Reducing Costs in Toxic Tort Litigation with Case Management and Defense Cooperation (Part 2 of 2)
April 17, 1993
Part I of this article addressed methods of reducing costs in toxic tort litigation through case management options (7 TXLR 1189, March 10, 1993). Part II looks at the coordination of multiple defendants in toxic tort cases. There are three areas of inquiry that must be addressed each time a decision is made with respect to group strategy in a specific case: 1) Are the defendants capable of working together in a coordinated and cooperative fashion?: 2) If the defendants are capable of working together, should they attempt to establish some form of a coordinated defense? Generally, defendants capable of conducting a coordinated defense should do so, but specific circumstances may temper this conclusion: 3). If the defendants should attempt to establish some form of a coordinated defense, what activities should be coordinated? Activities subject to coordination include cost-sharing, task-sharing and, less frequently, counsel sharing.
Before beginning a detailed analysis, it might be helpful to note that coordinated, cooperative or joint defense arrangements fall into several different patterns.
On the low end of the coordination spectrum, all defendants are individually represented by separate counsel with an informal agreement not to go out of their way to damage each other’s interests. The highest level of cooperation involves all defendants under the representation of a single law firm from commencement of a case through its conclusion. There are a variety of different joint approaches between these extremes that defendants should consider.
The first question to ask is whether the defendants are capable of working together in a coordinated and cooperative fashion. The answer is usually yes, but it does depend upon a complex series of factors that fall into three broad categories: 1) factors that motivate defendants towards a coordinated defense: 2) distinct facts that are the basis for decision-making in certain litigation settings: and 3) pragmatic reasons to compromise other concerns or goals in favor of a coordinated defense.
There are various motivational factors that will cause toxic tort defendants to move toward some type of a joint defense agreement. The effect of antagonistic defense posturing, high costs of defense, aggressive opposing attorneys, biased courts and negative public relations are examined.
The costs of an uncooperative approach among defendants in toxic tort litigation can be overwhelming. Large plaintiff verdicts are often the result of poor defense coordination. Whether this takes the form of outright attacks on one another, or merely conflicting case theories. the result is usually bad for the defense.
These antagonistic trial strategies occur when defendants do not cooperate on trial issues. It can be the result of ongoing difficulties between the parties or just poor trial planning. In either circumstance, the most effective defenses are not well communicated to the jury.
Fingerpointing and conflicting defense theories have consistently produced bad courtroom results in every type of multiple defendant litigation. Companies that have previously experienced large jury verdicts as a result of such an adversarial relationship between defendants or those who have witnessed it from close range, will be motivated toward a more cooperative effort.
High Defense Costs
High transactional costs, such as lawyers' fees litigation, costs and expert expenses are common in toxic tort cases. When the defendants are involved in enough active toxic tort cases with separate and uncoordinated defenses the costs of litigation will become large. Even though the cost per case might go down with an increase in the number of cases the overall cost increases.
For example, the asbestos litigation began with very little coordination among defendants. Most companies were separately represented by counsel, each pursuing its, own discovery, motion work and trial preparation. Coordination began on an informal basis and eventually evolved into a highly coordinated defense in which 37 defendants came together with representation by joint counsel.
It was in large part, the extremely high transactional cost; that motivated many of the asbestos defendants to join together. Although this joinder ultimately failed for other reasons, the group did experience a significant reduction in defense costs.
In addition, a number of petroleum and chemical companies around the country have been involved in highly publicized toxic tort cases. For the last several years, these companies have routinely worked together from the outset of litigation for a coordinated defense.
This generally involves a highly cooperative arrangement in which all grouped defendants are represented by a siingle law firm. This approach has enjoyed considerable cost savings success in most instances without significant detriment to the liability issues.
Aggressive Plaintiffs' Attorneys
The aggressiveness of the plaintiffs' attorneys can be a source of motivation to form a coordinated defense group. The competence funding and litigation approach of plaintiffs' attorneys will have a very direct effect on the way that the defendants respond to these cases.
