Case Study / A Key Litigation Risk: Exposure to Out-of-Control Waste of Money


The Point

Consider federal district court Judge Vince Chhabria’s observation in ordering Meta (Facebook) and its law firm, Gibson Dunn, to pay almost $1 million to their opponents in In re Facebook Inc. on February 9.

“This case is an example of a wealthy client (Facebook) and its high-powered law firm (Gibson Dunn) using delay, misdirection, and frivolous arguments to make litigation unfairly difficult and expensive for their opponents. Unfortunately, this sort of conduct is not uncommon in our court system.”

However disapproving judges may be on the rare occasions when they take time to look into it, the legal profession tolerates — often encourages — scorched-earth courtroom tactics. Even among America’s most celebrated companies and leading law firms, litigation too often imposes catastrophically wasteful costs on a business before any judgment has been rendered.

This Matters to Your Business

In a meticulously detailed 53-page opinion, Judge Chhabria offered a courtroom veteran’s real world understanding of what he saw. Inferring from their obstructive conduct that Meta / Facebook had sought to avoid going to trial, thereby forcing their opponents to settlement at a much lower number than the likely damages verdict, he stated his view of reality:

“Does anyone really think that Facebook was planning to take this case to trial? Or was Facebook, with the assistance of its lawyers, executing a different play from the playbook: resist discovery as long as possible, make things increasingly difficult and expensive and frustrating for the opposition, and hope that would drive down the case’s settlement value? This is by far the most likely explanation for Facebook and Gibson Dunn’s conduct.

“This is not to suggest that there necessarily was some back-room meeting at which Facebook and its lawyers said, ‘OK, here’s the plan, let’s be as unreasonable and obstructionist as possible in the hope that we’ll frustrate the plaintiff into settling for less than they could get if we were cooperative in discovery’.

Unfortunately, this approach to litigation is common enough that no such meeting was necessary. Facebook and its lawyers fell into their roles with ease, and then they took things way too far.”

Because …

Whether at the Olympian heights of Meta / Facebook and Gibson Dunn, or in lawsuits among more modest-size businesses and less eminent counsel, what Judge Chhabria discerned in In re Facebook is widespread reality for businesses dragged into America’s courts.

The judge’s description matches my experience representing businesses in federal and state courts.

Here’s how Judge Chhabria wrapped up his 53-page analysis:

“It’s important for courts to help protect litigants from suffering financial harm as a result of their opponents’ litigation misconduct. And hopefully, this ruling will create some incentive for Facebook and Gibson Dunn (and perhaps even others) to behave more honorably moving forward.”

I’m concerned that my fellow lawyers have caused even the most tough-minded executives to mistakenly view their defense of lawsuits as an unavoidable cost of doing business. That’s why preventive efforts are vital against litigation, and the waste that it imposes on honest enterprise.

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