bestpracticesforgeneral simulatingmotions,bench ......150n.fielddrive, suite193 lakeforest,il60045...

Many lawyers aspire to be the top lawyer for a majorcorporation, but increased risks are now associatedwith the coveted job of general counsel. Since the pas-

sage of the Sarbanes-Oxley Act in 2002, the Securities andExchange Commission (SEC) and the Department of Justice(DOJ) have placed mounting scrutiny on in-house lawyers.Corporate scandals involving the chief legal officers of TycoInternational Ltd.; Comverse Technology, Inc.; McAfee, Inc.;and Enron Corporation have brought to light serious personaland professional risks associated with the job. (See theCorporate Scandals chart on page 11.)

Unfortunately, the former in-house lawyers of Tyco,Comverse, McAfee, and Enron are not alone. In just the pastfive years, at least 77 SEC or DOJ probes have been launchedagainst in-house lawyers, 28 of which have been related tooptions backdating. Of the 77, 25 in-house lawyers have beensubjected to criminal indictments and/or convictions.1

Interestingly, most actions against in-house lawyers have beenagainst the chief legal officer of the company.2

To discuss the disturbing rise in enforcement actions andprosecutions of in-house lawyers, the ABA Section ofLitigation’s Committee on Corporate Counsel, in conjunction

Best Practices for GeneralCounsel in the Post-Enronand Sarbanes-Oxley EraBy Yuri Mikulka and Alexis Hunter

Simulating Motions, BenchTrials, and Arbitrations forCase Management andEvaluationBy Ralph I. Miller andAlejandra Montenegro Almonte

(Continued on page 12)

Highlights

Published by the American Bar Association Section of Litigation • 321 N. Clark Street • Chicago, IL 60610

“To see oursels as ithers see us!It wad frae monie a blunder free usAn’ foolish notion”

—Robert Burns (“To a Louse”)

Simulations can be powerful management and evalua-tion tools for in-house counsel, especially whenexpanded beyond traditional jury cases to motion

practice, bench trials, and arbitrations. Many forms of deci-sion research allow in-house lawyers to focus outside coun-sel on key themes, to observe the performance of theiradvocates, to glean objective outcome evaluations, to assessthe pros and cons of settlement or further litigation, andultimately to better advise their business counterparts.Although the usefulness of traditional jury simulations asmanagement devices has diminished because fewer civilcases are reaching juries than ever before,1 techniquesdeveloped to study jury behavior have been adapted effec-tively for use with issues submitted to individual judges or


How to Defend a Consumer Class Action Without Breaking the BankBy Henry Pietrkowski, Gary S. Caplan, and David Z. Smith........................................................................................................................................4

Practice Tip for Young In-House LawyersBy Stewart M. Gisser ....................................................................................................................................................................................................7

E-Discovery Case Law—Since the New RulesBy Thomas Y. Allman and Courtney Ingraffia Barton....................................................................................................................................................8

In-House Top 10By Theodore K. Whitfield Jr.........................................................................................................................................................................................19

VOL. 22 NO. 2 WINTER 2008

2IN-HOUSE LITIGATOR AMERICAN BAR ASSOCIATION

Message from the Annual CLE Progr

Many of you reading this message will have pulled thisissue of In-House Litigator off the registration table at

the Annual CLE Conference in Scottsdale. Whether this is yourfirst Corporate Counsel CLE Conference or your fifth (or fif-teenth for many folks), the methods for getting your money’sworth out of the conference have not changed over the years.We have attempted to capture below the ways to make the mostof your conference experience. For those receiving this in yourinbox, or reading it on the website, use these tips in February2009 when the conference visits the Dolphin Resort at DisneyWorld in Orlando, Florida.