Defendants facing an aggressive opponent are much more likely to authorize their own counsel to do complete discovery, investigation, expert consultation motion work and trial preparation. The cost of such extensive work being done separately by each defendant should motivate the defendants to consider coordination.
A capable plaintiffs' attorney will also force the defendants to face the reality of a trial. The potential results always come into much sharper focus in these circumstances. The defendants may then recognize the value of coordinated approach that highlights the best defense issues.
The attitude and actions of the court in connection with these cases can also be a significant motivational force. If the court develops a plaintiff-oriented approach to the case, defendants will feel more threatened by the potential outcome. This type of situation can be expected to motivate defendants to group together.
Even a fair minded court can motivate defendants to coordinate. CMOs in large cases have become quite fashionable throughout the nation's judiciary. The form of CMOs vary widely, but generally include one or more designated "liaison" counsel.
Inherent in the concept of liaison counsel is a grouping and organization of defendants. whether they want it or not. Cost-sharing can also be imposed upon the parties as part of a CMO.
The prospect of such court-imposed joint defense arrangements or cost-sharing plans may be cause enough for defendants to initiate a limited joint defense agreement. A private agreement among defendants will almost always provide more control and flexibility than anything imposed by the court.
Negative Public Relations
A local history of negative health consequences or adverse publicity related to toxic exposure can be an important motivational factor to defendants. Juries will be comprised of ordinary citizens from the community. If these people have lived in fear of cancer or other health-related problems from an earlier publicized toxic exposure defendants' chances of success at trial are reduced.
Indeed, these types of trials have enough juror demographic problems without an additional overlying prejudice. Most such trials can be expected to last from one to four months. The length of such cases often removes the best defense jurors. The very people the defendants want such as professionals, business executives, managers and other individuals with demanding work schedules will most likely be excused from service.
The heightened negative prospects associated with a jury trial under these circumstances should be a concern of the defendants. This should cause defendants to do whatever they can to improve their chances at trial. Increased-cooperation between the defendants is a logical response.
Litigation Setting
When certain factors are present in the litigation setting of a toxic tort case, a coordinated defense becomes more attractive. These factors include the effects of the number of parties to the case, the diversity of toxics involved, the differing contributions to the site by the defendants, the historical relationships of the companies and the quality of legal representation available.
It is a fundamental rule of human nature that the more people involved in a problem. the less likely the chances of unanimous agreement concerning its resolution. Thus, the fewer the defendants, the more likely the coordination of a defense. While increased numbers of defendants may spread the financial exposure of settlement or judgments, it will always make coordination more difficult.
The greater the number of different toxics, the less likely defendants will be able to agree to coordinate their defense. Each defendant can be expected to attempt to isolate their own toxic from the health problems identified by plaintiffs' experts. Inevitably, some defendants may be tempted to implicate other defendants' substances. Although such a tactic would be unwise, the mere existence of diverse toxic substances at a site will make defense coordination much more difficult.
Significant differences in the roles defendants played at the site will likewise reduce the chances of defense coordination. For example, cases with only manufacturers and retailers are far less complicated than those with manufacturers, distributors, retailers, intermediate and end-users.
Municipalities are also potential defendants in many toxic tort cases: however, municipalities in the regulatory cases or because they represent the taxpayers' interest (i.e., the jurors), municipalities appear to expect more favorable treatment than other defendants and therefore will often not join coordinated defense efforts.
Many courts automatically assume that defendants of different status in relation to the site cannot coordinate their defense. However, coordination is in the interest of such defendants because it reduces transactional costs and results in the pooling/sharing of information. Thus, self-imposed coordination will be preferable over court ordered coordination.
Defendants' Experience
The history and experience of the defendants may influence the possibility of a coordinated defense. Defendants with experience in toxic tort cases are more likely to agree to joint defense activities having seen the benefits of such an approach in the past.
The drawbacks of a splintered or antagonist defense will be easier for them to appreciate. The absence of environmental litigation experience of some parties is clearly a factor in the floundering of defense coordination efforts as such defendants do not comprehend their exposure, or the danger of doing nothing about preparing the case for trial.
