleadings may give opposing counsel the basis for convincing his or her client that your company is unreasonable and that early settlement is unlikely. Such pleadings may ignite motion practice attacking the pleadings that will add certain cost but will be very unlikely to impact the outcome. On the other hand, if the objective is to deter potential plaintiffs from filing similar claims, aggressive pleadings that raise the stakes and the cost of litigation may be perfectly appropriate. Again, the judgment has to be aligned with the goal of the litigation and then consistent with achieving that goal in a cost effective manner.
From the litigation management perspective, the question is whether the claims are asserted because they can be or because they should be in order to enhance the probability of achieving the defined range of acceptable resolution cost effectively. The same analysis applies to other judgments made throughout the litigation process. Parties may be entitled to broad discovery, but what is the scope of discovery that is really needed to get the case in the range of acceptable resolution?
The adversarial nature of litigation, combined with the duty of lawyers to zealously represent their clients, can impede the exercise of good practical judgment in the day-to-day process of litigation. A common area where good practical judgment is compromised is with respect to disputes over discovery. One side, either your attorney or the other party, may demand overly broad and burdensome discovery even though such extensive discovery will not likely impact the outcome of the litigation. In another case, a party may resist even reasonable discovery, forcing costly motion practice. Experienced litigators should be able to resolve most differences over discovery through negotiation and compromise. When the litigation involves extensive fees relating to discovery disputes; it is likely that at least one of the attorneys is not exercising good practical judgment. A good litigation manager will want to make sure that it is not his or her attorney who is not exercising good judgment in discovery matters.
When litigation is staffed by lawyers of varying levels of experience, it is important that the senior lawyers monitor the practical judgments of attorneys with limited experience. The ability to find practical solutions to issues is, at least in part, a function of experience. Junior attorneys also may not have the confidence to compromise on issues. In managing outside litigation counsel, one will want to understand how discovery is managed and the role of senior counsel in avoiding and resolving disputes.
While all areas for the exercise of good judgment involve the consideration of costs, the area of cost management should be considered separately in assessing and encouraging good judgment. The first issue is the fee structure. Does litigation counsel suggest a case appropriate alternative to a strictly hourly based fee structure? For example, will the firm suggest an hourly fee that declines with the hours billed to the matter? Certain cases may be appropriate for either a flat fee or a reduced fee and success bonus. The litmus test is whether the outside counsel takes the lead in suggesting an alternative to a strictly hourly fee structure, especially if the rates are high. If the outside firm seems reluctant to use alternative fee structures, even greater care should be exercised in monitoring the judgments that can significantly impact total litigation costs.
Staffing is another initial area for the exercise of judgment at the outset. Firms routinely promote the use of associate at lower hourly rates as a means of containing costs. However, without information about the level of experience of associates who will work on the case, in-house counsel has a limited basis for assessing whether staffing reflects good judgment or the need of the firm to either train or find work for underutilized lawyers. Outside litigation counsel should control staffing, but outside counsel should also provide information to support the judgment for staffing decisions.
During the litigation process, the judgments relating to costs need to be assessed and counsel encouraged to focus on containing costs. There are a number of approaches used by insurance companies, such as rigid litigation guidelines and billing rules that are subject to computerized analysis. Other companies involved in commercial litigation will need to find a more flexible approach. There are various alternatives, but one simple approach is to ask that each bill be accompanied by a brief statement from lead counsel concerning efforts, decisions or steps taken during the billing period that were aimed at reducing costs. The examples could range from avoiding travel costs by attending a deposition telephonically to avoiding motion practice by negotiating a resolution of a discovery disputes. Simply requiring such a statement as part of the billing process will encourage outside litigation counsel to focus on cost control.
Finally, litigation counsel should exercise good creative judgment. This may be the most difficult to encourage and assess, as creative solutions are not always available.
Creative judgment in litigation involves combining legal, practical, cost judgments with an understanding of the clients business interests involved in the litigation. Creative solutions can involve the effective use of alternative dispute resolution, creating non-monetary components to a settlement or streamlining the discovery necessary to get the parties to the point of settlement. Critical to finding creative solutions is a clear understanding by outside counsel of the business issues and objective of the client, which is why the litigation management process starts with defining the range of acceptable resolution. The creative litigator adds real value by getting the client into that range more efficiently and in ways that may not be obvious.