Enjoy the Great ProgrammingThis year’s lineup once again provides the high-caliber speak-ers that have kept folks coming back year after year. DanPetrocelli will give a plenary program about his trial experi-ence defending former Enron CEO Jeffrey Skilling. SheilaBirnbaum, who argued State Farm v. Campbell before the U.S.Supreme Court, will help update us on the law of punitivedamages. The general counsels from Coors, Fidelity, DeutscheBank, and other companies will give us their insights into howthey, their legal departments, and the outside counsel they useall work together to serve the client. ABA leadership is also in-volved. Bob Rothman, the incoming chair of the Section ofLitigation, will moderate our GC forum; former Section ChairKim Askew will speak about e-discovery; and Pamela Roberts,the chair of the ABA Commission on Women in the LegalProfession, will moderate a program on women of color andhow their success means success for everyone in the profession.And of course, don’t miss the opportunity to pick up an hour ofcredit in ethics during our Saturday morning breakout program,“Dealing with the Unethical Adversary and Difficult Client.”

Make New FriendsNetworking is fine, but at this conference, you will find oppor-tunities to make lifelong friends. This type of fellowship arisesfrom the culture of openness of the four sponsoringcommittees and is noticeable at every event, whether it be a re-ception, a CLE program, or a committee or subcommitteemeeting. Many of us came to our first conference knowing noone in the room and now can’t get out of the room because wesee one friend after another who wants to catch up. The programcochairs and those in leadership will be looking for the first-timers to introduce them to the seasoned attendees and to havedinner with them on a free night. Don’t hesitate to reach out tofolks and introduce yourself. We are glad you have chosen ourconference, and we’d like to see you back year after year.

Relax During Your Free TimeThe conference is at a resort for a reason. The amenities giveus a chance to relax, meet socially with other attendees, andexercise. You’ll find our folks at the golf course, tennis courts,pool, and spa. We’ve planned free time on Friday afternoon

COMMITTEE ON CORPORATE COUNSEL

COCHAIRS

EDITORIAL BOARD

ABA PUBLISHING

Horace W. Jordan Jr.Kingsbridge Holdings, LLCTwo Conway Park150 N. Field Drive, Suite 193Lake Forest, IL 60045(847) [email protected]

Robert R. SimpsonShipman & Goodwin LLPOne Constitution PlazaHartford, CT 06103-1919(860) [email protected]

Jill Tedhams, DesignerLindsay Cummings, Associate Editor

Yuri MikulkaHowrey LLP4 Park Plaza, Suite 1700Irvine, CA 92614(949) [email protected]

http://www.abanet.org/litigation/committees/corporate/

The In-House Litigator is published quarterly by the Committee on Corporate Counsel,Section of Litigation, American Bar Association, 321 N. Clark Street, Chicago, IL 60610;www.abanet.org/litigation. The views expressed within do not necessarily reflect the viewsor policies of the American Bar Association, the Section of Litigation, or the Committee onCorporate Counsel.

Copyright © 2008 American Bar Association. All rights reserved. For permission toreprint, contact ABA Copyrights & Contracts, 321 N. Clark Street, Chicago, IL 60610; fax:(312) 988-6030; email: [email protected].

Address corrections should be sent to the American Bar Association, c/o ABA ServiceCenter, 321 N. Clark Street, Chicago, IL 60610.

Christopher J. Akin, CoeditorCarrington Coleman Sloman &Blumenthal LLP901 Main Street, Suite 5500Dallas, TX 75202(214) [email protected]

C. Moze Cowper, CoeditorAmgen, Inc.One Amgen Center Drive, 28-2-BThousand Oaks, CA 91320(805) [email protected]

Stephen J. Siegel, CoeditorNovack and Macey LLP303 West Madison Street, Suite 1500Chicago, IL 60606(312) [email protected]

Holly Loiseau, Assistant EditorWeil, Gotshal & Manges LLP1300 Eye Street, NW, Suite 900Washington, DC 20005(202) [email protected]

Leah M. Gerbitz, Assistant EditorMiller & Martin PLLCVolunteer Building832 Georgia Avenue, Suite 1000Chattanooga, TN 37402(423) [email protected]

Jeremy L. Ross, Assistant EditorSkadden, Arps, Slate, Meagher &Flom LLP300 South Grand Avenue, Suite 3400Los Angeles, CA 90071(213) [email protected]

Thomas F. Bedsole, Website EditorLocke Reynolds LLP201 North Illinois Street, Suite 1000Indianapolis, IN 46244(317) [email protected]

