A Corporate Counsel’s Guide to Disaster Litigation
By Lisa Ann T. Ruggiero, Joseph E. Hopkins, and Anthony Molloy, Patton Boggs LLP
Disasters happen. Whether they are natural, man-made, or human error, disasters are an unfortunate part of existence in a modern world. Malcolm Gladwell may have said it best: “[w]hat accidents like the Challenger should teach us is that we have constructed a world in which the potential for high-tech catastrophe is embedded in the fabric of day-to-day life.” 1 And quickly following any disaster are the inevitable lawsuits raising claims relating to the rapid response efforts undertaken by the public and private sector during and immediately following a catastrophic event. Disaster response is necessarily done under emergency conditions, often with altruistic motives. Under these circumstances, steps are often taken without time for a full assessment of risks or potential liabilities associated with the actions being taken.
However, when emergency conditions abate and the spirit of heroism fades, second-guessing may begin regarding both the cause of the disaster (if not natural) and the safety of response efforts. And then, the lawsuits commence. The plaintiffs in these cases often include disaster victims, first responders, local residents, and local businesses, and the questions being asked are: “who was supposed to prevent this and didn’t?” and “why wasn’t the response to this disaster done better/faster/safer?” This pattern is one we have seen in litigations following the events of 9/11, Deepwater Horizon, Superstorm Sandy, and others.
There are issues and approaches a corporate counsel should consider once the company becomes involved in a disaster, even before litigation ensues, because sometimes even common sense tasks can be overlooked in the tumult of responding to a catastrophe.
Litigation Hold, Litigation Hold
The first step in defending anticipated disaster-related litigation starts before a complaint is ever filed. Disasters, almost by definition, have a triggering event, whether it is a terrorist attack, a plant explosion, or a fire. A thorough litigation hold memorandum should be promptly distributed to all document custodians and potential document custodians at the earliest possible time, which is usually immediately after the triggering event. As part of the preservation plan, IT personnel should be instructed to suspend all automatic email deletion policies and backup tape rewrites. Another recommendation is to remove backup tapes from circulation. The data need not be extracted, but the backup tape can be preserved and the data later extracted in the event that data on the primary system inadvertently is deleted. Because a spoliation sanction or negative inference can be crippling to an otherwise meritorious defense—and might not be discovered until years into litigation—it is imperative that efforts are made early on to ensure that documents are not inadvertently destroyed. In addition, “reminder”litigation hold memoranda should be re-distributed periodically. Disaster litigation tends to last for years. New employees must be made aware that they should not destroy documents, and veteran employees should be reminded that the litigation hold remains in place.
Retain Outside Counsel Promptly
There are many steps that should be taken immediately to protect a company’s legal rights and interests in the aftermath of a disaster. While the general counsel is managing, among other things, the board, the press, and the shareholders, outside counsel should be retained who can, if desired, advise on those issues and who will be dedicated to protecting the company’s legal interests. Disaster litigation is not something that a company sees often—and in the case of a catastrophic disaster, it will (hopefully) be a once-in-a-career event for most in-house counsel. Therefore, rather than calling counsel who handles routine matters for the company, a corporate counsel should contact peers for recommendations on counsel with specific experience in disaster defense.
Outside counsel needs to get to work early. Key employee witnesses must be identified and interviewed while events are still fresh in their memory. Prompt witness contact also protects against the dangers of losing critical knowledge through attrition because, over time, employees will leave the company. Interviewing key employees while they are still employed by the company can ensure cooperation as well as protection of those conversations by the attorney-client privilege. Also, document custodians should be promptly identified in these interviews and document collection should begin as soon as practical to ensure that no documents are inadvertently destroyed.
Do Not Walk Alone
One of the first things that a company facing possible involvement in disaster litigation must determine is whether they are standing alone. Whether potential co-defendants, an insurance carrier, or an indemnitor, a company must assess whether there is another entity that also has a pecuniary interest in the outcome of the disaster litigation. If so, communication with that entity is vital and it may be best to coordinate with that entity via a joint defense agreement (or “JDA”). A well-written JDA can permit potential co-defendants to avail themselves of the joint defense privilege while advancing a unified defense strategy. And a JDA also has the potential to allow the parties to share certain discovery costs. In addition, as to co-defendants, implementation of an “evergreen” order in the litigation can simplify the issues by preserving and preventing counter-suits by defendants and third-parties to promote advancing a collective defense while entities reserve their rights to pursue cross and third-party claims at a later date.