Litigation can be a plodding process, with lawyers ambling through discovery and motion practice without seriously analyzing alternatives. Simply asking what other options are available or were considered before deciding on the recommended course can provide some understanding of whether litigation counsel is simply plodding down the worn path or is looking for a new, shorter route.
Applying the Tools to Judgment Based Litigation Management
There are basic tools used in litigation management, including:
- Fee structure
- Staffing review
- Early case laws and evaluations
- Periodic status reports
- Case budgets
- Bill review
Judgment based litigation management uses these same tools, but the process looks at some different points and asks some different questions. For example, bills are not reviewed simply to see that the case is on budget, but rather they are also reviewed from the perspective whether efforts are being made to reduce costs and bring the case in under budget.
The following are some additional examples of how the traditional litigation management tools are approached from the judgment based process:
- The fee structure should be aligned with the goals of achieving acceptable resolution promptly and reducing costs, which often is not the case with the standard hourly fee. Examples of alternative fees would be hourly rates that reduce as the litigation proceeds, flat fees, significantly reduced fees with success bonuses and contingent fees.
- The appropriateness of staffing should be reviewed in terms of cost-for-experience and the areas of responsibility. The fee agreement should address how costs associated with changes in staffing will be handled.
- The initial case plan should outline not only the recommended course of action, but also possible alternatives considered but not recommended.
- The initial case plan should outline a strategy, and the steps for getting the case in a position as promptly as possible where a reasonable potential for settlement could be expected (Phase 1 of litigation). The plan can then detail the strategy and additional steps if settlement is not obtained at the target point.
- The budget should track the case plan in outlining costs to get to a reasonable settlement and then additional costs to get to trial. The budget should be broken down into milestones.
- The periodic status reports should address how the actions and developments relate to the initial case evaluation and what modifications, if any are necessary.
- The billing format should be in broad categories, such as motions, research, written discovery, depositions and meetings/communications. This will allow for easier assessment of where time and money is being spent, as compared to a simple chronological reporting of time billed.
- The bill should include a statement by responsible counsel of steps taken during the period to contain or reduce costs. Examples might be negotiating a solution to a discovery dispute, telephonic attendance at or minor deposition, or steps to reduce travel costs. Simply making this part of the billing process can help maintain the proper focus.
The above are just some basic examples of how traditional litigation management tools can be employed to support judgment based litigation management. Companies will likely vary on how they use traditional litigation management tools to encourage and assess the ongoing use of good judgment throughout the litigation process.
Litigation management should involve more than simply being informed about what is happening and how much it is costing. The goal of parties in the vast majority of litigation should be to resolve the dispute as promptly as reasonably possible and with litigation expenses as low as possible. Judgment based litigation management is designed to help parties achieve the goal by focusing litigation counsel on constantly exercising judgments aimed at achieving the goal of finding a prompt, cost effective resolution.
Donald V Jernberg
Jernberg Law Group
10 S LaSalle Street, Suite 3300
Chicago, IL 60603
312.899.8011
djernberg@jernberglaw.com
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The JLG Counsel Facilitated Follow Up Option for Anonymous Whistleblowers: Always Available, Employed Only as Needed
Anonymous Whistle Blowing Required
Section 301 of Sarbanes Oxley requires that public companies provide a system for anonymous employee whistle blowing on questionable accounting or auditing matters. The revised Federal Sentencing Guidelines substantially broaden the requirements, calling for all companies, not just those which are publicly traded, to implement a mechanism to allow for anonymous reporting of actual or potential violations of law, including regulations and not limited to criminal violations.
The Importance of Whistleblower Follow Up Will Range from Minor to Critical
The initial tip from an anonymous informant is legally significant because it constitutes notice of a potential legal violation. A duty to do something is triggered, and the clock begins ticking when the notice is received.
