Once again, I am going to discuss what I term litigation train wrecks. I address the specific variant of litigation train wreck that I see in my wheelhouse. That is non-compete, trade secrets, partnership breakups, unfair competition, etc. Generally on the defense side of the v.
Over the past decade, we have litigated nearly 200 cases in this wheelhouse. And we have taken over more than a dozen cases that were in the middle of litigation and in various stages of train wreckage.
Common players. The corporate plaintiff is usually the bigger dog on the block. BIGLAW typically represents the corporate plaintiff. These are often spare-no-expense and destroy the competition cases. That means a blank check — a BIGLAW, billable hour dream. The defendant is often privately held, some resources or even significant resources, but not legally sophisticated.
I see this happen to companies that have grown rapidly. They have money but they don’t have all the tools and pieces they need to mitigate risks and solve complex legal problems. I also see this happen with foreign companies that have no experience with the American legal system. They often hire a generic BIGLAW or MIDLAW commercial litigator type who lacks appropriate subject matter expertise.
No strategy. There is no coherent plan or strategy. In litigation, regardless of which side of the V you are on, you need a strategy. And, to the greatest extent possible, you need to drive the action. You need to be the aggressor in the case. In these litigation train wrecks, the defendant’s counsel typically has no strategy and does not drive the action. They are purely reactive. They wait. The plaintiff does something. The defendant reacts. The defense lawyer basically is playing whack-a-mole.
The “throw our hands up and say we’re screwed” defense. You know, we were recently in court in the United States District Court for the Southern District of Florida in a non-compete and trade secret case. The plaintiff had already obtained an ex-parte temporary restraining order and was barking about wanting millions of dollars and threatening to seek criminal charges. Yawn. Does that spook me? No. That is literally standard fare. I have seen that movie 100 times. You fight through it and sort it out. But many lawyers who supposedly do this sort of litigation don’t actually do this sort of litigation. Instead, at the first sign of something potentially ugly or uncomfortable, they just want to roll over. Rolling over is not a viable defense.
Even in cases where one should settle (because one is probably screwed), experience teaches that it’s almost impossible to go to the other side and get reasonable terms from the jump. Because nobody is reasonable (other than me). That means you have to litigate the case for a bit and move the other side off of their original position.
In many of these cases, the corporate plaintiff’s position is – in fact – complete and utter bullshit. I can’t even count the number of bogus non-compete and trade secret cases I have seen. If I ever filed a single false statement in court, the system would have my head and my law license. But big companies lie about non-existent trade secrets all the time and that is – somehow – different and acceptable.
So call the universe of these cases 70% bullshit and 30% plausible. Either way, you have to beat the other side off of their starting position. You have to get some leverage. Even in a plausible case, I have seen corporate plaintiffs go from demanding $4 million or $5 million to demanding $1 million as soon as they realize that they are up against a determined adversary who will give them a fight. And that’s in a plausible case (the minority).
In the vast majority of these cases, the corporate plaintiff’s position is trash. On the merits. The supposed trade secret is a list of customers that anyone can find on Google. Or a formula that is available to other competitors in the same market. Or software that the company bought from a third party — who sells that software to lots of other folks. That sort of thing. But there will be some bad facts. Not bad facts that actually go to the merits. Bad facts that are a sideshow. The most common bad facts: Someone had or took some documents from Old Co. but the documents are worthless. And what does the typical train wreck defense lawyer do? Throw up their hands and say “Gee golly. This is really ugly. We should just give the other side whatever they want.” Some defense strategy. But it happens all the time.
Orientation. When you do it that way, you allow the corporate plaintiff to remain oriented in la-la land. Remember: The corporate plaintiff is foaming at the mouth and demanding $5 million over their secret “customer list” that anyone can find on Google. That position is a delusion. But given the machinations and pro-corporate bent of the American legal system, perhaps a reasonable one. But it’s still a delusion. It is not real. It has no basis in law or fact. The defendant needs to push back and make it clear that the plaintiff’s starting position is delusional. But throwing up your hands right from the jump and saying “we’re screwed, we’ll pay millions” — that is the exact opposite.
I see defendants and their defense lawyers doing this in cases that are objectively bogus. Cases where the merits are strongly (if not overwhelmingly) in the defendant’s favor. But the defense strategy (strategy used loosely) is just to cry uncle. What does that do? It allows the corporate plaintiff to remain oriented in their absurd universe where the case is a strong one, there are $5 million+ in damages, etc.
In fact, it doesn’t just allow the corporate plaintiff to remain oriented in that universe, it further entrenches them in that universe because you – the adversary – have confirmed their position. Apparently, the enemy is a liar except when the enemy says what you want to hear. Litigation ultimately collapses into psychology. Everything does.