Turn Over Every Stone
Depending on the type of disaster (for example, a terrorist attack or a disaster at sea), there may be relatively obscure statutory or common law immunity protections and affirmative defenses available to the company. Many such statutes were passed during the post-World War II and early Cold War era or may have evolved from maritime law. Thus, they may be decades old and, in many cases, untested in any modern context. The defense team should conduct thorough research beyond recent case law precedent to determine if any such immunity statutes or common law principals exist that may assist in the defense of the company. If none are available, then affirmative defenses should be ascertained early in the process so that central defense themes can guide motion and discovery strategies.
Streamline the Case
In disaster litigation, and as with any mass tort, there can be potentially hundreds of fora and thousands of plaintiffs. If possible, the first goal should be removal of any state cases to the federal courts. The federal district courts provide a level of uniformity that can be valuable to a defendant in a mass tort. Diversity, or lack thereof, should not discourage the defendant from seeking removal as every potential avenue for federal question jurisdiction must also be explored, especially if there is a putative class that would qualify under the Class Action Fairness Act of 2005. Further, a bona fide federal affirmative defense—the government contractor defense or Stafford Act immunity, for example—can provide the vehicle for removal via federal question jurisdiction. If not available at the outset, federal question jurisdiction should continue to be considered throughout the litigation as the federal-based affirmative defenses develop. Also, be conscious of defendants and/or plaintiffs that are included only to destroy diversity. If these faux parties are exposed and eliminated, removal via diversity can be established.
If removal is successful, and the cases are in multiple district courts, further consolidation of pre-trial proceedings before the Judicial Panel on Multidistrict Litigation can provide a cost-effective alternative in mass tort litigation. This consolidation only requires that the cases are determined to involve one or more common questions of fact, which generally is satisfied if the litigations involve a common disaster.
Shorten the Case
Know your strongest defenses early in the process. If immunity or another dispositive defense is available, it is in the defendant’s and the court’s best interest to evaluate these dispositive issues early in the case. The court may be amenable to a proposed case management order that partially stays the case while limited discovery proceeds that explores certain immunities and/or other dispositive defenses. This period will culminate with a dispositive motion based on the discrete issue of those immunities/defenses. At best, this tactic can significantly shorten the life of a case. At worst, it provides time for both parties to gauge the relative strengths and weaknesses of their cases. Ideally, a case management order addressing these considerations should be offered to the court at the initial status conference.
Resolution Without Trial
A 2009 Department of Justice survey revealed that over 96 percent of cases are resolved before trial either by motion practice or settlement. Exploring alternatives to litigation, particularly in the context of lawsuits relating to a disaster, is essential. Fair and appropriate solutions that can take matters largely or entirely out of the court system may be possible through the actions of state and/or federal legislative bodies or via creative approaches that meet the litigants’ needs while minimizing or eliminating the time and transactional costs involved in a protracted court battle. Early consideration (internally at the company and possibly even in discussions with opposing counsel) of methods to reach a quick resolution, and the information needed to formulate such methods, is highly recommended so that the company can understand whether it faces a negotiated or legislative resolution or a battle in court.
Don’t Forget There’s a Disaster Here
As attorneys, corporate counsel are trained to analyze situations by removing emotion and focusing on the law and the facts. However, there of course is a deep human element to any disaster and its response. While the corporate counsel seeks to protect the company’s assets and reputation, taking too hard a defense or hastily distributing an aggressive press release could lead to public and media backlash. Initial legal efforts and public statements must be sensitive to those affected by the disaster. Therefore, corporate counsel, outside counsel, and management must work together to both protect the company while considering those impacted by the disaster.
Lisa Ruggiero is a partner in the New Jersey office of Patton Boggs LLP. Her practice focuses on complex litigation in federal and state courts with an emphasis on disaster, products liability, and general commercial litigation. Ms. Ruggiero has defended corporations in the aftermath of the 9/11, Superstorm Sandy, and Deepwater Horizon disasters, amongst others.
Joseph Hopkins is a partner in the New Jersey office of Patton Boggs LLP. Mr. Hopkins’ practice centers on the defense of complex litigation matters involving disasters and mass toxic torts in addition to products liability matters and general commercial disputes. He has defended corporations in connection with several disaster litigations, including the 9/11 and Deepwater Horizon litigations.
Anthony Molloy is a senior associate in the New Jersey office of Patton Boggs LLP. Mr. Molloy has experience with disaster and IP litigation, and also counsels clients on OSHA compliance. He has represented corporations in connection with their response to the 9/11, Superstorm Sandy, and Deepwater Horizon disasters.
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