Some of these toxic tort cases involve a certain percentage of defendants who are uninsured and have little in the way of assets.
These defendants generally try to stay completely uninvolved in the litigation. They are likely to avoid any coordination efforts, largely because they cannot afford any other approach. These defendants do not prevent others from joining forces in defense of the case, but rather refrain from doing anything but riding on the coattails of others. This situation seems unavoidable in any large case. Hour to deal with such "free-riders" is discussed below.
Previous litigation difficulties among the defendants can prevent coordination of the current case. Given the number of defendants who are involved in cases at different sites, there will be times when companies are co-defendants in more than one jurisdiction. If there have been problems in earlier cases, there is less likelihood that the parties will trust one another and cooperate in future cases.
Business differences, wholly unrelated to the litigation at hand, could also tend to prevent coordination. Whether or not the defendants have been in a case together in the past, there may be business reasons that make trust and cooperation unlikely.
For example, the parties may be intensely competitive in the marketplace. This may have lead to any number of pre-existing problems including public relations battles, efforts to involve government entities against one another (i.e., antitrust), trade secret disputes or other litigation. These kinds of disagreements defy easy categorization, but may well exist and would tend to prevent defense coordination among those parties.
Personality Problems
Any discussion of past litigation or business differences would be incomplete if it did not address the influence of executive personalities on defense coordination efforts. Companies obviously act through their employees and trouble between companies often will be reflected in the personal relationships between people at various levels. If the chief executives of two co-defendant companies have developed a strong dislike for one another cooperation in the case at lower levels may be impossible.
A more likely problem is the breakdown of relationships between the co-defendants' in-house litigation management personnel. This may be at the general counsel level, or below.
The possibilities for problems at that level are numerous. Disagreements about discovery, experts, trial issues, allocation, settlement, unification of defense and selection of lead counsel are but a few areas in which strong-willed and intelligent people can run into very basic disagreements.
These differences in approach and personality can become major obstacles to any joint defense approach. Cost-conscious counsel will do their best to minimize these "human factors" and encourage cooperation for the benefit of all defendants.
Defendants can generally select the counsel they wish to defend a case, subject to their financial ability to pay fees and possible conflicts of interest. Except to suggest a counsel sharing arrangement the defendants generally cannot do a lot about which attorneys represent others in the case. The law firms employed to defend a particular case will have an important effect on whether coordination efforts ran be successful.
Law firms with experience in toxic tort litigation will generally attempt to coordinate some elements of the defense. By virtue of their experience in this field, they recognize the importance of uniting on the best defense issues and avoidance of activity that is harmful to one another.
Firms without toxic tort litigation experience, or at least significant co-defendant trial work, may not see the benefit of a coordinated defense. They may adopt the short-sighted approach of trying to blame other defendants in the erroneous belief that such behavior will help their client's case.
Conflicts of interest can prevent certain law firms from functioning as a shared counsel for several different companies. The number and type of conflicts that can occur are simply too numerous to cite exhaustively. A firm may simply know too much about one company from past dealings to fairly represent a co-defendant in the case. Joint counsel arrangements require a full disclosure of all potential conflicts of the law firm so that any party represented can make its own informed decision about the quality and loyalty of the firm involved.
Historical Relationships
Historical relationships between a law firm and one of the defendants will create more than a conflict of interest problem.
Other defendants involved in the joint counsel arrangement will be prone to question whether the long term client's interests are being elevated above that of other parties represented jointly by the single law firm. Indeed, some law firms will be incapable of equal loyalty to all clients in a joint defense arrangements.
The temptation to take care of one's long time source of revenue may simply be too great. In other instances the jointly represented clients may develop an unwarranted concern over this issue. If these concerns are not overcome by careful and complete communication from the attorneys a joint counsel arrangement will quickly fall apart.
