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Litigation in the U.S.: A Primer
Martin L. Pitha, Lillis Pitha LLP
Lillis Pitha LLP is a business and employment litigation firm with offices in San Francisco and Irvine, California. Lillis Pitha LLP is not an affiliate of Synch Advokat AB.
This article is not legal advice and is provided for general information purposes only.
Litigation in the United States can be a daunting prospect to foreign entities doing business with companies there. This commentary is intended to summarize, from a rudimentary perspective, the process of litigation for foreign parties unfamiliar with it, not only by explaining certain litigation-specific terms in context but also asking the reader to consider litigation in three dimensions: as a process that is a means to an end which can create opportunities as well as present traps.
This article is not intended to provide advice about any specific dispute, nor to cover all of the procedural vagaries which may occur in a given dispute. This is in part because the United States is made up of fifty different state court systems as well as a federal court system (whose rules are more generalized and which has specific jurisdiction as to certain types of cases). It is also because, with rare exceptions, the old saying that “every case is different” is true. Cases present at least one, if not many differences, either in subject matter, parties, lawyers representing those parties, goals, rules, judges, and jury pools.
Setting litigation goals
Litigation is a formal process, overseen by a court, with deadlines and requirements, that forces parties to present claims and defenses to reach a “final” decision (subject, of course, to the appellate process). In this respect, litigation is seen by some as a “last resort” when other forms of negotiation have failed. To others, litigation is a form of “negotiation by other means.” And sometimes those views can be held by the same party at different times in the same case.
Thus, an important question at the outset is to determine what goal or outcome the client seeks or faces. Consider the business (Business A) that paid for, but did not receive, goods purchased from Business B. Will Business A, perhaps recognizing that it may need Business B’s products in the future, negotiate? Or will Business A aggressively sue for business B to perform and deliver products? Or to recover Business A’s payment? To recover other consequential damages from Business B’s failure to perform?
And what of the fact that Business A once failed to adequately perform an agreement it had with Business B? Won’t Business B turn Business A’s litigation “against it” by filing a claim about that issue in response? Or perhaps Business B will blame Business C, a manufacturer of a certain component used in the goods, for its failure to deliver product on time?
The point is that a fairly simple dispute can mushroom into a series of more complicated disputes, depending on the relationship of the parties, their interactions, their intentions, and their goals. It is for this reason that, despite litigation’s prevalence in the United States, it is important that litigation not be taken lightly. While the phrase “see you in court” may be associated with the United States’ love of litigation, actually getting to court, and “seeing” your opponent there, is another thing altogether. With pre-litigation strategy, fact-finding, and understanding of the potential landscape of the dispute, a litigant can avoid finding itself in a dispute in which it has less control or influence than initially envisioned.
Jurisdiction and venue: where am I and why am I here?
State courts generally exercise jurisdiction over their citizens, including businesses located or incorporated there. Those concepts sound simple enough, at first. The reality can be more complicated when a foreign entity is involved as a defendant.
For example, is a foreign entity selling products into a state subject to that state’s jurisdiction? Perhaps, if the entity “purposefully availed” itself of doing business in that state. What if one of the products fails, injuring a citizen of that state? Again, courts will analyze whether the entity directed sales into the state, or whether the product simply fortuitously ended up there.
What about the entity that simply advertises over the internet? Unless directed to a specific state, the entity can argue that a static advertisement should not result in an exercise of jurisdiction over it by a court in that state. The analysis changes, however, when the entity takes orders or actually “does business” through the internet.
These are a mere handful of examples of the situations in which foreign entities may find themselves in litigation in the United States. The “takeaways” for the foreign entity is to understand the importance of analyzing the jurisdiction (whether a court can exercise its authority over it) and venue (where within the state that jurisdiction should be exercised), particularly within a multi-state court system. A judge and jury members in San Francisco, California will likely not only have some personal familiarity with, for example, the technology industry, they may well have strong feelings (positive or negative) about it as well -- just as a judge and jury in Oklahoma will about the energy industry. It is important that an entity obtain counsel within the geographic area (or potential location) of the suit to guide that entity, explain local rules and practices, and help determine the best location for a particular dispute to “play out.”
Service – but without a smile
A concept closely related to jurisdiction is whether a party can be physically served with notice of a lawsuit, often called “service of process.” The general rule is simple: if an appropriate representative of an entity (usually an “agent for service of process” or someone authorized, by law or otherwise, to be served) can be found within the jurisdiction, service can be effected – even if that individual or entity is domiciled somewhere else. Otherwise, service will be required through an international treaty, such as the Hague Convention. As a result, entities within the United States seeking to sue and serve a foreign entity will have to observe treaty rules in effecting service – rules which can be expensive and time-consuming to follow. Alternatively, a party can request another to accept service voluntarily, often in an attempt to spare expense. Failing to voluntary accept service may expose a party to the costs incurred in actually serving that party. Service rules may ultimately benefit a foreign entity, but the importance of an entity having an intake system to recognize that it is being sued, and where the suit is occurring, is paramount because the consequence of not responding can result in, for example, the “default” judgment of a non-responding party being entered.