The initial report received from the anonymous informant may contain all of the information that is necessary for decision makers to accurately assess the situation and take appropriate action. Or, the recipients of the initial report may want additional information before taking further action. The data suggests that follow up information is often sought, with variations between industries. In the retail industry follow up is sought in response to only 33% of initial reports, but in the financial industry follow up is sought with respect to 94% of the initial reports. The telecom industry falls in the middle with follow up sought in response to about 50% of the initial reports.
The nature of the information desired from the follow up will vary from a straightforward clarification of basic points to a full vetting of potentially complex issues.
The potential materiality of the reported event may vary from minor ethical or human resource issues to potential criminal conduct or accounting matters that could have a devastating impact on the entire corporation. The more complex and material the reported event, the greater the value of a full, professional vetting of initial report through follow up with the whistleblower.
If the initial report results in an ongoing investigation, the company may well want to contact the whistleblower for further input as information is developed in the ongoing investigation.
What may be adequate follow up with an informant on a minor matter likely would be inadequate with respect to a complex, potential corporate impact issue. Not having a process in place designed to provide adequate whistleblower follow up on serious, complex matters places the company and decision makers at risk. Substantial funds and time may be wasted on an investigation that is either unnecessary or poorly focused if adequate follow up cannot be obtained and the initial report, through no fault of the initial report taker, is sketchy or inaccurate. Worse, a serious potential problem may not receive the attention it deserves because the initial report does not capture the gravity of the situation and an adequate follow up is not conducted.
How Basic Reporting Programs Handle Follow Up With Anonymous Whistleblowers
In order to offer anonymous reporting, hotline providers refrain from taking identifying or contact information from an informant wishing to remain anonymous. The potential for follow up is provided by giving the anonymous caller with a pin and asking the person to call back after a certain period of time. The company reviews the initial report and submits a script of questions back to the hotline company if follow up is desired. If the anonymous whistleblower calls back as requested and can provide his or her pin, the operator taking the call uses the pin to access the script of questions. The operator asks the designated questions, records the answers and provides a follow up report to the company.
Web-based reporting programs follow the same general process, with the company placing the script of questions in a secure file that the anonymous informant can access with the given pin. If the anonymous whistleblower logs in as requested, he or she enters responses into a digital file where the company can review the answers.
Inherent Limitations and Risks With Follow Up Available Through Unaided Reporting Systems
1. Dependent on whistleblower calling back. Fifty to perhaps sixty percent of anonymous whistleblowers do not call back a second time to provide follow up. While this level of failure in the follow up process may be acceptable with respect to minor issues, it should not be considered acceptable for handling reports of potentially serious, corporate impact issues.
2. Random operator limitation. If the informant calls back, the call is routed to an operator available when the call is received. The odds are overwhelming that the operator will not have any familiarity with the initial report and will be constrained to basically follow the scripted questions. Second, while all the operators may have received solid training, every operator will have to receive his or her first follow up call. Again, these may be perfectly acceptable limitations for the more routine matters that constitute the bulk of the reported issues, but the adequacy of a follow up process with these limitations for handling serious corporate impact issues should be carefully considered and questioned.
3. Scripted questions limitation. There are a number of issues that should be considered in using scripted questions to attempt to follow up on a serious corporate impact issue. First, the whistleblower may not understand the question, and the operator without knowledge of the matter at issue is not well positioned to attempt to rephrase the question. Even a well phrased question may not be understood by the person to whom it is directed. The script creates a discoverable record of both questions asked and questions not asked. Creating such a record may or may not be in a companys best interest.
If scripted questions are provided, should the operator ask follow up questions not on the script based upon the answers given? With no prior background in the matter being reported, the operators foundation for appropriately probing answers is quite limited. With serious corporate impact issues, companies must consider how much latitude and discretion they wish to give the hotline operator who, though well trained, is not a lawyer seasoned by years of experience
4. The written report limitation. A hotline is limited to providing a written report, which either summarizes or states verbatim what was said. Experienced lawyers will acknowledge that with serious matters they may prefer to receive a short, carefully crafted summary report that can be amplified in oral discussions with the person who took the information and prepared the report. Unaided hotline and web based reporting programs cannot offer this reporting flexibility.