Lawyer's personalities can have a significantly negative effect on the development of a joint counsel or sharing arrangement. Unfortunately, attorneys have acquired a reputation for possessing uncontrolled egos. This approach to interpersonal dealings is never productive will rarely lead to any agreement, and must be avoided if a coordinated defense is to be developed.
Depending on the personalities of the outside attorneys, it may be necessary for the in-house corporate litigation managers to resolve many of the joint defense issues. These efforts would need to be initiated and undertaken directly between company officials. The outside attorneys should be excluded from this process if necessary.
Coordination will be facilitated where firms have worked together on toxic tort cases in the past and trust each other's competence, diligence and integrity. Conversely, when the firms have not developed confidence in one another, or worse have come to a state of mutual distrust coordination will be very unlikely.
Advisability Of Coordinated Defense
Whether a coordinated defense is advisable depends entirely upon one single determination: Can the defendants achieve an overall savings by coordinating their defense?
The answer to this question should consider not only transactional costs, but also the savings that can be achieved by lower settlements and defense verdicts at trial. The analysis involves some complex tradeoffs.
The following sections will look at the advantages and disadvantages of defense coordination, and will ultimately conclude that coordination is generally advantageous because it increases the likelihood of a defense verdict, even though opportunities to employ joint counsel may be limited by the circumstances.
Coordinated defenses can result in cost savings in several categories. The extent of sayings depends upon the extent of a joint defense. Since transactional costs can be substantial in this type of litigation simple task sharing can achieve litigation cost savings on a variety of matters including discovery motions work investigation court appearances, expert witness consultation, and liaison activities.
Joint experts on non-diverse issues can be retained at a significant savings to all parties involved. Depending on the extent of cooperation, some of the defendants could enter into counsel sharing arrangements, reducing transactional costs dramatically.
Reduction Of Payments
Liability and settlement payments will on an overall basis, be reduced by the coordination of trial issues. Defendants gain greater control over most cases by being organized into a united front. They carry more weight and persuasiveness with the court and plaintiffs' counsel. Lone Pine type orders are more likely where defendants, as a unified group try to persuade the court to weed out unfounded claims.
The courts will more often agree with a largely united defense to "reverse trifurcate" these types of trials. If the California asbestos experience is any indication, most cases are settled if plaintiffs are successful in the first phase of a reverse trifurcated trial. The potential for time savings associated with this approach is appealing to most courts and the defendants are more likely to be prepared for such three-part trials in the context of a unified defense.
The unified front approach presented through Lone Pine case management orders and the prospect of reverse trifurcated trials should result in an overall favorable effect on the settlement value of cases. Plaintiffs' attorneys will rightfully be concerned that the defendants intend to focus their entire case on issues of medical causation and damages since this is ordinarily the defendants' best approach and the area in which plaintiff's arc often the weakest.
Disadvantages Of Coordinated Defense
There are of course, disadvantages and difficulties to maintaining a coordinated defense that should be considered and discussed.
Many defense attorneys in the asbestos litigation believe. in retrospect. that measures that streamlined and coordinated the litigation benefited the plaintiffs and made marginal cases economically viable by reducing the plaintiffs' costs.
Defense coordination in that litigation has been referred to by some as a "corralling" or grouping of the defendants to make everyone's job a lot easier. As the primary means of solving calendar congestion problems the potential disadvantages of coordination must be carefully considered.
Plaintiffs' attorneys, in general tend to have less personnel and financial resources than defense firms. As a result, streamlining the handling of discovery, motions work expert witness issues and virtually all pretrial activity has made the plaintiffs' attorneys' tasks more manageable.
The clearest example of this was the ACF’s experience in actual trial of cases. The average settlement value of cases fell in direct relation to an increase in the number of cases that ACF tried and rose when fewer cases were tried. Consequently, it was essential that the defendants be well prepared for trial.
As things progressed in the asbestos litigation the defendant’s became highly unified through joint counsel. The streamlining that resulted reduced the plaintiffs' attorneys workload significantly. This allowed them to devote more time and attention to case analysis and preparation, reduced their costs and allowed the marginally prepared and funded plaintiffs’ attorneys to stay in the cases. As marginal cases began to appear profitable, filings began to increase.