The Committee on Corporate Counselhas closely followed the federal gov-

ernment’s policies and practices relatingto requests for a waiver of the attorney-client privilege or the attorney work prod-uct doctrine. The Department of Justice’scurrent policy is reflected in the McNultyMemorandum, which permits prosecutorsto request the waiver of the privilegeunder certain conditions. On November13, 2007, the U.S. House of Represen-tatives approved H.R. 3013, the Attorney-Client Privilege Act of 2007. The actwould, among other things, prohibit anyagent or attorney of the United Statesfrom demanding, requesting, or otherwisepressuring any company or other organi-zation to disclose information that is pro-tected by the attorney-client privilege orthe attorney work product doctrine. ABAPresident William H. Neukom describedthe House of Representatives’ action as“an immensely important step” that“strikes the proper balance between thelegitimate needs of federal prosecutorsand regulators and the constitutional andfundamental rights of individuals andorganizations.” As of the publicationdeadline for this newsletter, a similar mea-sure is pending in the Senate JudiciaryCommittee. If passed, the act could have asignificant impact on the practices ofmany members of this committee.

The recent erosion of the attorney-client privilege has been a disturbingtrend; another worrisome trend has beenthe increase in regulatory and criminal

3 WINTER 2008SECTION OF LITIGATION

Message from the Editorial Boardam Cochairs

actions against corporate counsel. Thecommittee recently held two very suc-cessful regional roundtable meetings enti-tled “General Counsel Under Attack.”Committee Cochair Yuri Mikulka andAlexis Hunter have written an excellentarticle for this issue, highlighting some ofthe insights and best practices gainedfrom those roundtable meetings.

Ralph I. Miller and AlejandraMontenegro Almonte have written a veryinteresting article about the use of simu-lated bench trials and arbitrations as atool for case management and evaluation.In an article entitled “How to Defend aConsumer Class Action WithoutBreaking the Bank,” Henry Pietrkowski,Gary S. Caplan, and David Z. Smith offerpractical insights and helpful advice forin-house counsel and outside counsel.ThomasY. Allman and Courtney IngraffiaBarton have provided an update on sig-nificant cases in the one year since pas-sage of the 2006 e-discoveryamendments to the federal rules. Thisissue also contains two regular features:In-House Top 10 and the Practice Tip forYoung, In-House Lawyers.

The committee would also like todraw your attention to the recently pub-lished novel by Andrew E. Shipley,Senior Corporate Counsel for NorthropGrumman Corp., entitled The Messenger.Many of you know Andrew from his con-tributions to the committee and thisnewsletter, and the novel is certain to bewell-written and thought-provoking.

and starting right after lunch onSaturday. This is also a good time tomix in the second tip mentioned above.

Get InvolvedYou’ve already had a great conferencegetting your CLE credits, meeting peo-ple, and relaxing, but you can take it toanother level by being part of the confer-ence in the future. Whether you join aneditorial board of one of the sponsoringcommittee journals, take a cochair posi-tion on a subcommittee of one of the foursponsoring committees, or submit a pro-gram proposal for 2009, you’ll get moreout of the conference once you becomeinvolved. As the 2008 program cochairs,we have rolled up our sleeves to get thejob done, but we have also met dozens ofnew people, broadened our own knowl-edge base, and felt the satisfaction of con-tinuing a long tradition of great CLE pro-

gramming. Approach one of usor anyone in committee lead-ership and learn about theopportunities.

— Larry Kristinik— Rick Merrick— Mary Smith

Visit the Committeeon Corporate Counselon the Web

www.abanet.org/litigation/committees/corporate


Any company selling products orservices to consumers is bound,sooner or later, to be named as a

defendant in a consumer class actionlawsuit. Plaintiffs’ class counsel canchoose from a wide variety of statutes,including a whole alphabet soup of fed-eral consumer laws (TILA, FCRA,FDCPA, CROA, TCPA, EFTA, RESPA,FACTA), not to mention the 50 states’consumer fraud acts and common-lawtorts. Plaintiffs’ attorneys often filecopycat class actions against the samedefendant or industry as soon as onefirm latches onto a new theory of liabil-ity. In addition, companies now face anincreasing number of representativeactions brought by states’ attorneys gen-eral. Depending on the size and scope ofits customer base, a business may befacing dozens of simultaneous classaction cases, any one of which can havea devastating effect on its bottom line.

