Friday, June 13, 2008

Trouble in River City Episode 3: Super Lawyer’s Opinion

I called Super Lawyer to explain my problem. He said he would get together with the head of his litigation department and review the cases they had for that division. We had to center all the litigation at Super Lawyer’s firm because we believed that we could save money since the firms lawyers would not have to relearn the nature of our business, the technology of our product line and there would be economies of scale with similar litigation.

When I arrived a few days later at the ACE firm, Super Lawyer and his colleagues had collected and charted out litigation. It fell into three categories, product liability claims in our widget product line, a couple of employment claims and a substantial tax claim disputing the constitutionality of a certain tax that was hurting our ability to import raw materials in order to be competitive with non-domestic supplier.

The firm had graphed the claims over a 5 year period. Only the product liability claims of which there was a great number showed a study increase. They also graphed the division’s quarterly expense of the litigation and it became immediately clear why Superstar had focused on this area. Costs had been going up steadily and when taken as a whole over time, it was clear why it was something he was interested in.

I asked Super Lawyer whether he thought could control this escalation of claims? He suggested that we undertake a comprehensive program to review both our quality control procedures and our product labeling. He also suggested
a series of presentations by his firm to operations personal that would increase their sensitivity to product liability exposure.

What about more aggressive litigation posture? We considered that he said as he produced another graph. We have taken the position that ADR and cost reduction was a key policy objective. We have graphed amount we would have spent if we had litigated to a resolution and the amount we settled for. In almost every case we paid less in settlement than it would have cost to litigate. This does not seem to be an economic option.

I left the meeting with the recommendations in hand to present to Superstar.

-Larry Salibra
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