5. The discoverable record limitation. The questions and answers obtained through a follow up will be fully discoverable in subsequent legal proceedings. While reports must be accurate reflections of the whistleblowers concerns, judgment can be exercised in terms of how the report is drafted so as to avoid creating collateral problems or issues in subsequent legal proceedings. The operator taking the report is not equipped by legal training or background on the underlying event to exercise such judgments. While reports can be reviewed by editors at the hotline company, such editors may also be constrained by a lack of a legal background and not having participated in the interview.
6. The inability to use documents in the follow up questioning. In serious matters, especially where accounting and financial issues are involved, the ability to ask the anonymous whistleblower specific questions about specific documents may be very helpful, or even critical. Unless the questioner and the whistleblower are both looking at the same document at the time the questions are asked, effective and intelligible questioning about the documents cannot occur. Indeed, using documents effectively in a questioning process is a skill that takes significant time to develop.
7. The inability to initiate ongoing follow up as an investigation unfolds. If an investigation results from an initial report, it may be useful (or critical) to ask further questions of the whistleblower as information is gained in the investigation. Since it cannot be determined when the additional information and the follow up will be sought, a system that depends on the whistleblower to initiate a follow up contact is not well suited to such a process. If 50% or more do not call back one time when requested, one can expect that the callback rate will further decline overtime, especially if follow up questions are not ready when the callback is made.
The limitations on effective follow up with anonymous whistleblowers are inherent with hotline and web based reporting systems. These limitations can be quite acceptable over a broad range of matters reported through a companys reporting program. However, with respect to some anonymously reported matters, likely those that are more serious and complex, the potential cost and risk associated with these inherent limitations on the follow up capability of unaided reporting systems may be significant.
The JLG counsel facilitated follow up program is an integrated option that provides professionally vetted follow up when the company determines that a more robust approach will have value to the company.
How the JLG Counsel Facilitated Follow up Works
1. JLG enters into a contract with the company to serve as counsel to anonymous whistleblowers in connection with follow up questioning when, and only when, requested to do so by the company.
The contract between JLG and the company strictly limits the representation by JLG to the follow up process. JLG will not represent the employee in claims against the company or in other matters.
2. When an anonymous report is received, the taker of the report explains that the company has two options that it may use if follow up information is desired. One is the pin and callback system currently in place. The second is by providing the whistleblower a lawyer who represent the employee and serves as the conduit through which follow up information is sought.
The companys material promoting the reporting program should promote and explain both follow up options as well.
3. The whistleblower is asked to agree to participate in the counsel facilitated follow up if the company deems that such is the best method in light of the matter reported.
A. If the employee agrees, he or she is switched to a JLG identification intake system (voicemail or digital). It is explained that the identification information is being taken in anticipation of potential legal representation and will be held in confidence under attorney-client privilege. If the company does not indicate within an agreed time a desire to potentially use the JLG follow up, the identification information is removed from the system.
B. If the employee does not agree, the pin and callback follow up system is still in place. The company is in a better position for at least having offered a more robust option if the subsequent follow up falters due to the inherent limitations discussed.
4. JLG sends a letter to the participating anonymous informants further explaining the process and reinforcing the fact that actual legal representation will only be triggered if the company decides to engage the counsel facilitated follow up program.
5. The company representative will decide whether follow up is desired and, if so, which of the two channels to use:
A. If the JLG counsel facilitated option is selected, JLG is notified and in turn notifies the employee, sending a retainer letter describing the limited scope of the representation. JLG receives a copy of the initial report, such other information as the company deems appropriate, and a description of the additional information the company desires to obtain from the whistleblower. The information request can be limited and specific or very general. The company sets guidelines for the nature and scope of the follow up process (i.e. a basic telephonic interview or an in-person session). JLG conducts the questioning and assists in preparing an accurate and useful report to the company. JLG also serves as the mechanism for retaining local counsel to provide the counsel facilitated vetting when desired by the company, thus providing global coverage if needed.