And let’s face it: Defending classaction lawsuits can be very expensive.So how can a company effectively dealwith these high-stakes cases without“breaking the bank”? The answer to thisquestion varies widely, but certain tried-and-true methods are emphasized below.

Make an Early Business DecisionAfter the initial dismay at being sued ina large consumer class action subsides,only one central question must bedecided: How, if at all, should we defendthis case? The answer to this question is,at bottom, a business decision for man-agement to make with the advice ofcounsel. Management will want to know(among other things) the potential mone-tary exposure, disruption in employeetime, and bad publicity that a class actionlawsuit may engender, as well as thestrength of the company’s defenses. Earlydevelopment of an endgame strategy iskey to making useful recommendations tocompany management in the high-stakesclass action arena.

Because consumer class actions, bydefinition, involve potential claims by alarge number of the company’s cus-tomers, they raise a host of issues thatare just as important as how muchmoney the company stands to lose froman adverse judgment or in defense costs.Will the lawsuit need to be reported in apublic filing with the Securities andExchange Commission? Will a strenuousdefense result in unwanted publicity thatcould affect the company’s future sales?These concerns may lead management tothink long and hard about entrenchingthe company in years of litigation. Atother times, however, management willdecide, as a matter of policy, that thecompany will vigorously contest all con-sumer class actions both in the press andin the courthouse.

The decision whether to defend orsettle a consumer class action may beinfluenced by the nature of the claimsalleged. For example, if the claimsinvolve only a technical statutory viola-tion, such as the “firm offer” provisionsof the Fair Credit Reporting Act, thecompany may decide to contest theaction because it is not being accused ofany malicious wrongdoing and may beable to defend the case at the dismissalstage with relatively little expense.Conversely, an amorphous misrepresen-tation claim under a state consumerfraud statute may not be disposed ofquickly and could damage the com-pany’s reputation if not carefully con-trolled.

In either case, it is important for acompany to decide up front what itsoverall business strategy is going to be,based in part on counsel’s informedinput. Once management makes that ini-tial business decision, counsel mustdetermine the game plan they will use toachieve the desired result. For instance,if the endgame is settlement, the com-pany must decide whether to commenceinformal negotiations right away with

the plaintiffs’ counsel, suggest a formalmediation, or take a strong litigationposition in the hope of settling at a latertime when the plaintiffs’ resources havebeen depleted. Conversely, if the com-pany decides to vigorously contest thelawsuit, immediate steps must be takento craft a long-term litigation and publicrelations strategy.

The company should ask outsidecounsel to develop an initial budgetestimate for achieving the goals it hasestablished. This initial budget should bereevaluated as the case progresses todetermine whether counsel’s fees are ontrack, whether the work being done isgeared toward achieving the company’sgoals, and whether those goals havechanged as a result of developments inthe litigation or at the company.

Concentrate on Denial of ClassCertification and Early DismissalIn most litigation, resources are gearedtoward preparing for summary judgmentor a trial on the merits; however, thedefense of consumer class action litiga-tion is most often focused on the classcertification stage. According to SeventhCircuit Judge Richard A. Posner, classcertification can be the “death knell” foreither side to a class action. If classcertification is denied, the class repre-sentative’s claim may be too small tojustify the expense of further litigation.Conversely, if class certification isgranted, it puts “considerable pressureon the defendant to settle, even when theplaintiff’s probability of success on themerits is slight.”1

Because of the importance of theplaintiffs’ class certification motion,early litigation strategy should focus notso much on the merits of the company’sdefenses, but on how best to defeat classcertification. This makes sense not onlyfrom the standpoint of strategy, but alsofrom a cost-savings perspective. Forinstance, a defendant may be able tolimit the scope of the initial discovery to

How to Defend a Consumer Class Action WithoutBreaking the BankBy Henry Pietrkowski, Gary S. Caplan, and David Z. Smith


class rather than merits issues.2 Astreamlined plan to defeat class certifi-cation generally will be more cost-effective than a trial-based strategy inconsumer class action cases.