The asbestos plaintiffs’ attorneys were also faced with fewer defense issues. The motions work, discovery and expert witness activity began to fall into routine and less time consuming ad expensive patterns.
Moreover, judges are being taught to streamline large cases with case management orders that:
- Eliminate worthless claims at an early stage;
- Consolidate similar issues so that they are not end lessly relitigated and;
- Avoid multiple discovery procedures.
Two of the CMOs in Lore v. Lone Pine are used by the Judicial College as examples of case management that can be effective in achieving the listed goals.
Benefit To Plaintiffs' Attorneys?
The practical result of this trend toward CMOs is that defendants will have little chance to avoid significant streamlining of toxic tort litigation. Plaintiffs' attorneys will be afforded these time and cost saving benefits.
This prospect strongly suggests that the defendants must organize and coordinate before CMOs are entered. Obviously, defendants should try to minimize the profitable effect streamlining has on many cases previously worthless to plaintiffs counsel by coordinating themselves and submitting their own case management plans from the very outset. If defendants simply resist the entry of CMOs, they will have little to say about the substance of these decisions.
We have already explored the potential concerns that might arise with regard to the loyalty of joint counsel. Defense coordination efforts can produce potentially significant difficulties in the handling of administrative problems among the defendants. In task sharing arrangements, there is generally no precise accounting about the extent of work done by each party's attorneys. Rough justice is the guideline. Disputes can erupt, however, over the parties' contributions both quantitatively and qualitatively.
Precise accounting is possible in cost sharing arrangements, but disputes can easily arise once you get beyond routine expenditures. The retention of expert witnesses, for example, is a fertile area for disagreement. In one case defense counsel evidently attempted to secure the agreement of the defense steering committee to retain a firm of expert witness brokers in the case. Some of the coordinating defense efforts, refused.
Some simply did not want to spend the money, but others objects to the substance of the approach as the use of expert witness brokers is often viewed unfavorably by experienced trial attorneys since the existence of these entities will usually come out in discovery, and quite possibly trial, feeding the "hired gun" image of retained experts.
While this example shows how disagreement can occur over fairly routine decisions, these problems are nevertheless usually solvable and do not pose major problems in task sharing arrangements.
Punitive Damage Claims
Toxic tort cases almost always contain punitive damage allegations. Punitive damages are not susceptible to joint defense agreements. Whatever coordination efforts may be undertaken in any other areas, a separate defense is essential to these kinds of claims.
Though conceivably possible, it is very difficult to share counsel for this issue. Actual punitive damage trials would be very infrequent if the proper issues were advanced and accepted by the court. Unfortunately, many judges understand the in terrorem effect of punitive damage claims and refuse to bifurcate the issues in order to force defendants to settle.
However, if a case is bifurcated or trifurcated, separate counsel for each defendant would not have to be summoned until the punitive damage phase. This was done successfully in the asbestos litigation by maintaining standby counsel who did nothing until notified of a phase three trial. These were very rare because defendants who lost both phases one and two universally settled.
Conclusion
Every location at which your client is a toxic tort defendant will have a variety of factors to be considered in deciding how to approach a joint defense arrangement. Understanding the factors that can influence the creation and extent of a defense coordination agreement will be helpful in this analysis.
It is possible that co-defendants could be educated to work together by foreseeing motivational factors, rather than actually experiencing them. It is also possible that they could be encouraged to understand the importance of pragmatism in cases of this type. Recognizing the predispositional factors that give rise to a coordinated defense would allow an interested party to exploit the circumstances of a given case to promote a coordinated defense.
The role of intellectual leadership in this kind of an organizational effort requires both a detailed understanding of the factors that will move the parties together successfully and a "big picture" view of the goals that need to be attained.
Ultimately, people will often act in their own best interests. It is possible, recognizing all of the potential factors involved, that you would be able to organize an effective task and cost-sharing arrangement for your client as well as a limited counsel-sharing arrangement at various sites.