B. If the JLG counsel facilitated option is not selected, the follow up proceeds through the hotline or web based reporting as usual.
C. If the hotline callback system is initially selected but the whistleblower does not call back, the JLG process can be initiated if follow up is still desired.
6. JLG reports accurately reflect the whistleblowers concerns and knowledge, as established through professional vetting. The report also will take into consideration the discoverable record, both as it relates to the whistleblower and the company. The firms attorneys can orally amplify on written reports in appropriate circumstances.
7. If the company initiates an investigation, the firm serves as a proactive channel for seeking additional information from the whistleblower as the review process proceeds.
8. If the company wishes to assure that the informant is advised of the results of any review based upon his or her report, the firm serves as a conduit to assure that the message is delivered.
Advantages of the JLG Counsel Facilitated Follow Up
1. Identity of the anonymous whistleblower is protected under the attorney client privilege.
2. Serious and complex matters will receive the professional vetting required. The report is more useful and accurate as a result of the vetting.
3. Follow up can be proactively pursued without depending on the whistleblower to callback. The rate of failure in follow up should be significantly reduced.
4. The JLG process serves as a backup to the hotline callback system.
5. Document based questioning can be part of the follow up process.
6. The company will be able to effectively seek additional input from the anonymous whistleblower on an ongoing basis as an investigation unfolds.
7. Professional vetting of a serious matter will reduce costs by better focusing any follow up investigation. Professional vetting will also better identify reports lacking foundation and reduce the potential for costly and unnecessary investigations.
8. The strength of the counsel facilitated follow up program will be a positive factor if the company must negotiate over a serious matter with regulatory or law enforcement personnel.
9. The follow up reporting process is more flexible and can help the company better manage the discoverable record, which can be important at the initial stages of an investigation into a potentially serious issue.
10. Inclusion of the counsel facilitated follow up option will confirm to employees the companys commitment to support reporting, even if serious matters possibly involving senior management.
11. JLG serves as the vehicle for retaining local co-counsel when desired by the company for the follow up, thus giving the company the ability to have counsel facilitated follow up anywhere in the world.
Cost
1. A very minimal charge is made to cover the integration with the companys reporting system and the overhead associated with maintaining the identity database and notifying anonymous whistleblowers that counsel facilitated follow up may be initiated of the company desires.
2. If the company chooses to use counsel facilitated follow up, the firm charges very reasonable hourly rates for senior attorneys.
3. The company is in complete control of when the counsel facilitated follow up is used. The company also defines the scope of the follow up desired, such as in-person or telephonic interview, thus further managing the cost.
The firm must, of course, be sure that its efforts are sufficient to protect the interests of its client, the employee.
Why Use JLG For The Counsel Facilitated Follow Up Process
1. We have only senior attorneys who are well qualified to handle the process.
2. We strictly limit our representation to the follow up process and contractually commit not to seek to represent whistleblowers in claims against the company or in other matters.
3. JLG maintains a very low overhead structure and passes the savings in the form of very reasonable fees for highly experienced attorneys.
4. The focus on the niche of counsel facilitated whistleblower follow up will make JLG both more adept at integrating with the companys basic reporting system and efficient in providing the follow up service.
5. We are experienced in managing and working with co-counsel. We can serve as the means for bringing on local counsel as necessary or appropriate. Using JLG as the base for counsel facilitated follow up, a company can utilize local counsel any place in the world to follow up with anonymous whistleblowers when desired.
Conclusion
If a company can envision any circumstances where the JLG counsel facilitated follow up with anonymous whistleblowers would be of value, then the company should integrate the follow up option into its reporting process at this time.
If the JLG counsel facilitated option is never used, legal fees are never incurred. The base integration charge is insignificant, and a form of inexpensive insurance premium.
If a circumstance arises where professional, counsel based vetting of an anonymous whistleblowers knowledge and beliefs would be of significant value to the company, the costs to the company of not having the JLG option available can be very significant.