This does not mean that the meritsof the case should be ignored, however.A successful early dismissal motionmight be the most effective weapon in adefendant’s arsenal. If there is a basis todismiss or narrow your opponent’sclaims on a threshold motion—such aslack of personal jurisdiction or failureto state a claim—that should be theinitial focus of your efforts. Moreover,even an unsuccessful motion to dismissor for summary judgment can helpdefeat class certification by forcing thenamed plaintiff to raise individualizedfacts about his or her own claim. Forexample, a corporate defendant mightmove to dismiss the named plaintiff’sconsumer fraud complaint on theground that the defendant’s representa-tions did not “cause” the plaintiff’sinjury. To avoid dismissal, the plaintifflikely will point to disputed facts todemonstrate that he or she did rely onthe defendant’s representations. Thedefendant could then use these plain-tiff-specific facts to argue that a similarfactual determination would need to beperformed for each individual putativeclass member, thereby precluding aclass-wide resolution of the issue. Inthis way, an early dismissal or sum-mary judgment motion can help stream-line the case, whether or not it isultimately successful in knocking outthe claim.

Consolidate Your Counseland Your CasesIt is generally more efficient and cost-effective to use a single firm as leaddefense counsel on all related classaction cases. This is a particularly goodidea when multiple cases of the sametype are pending in different jurisdic-tions. In such instances, removal andconsolidation of these cases through afederal court multidistrict litigation(MDL) proceeding is much more effi-cient than defending each case on itsown. A single nationwide coordinatingcounsel can most effectively accom-plish this MDL consolidation from

multiple jurisdictions, with the assis-tance of qualified local counsel.3

Even when case consolidation is notpossible, however, it still makes sense touse a single lead defense firm to coordi-nate all related class cases pending indifferent jurisdictions. Companies alsomay want to use that same counsel todefend single-plaintiff cases involvingthe same substantive issues as in apending class action lawsuit. Even acourt ruling in an individual case cansignificantly impact related classlawsuits involving the same facts orlegal theories.

When choosing a firm to be leadcounsel, a company should look forproven expertise and a successful trackrecord in the specific types of cases atissue. Although the firm need not be themost expensive firm on the market, acompany cannot afford to skimp on thequality of counsel in a “bet the com-pany” class action lawsuit. Retainingexperienced counsel who know how toproperly defend (or settle) these casescan be critical to the company’s bottomline. Selecting a small number of firmsto compete in a “beauty contest” for thelitigation may lead to cost savings thatmight not otherwise be available if afirm does not have to compete for theretention. Moreover, having more thanone law firm in mind is always a goodidea in case conflicts arise that preventyour first choice from taking the case

Explore Alternative FeeArrangementsBecause multiple law firms often com-pete for a client’s business, this maycreate opportunities for corporate coun-sel to propose alternative fee arrange-ments, such as a single blended rate orcaps on annual rate increases. Thesetypes of arrangements are regularlynegotiated by insurance companieswhen they agree to defend theirinsureds from third-party liabilityclaims. These same principles some-times can be applied outside the insur-ance context, when the size of the classaction, or the repetitive nature of thesecases, justifies such a bulk discount.Another possibility is to couple areduced hourly rate with a bonus pay-ment to defense counsel in the event

certain litigation goals are achieved,such as a final dismissal with prejudiceor a final judgment denying classcertification.

Try Triggering InsuranceCoverageMany companies hesitate to report classaction claims to their insurers. There area variety of reasons for this reluctance,including a risk of increased premiumsand the perception that the insurer nevercovers class action claims. We havefound, however, that often the attorneyfees and costs of defending a classaction lawsuit are covered by an errors-and-omission professional liability orcommercial general liability policy,

depending on the specific claim beingbrought and the particular policy lan-guage at issue. If the potential exposureis high, and any potential for coverageexists, we recommend that you reviewall insurance policies for possible cover-age and report the claim as soon as pos-sible. In addition, the company maywish to hire qualified coverage counselto review the policy for possible cover-age arguments.

Procuring insurance coverage at theoutset of litigation can have a profoundeffect on the tactical defense of a classaction case. For example, if the insurerprovides coverage, or even defends undera reservation of rights, a company maytry to achieve an early settlement at theinsurer’s expense, resulting in little or nocost to the company and limiting negativepublicity. Alternatively, a company mayrelish the availability of insuranceresources to fight unwarranted allegationsor allegations that may damage the com-pany’s reputation and bottom line.