“Provisional” remedies: rush, rush, rush
Once a suit has been filed, a not-uncommon part of litigation practice is “ex parte” requests to a court, on shortened notice, requesting it take action by ordering some form of relief. This form of request is, in essence, an attempt to “cut in front of the line” of the “usual” caseload with which a judge may be confronted. The success of such a request is often dependent on the stakes and the fact that courts can be loathe to assist dilatory parties. However, as an example, if a party has sensitive records “raided” and stolen by a departing employee, a court may be more inclined to step in – but, again, its willingness to do so will be dependent on the nature of the information, the quality of the evidence presented to it, what harm is occurring, and related factors. Provisional remedies frequently include temporary restraining orders (stopping or compelling some action), writs of attachment (essentially, “freezing” a party’s funds), writs of possession (a similar request, but relating to personal or real property), and the appointment of a receiver (to “take care of” property, a business, or related interest that may be going to waste without the assistance of a professional).
It is important to note that, in addition to the “usual” costs of litigation, the types of activity related to provisional remedies can add to the expense. Presenting paperwork to a court seeking “unusual” relief, and appearing in conjunction with that request, requires special care and attention and should not be done without all due consideration.
Discovery: the long slog
“Discovery” may be a word that strikes the most fear in the heart of a foreign client “experienced” in litigation. Discovery is the time-consuming, and potentially expensive, process of obtaining information from your opponent, other parties in the case, and third parties. The form of those requests generally include, but are not limited to, written discovery (essentially, written questions seeking documents be produced, witnesses identified, events recounted), subpoenas (for documents to third parties), and depositions of parties and witnesses.
These processes sound and should be direct and straightforward. However, they can be anything but. For example, a party initiating a lawsuit, even in the most meritorious case possible, may seek relevant information from its opponent, but it can nonetheless be sure to be on the receiving end of similar requests. Discovery often involves significant client and attorney time, both in obtaining information and crafting responses.
And, sadly, these processes are not self-executing. A party failing in its discovery obligations does not “automatically” lose a case. Instead, the opponent is forced to seek court intervention and obtain orders compelling the other party to comply and, potentially, more serious sanctions, starting with monetary sanctions, preventing the admission of certain evidence having issues decided against a party, or termination of a case. The reality is that judges, if for no other reason than the fact they “carry” and are required to address hundreds of cases at a time, are not disposed to resolving picayune or unnecessary disputes that should readily be resolved between reasonable litigants and attorneys. As a result, “discovery fights” can become a tactic in and of themselves and a way of stretching a party’s resources.
Nonetheless, despite these concerns, the discovery process is vital. For example, a deposition – the questioning under oath of a party or witness – is, short of a trial, the only time a party will have an opportunity to find key information by actually questioning its opponent under oath. Depositions therefore become powerful tools for factfinding, learning about an opponent’s presentation, and assessing the credibility (and likability) of an opponent (or key witness). Cases can turn altogether on whether the deposition of a key witness goes well or poorly.
Finally, a note about evidence preservation. Destroying or altering of evidence when a party knows of a dispute, which is often unearthed during the discovery process, can be severely dealt with by judges. With the availability of forensic tools to search for records and determine whether they have been altered, to say nothing of witnesses, destroying or altering records is a “fool’s game.” Importantly, a party with a relatively strong case runs the risk of transforming the dispute from a dispute on the merits to a dispute about the handling of evidence, just as a weaker party may be emboldened to change the narrative of the case from the merits to the attempted “cover-up” by the other party. It is important that a party not only recognize these facts, but that it engage counsel sensitive to this subject who can assist a client in navigating and addressing evidence preservation requirements.
Motion “practice:” from the minor to the nuclear
Another mainstay of the litigation process is motion practice, the act of seeking relief from the court. The requests may be procedurally oriented (such as requesting the date of the trial be changed) or substantive (such as asking the court to determine that as to one or more claims of the other party is without merit because no triable issue of fact truly exists and should be dismissed).
Depending on the goal and requirements, motions – like discovery – can require significant client and attorney time. Imagine a party who has sued another for ten separate causes of action; in other words, ten separate alleged violations of law and requests for relief. A pre-trial motion to dispose of such claims – a “motion for summary judgment” – would need to present compelling and irrefutable facts attacking each such claim. Thus, litigators must do more than simply be oral advocates for their clients at trial; they must also be compelling pre-trial advocates “on paper,” where such motions are usually won and lost (even with each side presenting oral arguments about them to the judge). This has led to pejorative descriptions of certain lawyers as “paper lawyers,” but the reality is that courts require significant drafting of requests in order for a court to provide even rudimentary relief.