Information or Questions:
Donald V. Jernberg
Jernberg Law Group
10 South LaSalle, suite 3300
Chicago, IL 60603
312-899-8011
djernberg@jernberglaw.com Back To Top
Preparing Your Katrina Business Interruption Claim:
An Overview of the Issues and Immediate Steps to Be Taken
By Donald v. Jernberg, Jernberg Law Group, djernerbg@jernberglaw
Given the magnitude of the human suffering and dislocation, it might seem hard-hearted, or even crass, to urge companies to begin immediately to focus on their business interruption insurance claims. However, we suggest that it is not. If business operations cannot be saved and companies do not have the funds to continue employee payments at some level, the human suffering will be magnified. If New Orleans and the neighboring Gulf Coast are to be successfully reborn as business centers, local business operations must be brought back to life as soon and as fully as possible. Obtaining the fair and full measure of available business interruption insurance coverage will be one critical component in achieving these goals. Thus, we make no apology for urging business management and owners to focus now on preserving, preparing and maximizing their business interruption insurance claim.
Overview of Basic Legal Coverage Issues
The scope of coverage for business interruption will depend on specific policy language, the specific facts of Katrinas impact on a given business, perhaps certain collateral matters such as insurer advertising and underwriting, and how these factors are integrated and molded into a policyholder coverage position and strategy. There are many potential legal and coverage issue that will emerge, a number of them likely raising novel questions. The following is a brief checklist of the legal and coverage issues that policyholders will need to consider:
Ø Suspension of Operations: Business interruption coverage pays for economic losses that result from a suspension of operations. Major questions regarding this aspect of coverage include whether a complete shutdown is required, when the suspension ends, and what steps are required to end the suspension.
Ø Covered Cause of Loss: Standard policy language provides that the of the property damage must be a result of a covered cause of loss. Since many policies exclude loss from flooding, there will be questions of whether wind, wind driven rain, or other covered causes of loss were responsible for the property damage. How multiple and concurrent contributing causes, in the context of the Katrina fact pattern, will be treated is an open question that is likely to be debated vigorously with respect to both property and business interruption coverage.
Ø Causal Connection: The point here is that the covered cause of loss must be shown to have caused the suspension of business not merely the property damage. In the context of Katrina, if wind can be shown to have caused substantial property damage but flooding is deemed to have caused the suspension of the business the insurer will likely deny coverage. Establishing the causal connection element may be one of the more challenging parts of the policyholders claim.
Ø Loss of Income: Policyholder bear the burden of proving a loss of income. This may in many cases create a somewhat complex economic, accounting and legal question. For example, if the relevant economic sector was on an upswing at the time of Katrina, can the policyholder claim a loss of income even if it had a slight loss in the period immediately prior to Katrina?
Ø Triggered Coverage Period: If the other coverage requirements are met, the insurers obligation will cover the period of restoration. This is a very fluid concept not well defined under case law. Given the environmental contamination overlay in New Orleans, establishing the reasonable restoration period may be a difficult and contested issue.
Ø Restricted Access: Under some policies, business interruption coverage can be triggered by a lack of access to an otherwise operational property. Whether the access must be completely cutoff or merely significantly impaired may be a point of difference between the parties, and there is no definitive case law on the issue.
Ø Utility Outage: A lack of electricity can trigger coverage under some policies. In New Orleans, electricity may be spotty and unreliable for a period of time. This will raise the question of whether a lack of reliable power is sufficient to trigger coverage.
Ø Extra Expenses: Some policies pay for expenses incurred to either minimize the suspension of operations or to continue operations. Since there can be a broad grey area with regard to extra expenses, this is an issue where early negotiations with the insurer might be a good approach.
Ø Contingent Business Interruption: This coverage, if provided under the policy, pays the insured for loss caused by damage to a customer or suppliers property that causes interruption of the insureds business. All of the legal and coverage issues above can be relevant to a determination of whether or to what extent contingent business interruption coverage is triggered. The complicating factor is that the insured may have to prove what caused the closing of a third partys business.
Immediate Steps to Be Taken
Ø Assemble Copies All Available Policies: Do not just get the current property policy. Get policies of all types and copies of policies in effect during the prior two or three years. These may all be relevant in the hands of an experienced coverage attorney. |
