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Assessing the Risks of Litigation

Assessing the Risks of Litigation

Assessing the Risks of Litigation

Friday, 24 February 2012 21:13

By Richard Healy, Managing Partner


The decision to bring a claim or fight a case may be one of the difficult problems faced by any business.


Before embarking upon litigation it is essential to balance the merits of the case against the potential costs, which are not limited to the financial costs.

Whether you win, lose, or draw the case it will be a major distraction. Staff (very often senior management) will have to dedicate resources to locating documents, discussing the intricacies of the case with lawyers providing input to witness statements etc. Obviously, whilst they are engaged in this process they cannot be performing their regular occupations.

Further, litigation is by definition uncertain. The most solid looking cases can fall apart when they reach court and any weaknesses will be quickly exploited at trial.

The case of 2010 BSkyB v EDS case best illustrates how the outcomes of litigation can be a bolt from the blue. A £48million contract was entered into between BSkyB and EDS for the implementation of a customer relationship management project. Unfortunately, the business relationship proved unsuccessful and BSkyB subsequently brought legal proceedings against EDS, alleging that EDS made fraudulent misrepresentations that EDS was able to perform the contract within timescales.

Perhaps the most talked about aspect of the case was the performance of a key witness and former senior EDS employee, Joe Galloway who headed EDS’ Customer Relationship Management Division and was in effect the mastermind behind its bid. Unfortunately for EDS Mr. Galloway almost single handedly demolished its defence and was found to have falsified evidence.

The most devastating blow to his credibility came from a dog name Lulu belonging to Mark Howard QC (who has recently been retained by OLN in connection with a piece of litigation). Mr. Galloway was adamant in his evidence that he had attended and duly obtained an MBA from Concordia College in the US Virgin Islands, this went so far as to claim that he attended numerous classes a day for several months. These claims, however, were demolished when Mr. Mark Howard QC produced the MBA Certificate which his dog Lulu had successfully obtained on the internet from Concordia College. Lulu in fact achieved better grades than Mr. Galloway.

The upshot of it was that Mr. Justice Ramsay found that Mr. Galloway did not just seek to boost his academic qualifications which might have had a limited effect on his credibility but that he gave completely falsified evidence. In his judgment he stated “Joe Galloway’s credibility was completely destroyed by his perjured evidence over a prolonged period. It is simply not possible to distinguish between evidence that he gave on this aspect and on other aspects of the case. My general approach to his evidence has therefore to be that I cannot rely on the truth of his evidence unless it is supported by other evidence or there is some other reason to accept it.” This left EDS with little alternative but to accept that Joe Galloway had lied to the court and perhaps hardly surprisingly he was dismissed from his employment with EDS. After a long battle, the parties announced a £318million settlement of the dispute – an amount way beyond the capped liability pursuant to the original contract!

While a majority of litigation cases settle, many settle after costly expenses have been incurred. Assessing the risks of litigation can provide an evaluation of the merits and potential costs associated with a particular piece of litigation at an early stage.

BSkyB v EDS leaves us practical issues to consider. While the outcome of the case was indeed quite disastrous for EDS, litigants can take measures to reduce the various risks of litigation such measures can be summarized as PREPARATION, PREPARATION, PREPARATION.


Objectively assess your case before filing a lawsuit as litigation can be extremely resource-intensive – BSkyB v EDS lasted for 110 days, involving 500,000 documents and 70 witnesses!

Examine the facts, evidence, and claims that he or she wishes to present. Summarize the key facts in advance by reviewing documents or any available information, and interviewing witnesses. Check that their statements are consistent with each other.

• Create a succinct outline of the strengths and weaknesses of the position of your case. While supporting evidence and witnesses that prove your case can be the keys to your success, there is always a chance that a court might not accept all of your information as evidence. If your case depends highly upon oral evidence, this should be taken into account when determining the presentation and approach of your case.

• Try not to rely upon the evidence of just one witness as the dishonesty of a witness can completely damage your case.

• Consider who will need to give evidence – the more witnesses you put forward does not necessarily mean the better it will be for your case. Confirm the witness background, experiences, and qualifications.

• Prepare and evaluate the contents of the witness statements as these will be important pieces of evidence to be exchanged with the other side and to be presented in court.

What is your legal budget? The financial implications of bringing or defending a claim should be carefully considered. Legal fees in BSkyB v EDS were estimated to be over £70million! Although the general position is that the loser pays the legal fees and expenses of the winner, in reality, the winner often does not recover all costs incurred in its entirety.

• Estimate hidden costs. There is always a price to pay for litigation, regardless of whether one wins or loses a case. Hidden costs, such as the effort, stress, and man-hours spent can be substantial.

• Estimate potential reputational damage. Litigation can result in irreparable damage in reputation. Companies may strain relations with its customers or business partners and confidential business information may be revealed to the public.

• Target an early settlement. With an early settlement, unforeseeable litigation risks and costs can be avoided.

Summary


Litigation can be uncertain. Unusual circumstances can always occur. However, these risks can be mitigated by good preparation.

As Muhammad Ali said “the fight is won or lost far away from the crowd – behind the lines, in the gym and out there on the road long before I dance under those lights”.



Seeking legal advice before deciding on litigation can save you in the long run. OLN can guide you through all aspects of your case and advise on whether litigation is the best option. We pride ourselves in looking at the case from multiple angles, whether it be the opportunity cost of your employees, the financial reward or the damage to your brand.