Procuring insurancecoverage at the outsetof litigation can have aprofound effect on thetactical defense of aclass action case.


Even if only cost-of-defense cover-age is triggered, a company can defenditself vigorously in an attempt to knockout the litigation on the merits or byopposing class certification. On theother hand, if no coverage is available, acompany may be forced to settle defen-sible and unwarranted claims basedsolely on an estimate of the cost ofdefense, without regard to other impor-tant factors such as deterring similarclaims in the future. Thus, insurance canbe a very important factor in the classaction defense calculus.

Set Expectations and MaintainRegular CommunicationIt is important at the outset of a case togive outside counsel clear expectationsabout the company’s billing and staffingguidelines. Communicating with a firm

up front about its expected use of asso-ciates and paralegals, for instance, willprevent any confusion that may laterarise in the firm’s invoices.

Some in-house lawyers like to holdregular telephone conferences with theiroutside counsel at set times, such aseach week, every other week, or once amonth, to discuss a large or particularlyactive case. These regularly scheduledmeetings prevent the problem of havingto coordinate busy schedules on an adhoc basis, as well as the inevitable “firedrills” that arise when deadlines are notcommunicated sufficiently in advance toallow for proper staffing and prepara-tion. This is especially important in thetime leading up to the class certificationphase, when a number of briefing anddiscovery deadlines arrive all at once.

Topics that might be discussed at theseregularly scheduled meetings include set-ting internal deadlines for review andturnaround of draft pleadings, “big pic-ture” strategy issues, and any budgetconcerns. Regular communicationbetween client and counsel is critical toan effective and cost-efficient defense.

Don’t Reinvent the WheelChances are that any class action casefiled against your company already hasbeen filed against various other defen-dants. It is worthwhile to research thoseother complaints and to locate thedefense counsel in those cases, either forthe purpose of retaining them or just tofind out some useful information thatmight help your defense. The key is tosee if they are willing to share theirstrategies, insights, and experiences soyou don’t have to create your owndefense strategy from scratch.

Westlaw and other online searchengines also are useful tools for findingpublished opinions and briefs filed insimilar cases. Perusing briefs filed bysimilarly situated defendants will giveyou a head start on the arguments fordismissal and against class certification.Many sophisticated defense firms havetheir own electronic “brief banks” thatcontain the accumulated knowledge oftheir lawyers on particular issues. Youalso may be able to view your oppo-nents’ briefs online to get an idea of thearguments they intend to make againstyour company, as well as the quality oftheir lawyering.

Make Use of E-DiscoveryEfficienciesThe single greatest strategy for prevent-ing costly e-discovery disputes is the cre-ation and implementation of a gooddocument retention and destruction pol-icy. The specific guidelines for such apolicy are beyond the scope of this arti-cle, but it should include, at a minimum,automatic deletion of emails and otherelectronic communications after a certainnumber of days unless they are specifi-cally preserved by the sender or recipientin a separate folder. This rapid automaticdeletion of electronic documents givescompanies an opportunity to obtain theprotection of Federal Rule of CivilProcedure 37(f), which provides that

“absent exceptional circumstances,sanctions cannot be imposed for loss ofelectronically stored information result-ing from the routine, good faith opera-tion of an electronic informationsystem.”

Another important cost-saving mea-sure is to develop an internal process forefficient preservation and collection ofelectronically stored information (ESI)for possible future production. Settingup such a protocol requires input frominternal information technology (IT)personnel or an outside vendor as to theeasiest and cheapest way to preserve andcollect the targeted data. Consolidating alle-discovery information using a uniformprocess also allows the company tonegotiate a discounted rate in advancewith one or more outside vendors thatspecialize in processing, collecting, andpreserving ESI. Vendors often give bulk-rate discounts, and the competition isfierce.

In addition, companies should set upan internal e-discovery team, headed bya single point of contact (either an in-house or outside attorney). The teamshould include one or more IT employ-ees to help coordinate all e-discoveryrequests. Having such a team in placeallows for greater control and organiza-tion of e-discovery collection effortsand prevents unnecessary duplicationof work and the disruption thatundoubtedly will occur with multiplee-discovery requests from various out-side counsel defending different legalproceedings.