The discovery quagmire. Many train wrecks involve defense lawyers who do not understand how to handle (a) a case like this and (b) a BIGLAWYER who is using discovery as a weapon to inflict astronomical costs on the defendant. The rules of the road are straight forward. As a defendant in these cases, one must: (a) Conduct their own aggressive but targeted discovery; and (b) prevent the plaintiff from turning discovery into a massive fishing expedition conducted at the defendant’s expense; while (c) taking reasonable positions, doing it by the book, and not getting caught in a discovery trap / contempt / sanctions shakedown.
It often goes like this: Defense lawyer doesn’t really do this. Plaintiff’s lawyer makes absurd discovery demands. Defense lawyer adopts the cry uncle strategy. In keeping with that strategy, Defense lawyer basically agrees to give plaintiff’s lawyer everything they ask for. That includes collecting – say – 77 laptops, most of which are clearly irrelevant. Sometimes, the defense lawyer stipulates to all sorts of outlandish discovery obligations to avoid a hearing (i.e. a hearing on discovery or even a hearing on a preliminary injunction). This is the: Let’s make a crap deal because I do litigation but don’t have the stomach for this litigation approach. Fast-forward. The defense lawyer has no signed the defendant on for massive discovery obligations that are far beyond what is reasonable. Call them excess discovery obligations. These voluntarily assumed, excess discovery obligations massively drive up the litigation spend. Both in terms of (a) lawyer time dedicated to the fishing expedition and (b) hard costs paid to discovery vendors. This fact pattern routinely results in $300,000+ of additional litigation spend in cases like these. I’ve even seen more than $1 million in wasted time / money / costs on a boondoggle like this.
But that’s not even the kicker. Just wait for it. Now the defendant signed on for excess discovery obligations that are virtually impossible to satisfy. The plaintiff’s lawyer goes on the war path about discovery violations, failure to produce XYZ documents, sanctions, contempt. The case is no longer about the merits (i.e. the supposed trade secrets). Now, the case is almost entirely about discovery. BIGLAW loves that because it is the rock candy mountain of billable hours.
You know: “This case is huge! The other side stole your trade secrets! This could be an existential crisis for the business. We must spare no expense and leave no stone unturned. Who knows what they stole and how they could use it against us. Be afraid. Be so afraid that you will give us a blank check to pursue WWIII discovery, 99% of which is utterly unnecessary. But we are BIGLAW. We are a brand. If you don’t let us do the WWIII discovery crusade, then you can’t blame us if/when things go south. So you have to let us do it. And you don’t know enough of the game to figure all of this out.”
The further the case goes, the more the plaintiff needs to recoup something from the case because of all the money they have paid their BIGLAWYERS, including all the money they have payed for discovery. So the corporate plaintiff becomes more entrenched and is willing to go even further. That means more billable hours for the corporate plaintiff’s law firm. Isn’t it wild how this entire process operates in a way that is so predictably tied to corporate lawyers billing more hours and making more money?
We get 3 or 4 inquiries on cases like this every week. These cases are dumpster fires. I don’t talk with any of these people on the phone unless and until they hire us to review the case, do our analysis, provide them strategic recommendations. It is not my job to play nursemaid to the universe. I am not a charity dumpster fire problem solver.
Matter of fact, cases like this are typically a pain in the ass. It is far easier to solve problems when we get the problem from the beginning. When we inherit the problem after 18 months or two years in litigation — when the problem has been compounded, mishandled, made worse? Yeah, it’s a mess and a minefield.
Sometimes we take over these cases. Other times, we aren’t interested because we don’t see any viable solution or realize that we don’t like the particular client and don’t want to go through litigation with them. A common refrain from people is that they already spent $500,000 or $750,000 or $1 million– and that this is so unfair. Yes, it is. The litigation racket in America is exactly that: a racket. It sucks. It is unfair.
But all of that has no bearing on me, my firm, what we charge for the services we provide. That’s all sunk costs. It’s gone. You have to let it go. People always want to know: What’s it going to cost? The bigger the problem, the more of a train wreck, the more expensive to jump in and do triage. Every case is different. But basically a minimum $200,000 in fees. I’ve been to the rodeo before. Many of these train wrecks are solvable for between $200,000 and $400,000 in attorneys’ fees. Costs depending on the scope of discovery (which probably needs to be and can be reigned in). And you secure a walkaway or settlement on modest terms (often a reasonable dollar amount over time).
Jonathan Pollard is the founder of Pollard PLLC. Pollard and his colleagues have litigated many high stakes cases with a focus on non-compete, trade secret, and unfair competition cases. The firm is ranked in Chambers & Partners and has offices in Fort Lauderdale, Miami, and St. Louis. Pollard PLLC can be reached at 954-332-2380.
