See abstract below. Full transcript available for download here.
At a 2012 CLO forum Samuel Cooper, partner at Baker Botts and expert litigator presented a Thought Leadership Spotlight on the subject of being sued. In the space of a short speech, he attempted to discuss the entire “gamut” of situations in which a corporation might find themselves to be defendants. “The fact of the matter is, the civil litigation in many of these investigatory situations is the tail. It’s not the dog,”
The first possible situation that Cooper presents is that a competitor will sue a company. After a contract is procured under questionable circumstances, a competitor files suit. In these cases, a former employee will often, having no incentive to maintain loyalty after being terminated, assist the plaintiff’s investigation. Cooper sees every terminated employee as a likely whistle-blower. Which leads him to the second situation in which a company might be sued. A former employee can sue the company directly: “This is particularly prevalent in the FCPA context, where you have a business partner, you think the business partner has done something they shouldn’t have done, you terminate the business partner, and then the business partner turns around and sues you.”
Specifically in the public sector, securities class action lawsuits are also fairly common if a company is forced to start an investigation. “If you announce an investigation and your stock drops in a significant manner, you can have a fairly good likelihood that you’ll get a 10B case filed against you,” according to Cooper. These suits will target the CEO and CFO, and attempt to prove that false statements were filed that negatively impacted the stock price.
If a case is filed claiming that management did a bad job handling the company, for example if risk-management criteria were not properly met, then the investigation becomes a government issue. The plaintiffs in these cases are often at an advantage, since whichever former employee blew the whistle has already gathered a great deal of information pertaining to the case.
Cooper went on to talk about managing the risks that are apparent in these kinds of cases in terms of three areas – structuring representation, privilege issues, and interaction with the government. Structuring the representation is a matter of weaving through a tightly packed legal bureaucracy that necessitates certain back channels being taken: “why are you as general counsel going in and reporting to the CEO about what the lawyers who represent the audit committee are doing?” Though there may be very good reasons why a GC would have to talk to a CEO in the context of an audit committee, issues of privilege dictate before such a conversation can take place.
What is most important to Cooper, though, is remembering that each individual case is different, and has to be treated separately and with care: “How does it look, how does it work? Individual counsel and representation are obviously very important issues that can drive that. If the government has indicated that some particular member of your company is a target of the investigation, you frequently want to get them individual counsel.”