CRISIS MANAGEMENT WHEN THE BIG CASE HITS: HOW TO GET READY AND WHAT TO DO WHEN THE ALARM IS SOUNDED! By Daniel E. Tranen, Partner, Wilson Elser LLP; Missouri and Illinois
Basic Presentation Outline • Notice/response considerations – Nuts and bolts for what to do and consider up front before the big case hits • Protective considerations – More advanced preparation scheme and strategy for protection from significant litigation • Special mass tort considerations – For when the $#!T really hits the fan
Pre-suit Notice • A critical mass of injury notices • Significant recalls • Claim notice letters • Draft lawsuits • Demand letters • Requests for tolling agreements
Notice Checklist
Review the Lawsuit/Consider Deadlines • When a lawsuit is served deadlines come into play – Service date is the key – Creates deadline to respond to complaint – Creates deadline to remove action to federal court – If multiple suits in single forum – opportunity for consolidation and judge shopping • Risk of default with inaction • Remember any lawsuit regarding a medical device might be a “one-off” or it might be the first of many…
Notify your Insurer • This is may be your first step to getting a defense (depending on coverage) • Need to provide facts and circumstances of claim – Maybe first learned in course of lawsuit – Maybe first learned earlier (demand letter, complaint) • Specific requirements are set forth in the policy
Insurance Notice Requirements:
Consider Other Insurance • You have put your main carrier on notice - what about other insurance policies? • Other insurance my also provide coverage, including E&O, D&O and CGL • This may be important depending on the type and scope of claim – If you have coverage problems with claim – If you need more insurance to cover significant potential loss/defense costs • Contact Broker to discuss.
Regulatory Reporting • When you have first notice of a customer complaint in the course of a lawsuit – this may trigger a regulatory reporting obligation. – MDR – Other reporting • Since a lawsuit or demand letter is not a typical way in which complaints are reported – this may not always be considered by a company’s regulatory group. • Having evidence of a regulatory report may be useful later in the course of the litigation – so make certain defense counsel is kept in the loop- particularly regarding the content of that report.
Meet with Outside Counsel • Should happen as soon as possible. • To defend you, defense counsel will have to understand the strengths and weaknesses of your product design and label • Responsive pleading must be considered and implemented on short time frame – This involves creation of initial legal strategy – Do you want to fight or mediate or just settle? • Issues like preservation of evidence will need to be discussed
Protective Considerations
Response Team • Designate a person or small group to whom all lawsuits will be directed (in legal or risk management department). • That person/group will be responsible for addressing notice issues and implementing protective activities • If you have a legal department, include a lawyer in all of the work of this group, if possible, as this may provide a measure of protection from discovery of the group activities (outside counsel is also an option). • Without a designated group, with a specific plan, significant items may get lost in the shuffle.
Review/Control Investigation • Review investigation that has taken place – Includes regulatory requirements – Quality investigations – Complaint trending • Prepare documents for outside counsel review • Reserve continued investigation for outside counsel involvement – Flow of information and direction of investigations should flow through an attorney to maintain privilege – Keeps further activities outside of future discovery
Avoid Spoliation of Evidence
What is at Issue? In federal litigation (and largely also in state litigation) – parties must provide: “all documents, electronically stored information, and tangible things that the disclosing person has in its possession, custody or control and may use to support its claims or defenses…”
Products • Segregate and store samples • Special attention to recalled products • Special attention to critical batches – Recalled batches – keep samples of products with key lot numbers – Batches identified in product complaint reports – Batches identified in litigation
Documents • Start collecting documents: – Batch records – Sales records – Distribution records – Contracts/quality agreements • Preservation of paper documents is necessary to avoid spoliation of evidence • General counsel/outside counsel should ensure that preservation letter is sent throughout organization to all likely custodians of relevant paper documents.
Electronically Stored Information The Federal Rules define electronically stored information (“ESI”) as “information electronically stored in any medium from which information can be obtained either directly, or if necessary after translation by the responding party into a reasonably usable form” Any relevant ESI is discoverable in litigation – and the term “relevant” is broadly construed by the courts
Where ESI is Found • ESI is located in many contexts, including (but not limited to): – Emails – Word processing – Calendars – Voice messages – Text messages – Videos/photographs – Information on smartphones – Computer servers
Protocol for Litigation Hold Letters/Memos and Distribution • Establish a protocol for placing a hold on documents, including electronically stored documents from first notice of occurrence (not claim). • Response team should address this as soon as possible following notice of suit (or notice of a future suit) – including identifying custodians of the ESI (maybe different from custodians of paper documents)
Litigation Hold Content • Supersedes/suspends all other retention policies (that might allow for destruction of documents) • Explanation of the lawsuit/litigation • Description of records likely to be relevant • Maintain company computers/PDAs/smart phones • Maintain home/personal equipment to the extent used for business
Consequences of Spoliation • Typically depends on degree of culpability – stretches from “inadvertent loss” to “intentional destruction” • Goal is to restore the prejudiced party to position it would have been in if evidence was not destroyed. • Potential sanctions include: – Adverse inference jury instruction – Other sanctions
Look to Suppliers/Contract Manufacturers • What is the cause of the claim? – Internal error? – Outside issue • What suppliers might be responsible? • Are you a distributor? • What does your quality or distribution agreement say re: indemnity/insurance?
Indemnity • Indemnity or hold harmless obligations generally • Need to put suppliers/manufacturers on notice • Need to make a demand for defense/indemnity • Need to review insurance coverage which may back stop defense/indemnity obligation of third party– as your company is a potential additional insured on the third party’s insurance policies
Additional Insurance • If your company is an additional insured – it must follow notice requirements on the other policy • Demand for indemnity against supplier/manufacturer not enough to trigger coverage if your company is insured under additional policy • Clock is ticking • This helps you in many ways: – Preserve your own insurance limits – Avoid claim history/premium hit – Obtain a larger pot of insurance in case you need it.
Involve Public Relations/Marketing
Public Relations • When significant cases arise – news coverage follows (as does inquiries from product users) • Response team should have Public Relations firm ready to leap into action • PR firm can help company shape messaging and public perception – May help with juries down the road – Can help company survive impact of significant event/litigation on company reputation/good will
Involve Marketing Department • Marketing must work with legal department to ensure a consistent message that will not compromise litigation defense – Includes sales reps (scripts and brochures) – Includes public presentations at conferences – Includes any other written materials (public/internal)
Mass Torts
Special Considerations for Mass Torts • Greater need to control publicity • Much higher stakes on spoliation of ESI/products • Need for national coordinating counsel • Consolidation of lawsuits • Much higher stakes on finding insurance coverage • Potential involvement of bankruptcy counsel
The End QUESTIONS? Daniel E. Tranen, Partner, Wilson Elser LLP; Missouri and Illinois 618.307.4895 (Direct) | daniel.tranen@wilsonelser.com
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