A well-aimed, successful motion either at the beginning of a case or following certain discovery which disposes of even some of the claims involved can “set the tone” with another party and the court. Thus, despite the procedural requirements which may be involved, parties should always consider the availability of such relief.
Statistics vary from forum to forum and subject matter to subject matter, but the reality is that trials are rare. Business entities frequently resolve disputes prior to trial, and settlement processes such as non-binding mediation (involving negotiations utilizing a “neutral” mediator), settlement conferences with judges or volunteer attorneys, and related processes remain popular.
Despite the relative infrequency of trials, it is important to be aware of the trial process itself, because its existence as a decision-making process often drives the decisions that precede it. For example, a jury trial involves not just preparing witnesses and being able to present witnesses, but pre-trial practice about what evidence the jury should be allowed to hear and what “instructions” they will be given to decide the case, all prior to the process of selecting a jury itself.
The requirements of a jury trial often prompt litigants to choose a court trial (where a judge hears evidence and renders a decision), which is no less formal but can eliminate some of the jury trial preparation requirements. The same is true for arbitration, a binding process by which a retired judge or attorney, or panel of the same, decides a case (should the parties have agreed to do so). Litigants also often select these variants for numerous reasons, including to avoid having a decision made by jurors who may be potentially disinterested in the subject matter, hold unexpressed biases for or against one or more of the parties, and the like.
Appeals: more chances?
A trial, however, may not be the end of the litigation. Jury verdicts, court decisions, and pre-trial decisions can be vehicles for appeal, sometimes in the midst of litigation (in the form of a “writ of mandate” asking that a “higher” court direct a lower court to change its decision) or, more commonly, thereafter. Many state court systems are modeled after the federal appellate court systems, which include two such “higher” courts: a court of appeal and a supreme court. (Some states only have one such level.)
Appeals, however, are not always an opportunity for a simple “do over,” and the scope of the appellate court’s review can be limited. For example, a challenge to a jury’s verdict as unsupported by the evidence will not result in an appellate court “re-hearing” the entire case. Instead, the court will determine whether sufficient evidence existed to support the result, despite the existence of conflicting evidence. Put simply, an appellate court is not a “fact-finder” and will not simply substitute its judgment for others. Instead, such courts are finders of error charged with “stepping in” if such an error occurred. Litigants are promised a fair trial, but not necessarily a perfect one. The appellate process thus is a sort of winnowing, in which questions of law are raised and addressed and which provides the common law precedent to guide subsequent cases.
What’s it cost?
Like the multi-millionaire’s two-word piece of advice about how to amass wealth – “avoid litigation” – suggests, litigation sometimes can be expensive. However, lawyers can offer a variety of fee structures to attempt to meet a client’s budget. In an hourly arrangement, the attorney is paid by the hour; in a flat-fee arrangement, the attorney is paid a fixed amount; in a contingency arrangement, the attorney is paid a percentage of the result; and in a hybrid arrangement, the attorney may receive a (reduced) hourly or fixed amount and a (reduced) contingency. Other types of arrangements exist (such as a “reverse contingency” when defending a case, in which the defense lawyer is rewarded based on the result).
That said, all of these potential arrangements aside, the reality is that in the United States the “loser pays” concept has not gained widespread attraction. Nonetheless, savvy businesses often build into their agreements so-called “prevailing party” attorneys’ fees provisions in which the party prevailing in the dispute is awarded its attorneys fees and costs. This can have the effect of focusing the parties, early in the case, on the fact that in addition to the merits of the case they face the potential “reward” of recouping their attorneys’ fees (and the risk of having to pay the other side’s as well if unsuccessful). The prospect of those expenses can sharpen the parties’ focus at the outset.
Budgeting for litigation is a difficult and often speculative project. A party can control what it does in litigation, but it cannot necessarily control what its opponent attempts to make it do or what a court requests of it. The truth is that a lawyer can realistically provide a range of potential fees (outside of a fixed fee or other arrangement), but overly-specific estimates should be treated with some skepticism.
Litigation in the U.S. can seem to be a daunting, unfamiliar process replete with unfamiliar jargon and proceedings. Foreign entities would do well to identify subject matter experts, preferably in the locale where litigation may occur, to understand more about the opportunities and risks litigation presents – and all preferably before a suit actually commences. That sort of “breathing space” allows for strategic, non-reactive planning and risk management, better outcomes, and fewer surprises.