Last, it is important to understandthat e-discovery is something that canand should be negotiated with the plain-tiffs’ counsel very early in litigation totry to limit costs. For example, ratherthan producing all of the company’selectronic data (which may contain priv-ileged or out-of-date materials), thecompany should try to negotiate the useof targeted searches of collected data asa better and cheaper way to get to themost relevant documents. Another possi-ble savings strategy is to negotiate a cost-sharing agreement with the plaintiffs toproduce the data in a more readilyaccessible format, such as portable doc-ument format or tagged image file for-mat. The more reasonable a company’s

The single greateststrategy for preventing

costly e-discoverydisputes is the creation

and implementation of agood document retention

and destruction policy.


negotiating position, the more likely theplaintiffs’ counsel will be to cooperate,and the more likely a court will side withthe company in any discovery disputes.

Use Your Internal ResourcesDepending on the size of a company’slegal department, certain tasks may beperformed more efficiently in-house thanby an outside law firm. Examplesinclude collecting and organizing pro-duction documents and reviewing themfor privilege. An experienced in-houseparalegal or junior lawyer may be able todo this just as efficiently (if not moreefficiently) than an outside paralegal orassociate, and at great cost savings forthe company. Another approach is to pairan in-house paralegal with an outsideparalegal or associate so that the workcan be coordinated between them, ratherthan farming out the entire project to thelaw firm.

If All Else Fails, Settle CheaplyAt some point in a class action case, ifthe defendant does not obtain an outrightdismissal or class certification denial, thequestion of settlement will arise. Certaintime-tested strategies for settlement costsavings should be explored with theplaintiffs’ counsel.

The first is the concept of reversion.Rather than simply agreeing to pay a setamount to each class member, the com-pany may instead agree to (i) create acommon fund of X dollars, (ii) requireclass members to affirmatively returnproof-of-claim forms confirming thatthey want to receive a share of the settle-ment, and (iii) retain a reversionaryinterest in the portion of the settlementfund not claimed by class members.4

Although such reversions to the defen-dant have been approved by a number offederal courts and commentators,5 thegeneral rule still is that moneys remain-ing from a class fund should be distrib-uted as a cy pres award to one or morecharities. Ultimately, it will be up toclass counsel and the judge, who act asfiduciaries for the absent class members,to determine whether a reversion to thedefendant is feasible in any particularcase.

A second option, which has fallen outof favor recently, is the use of couponsettlements in which a company gives

class members the right to redeemcoupons for its products or services, andclass counsel collects a hefty fee basedon the supposed value of those coupons.Although such a practice may still beviable in certain state courts, the ClassAction Fairness Act of 2005 containsspecific provisions that restrict classcounsel’s attorney fees in federal courtcoupon settlements to “the value to classmembers of the coupons that areredeemed.”6 Because of the relativelylow percentage of coupons actuallyredeemed by class members, this couponsettlement option is now less attractiveto class counsel when the case is settledin a federal district court.

ConclusionAs demonstrated above, a number ofopportunities exist for potentially signifi-cant cost savings in class action cases.Either alone or in combination, thesetechniques may help take some of thesting out of the substantial resources thatmust be devoted to defend (and hope-fully defeat) these claims.

Henry Pietrkowski, Gary S. Caplan, and DavidZ. Smith are partners in Reed Smith LLP’sFinancial Services Litigation Group. Each ofthem has handled a wide variety of consumerclass action cases in the financial services,insurance, and real estate industries.

Endnotes1. Blair v. Equifax Check Servs., Inc., 181

F.3d 832, 834 (7th Cir. 1999) (“Many corpo-rate executives are unwilling to bet theircompany that they are in the right in big-

stakes litigation, and a grant of class statuscan propel the stakes of a case into thestratosphere.”).

2. The line between class and merits dis-covery often is blurry and may be challengedby plaintiffs’ counsel. Moreover, a companywant may to expand discovery to the meritsso long as it actually helps establish individ-ual factual variations to defeat the predomi-nance and superiority elements under FederalRule of Civil Procedure 23(b)(3).

3. For more information, see Angela C.Zambrano, Successfully ManagingMultijurisdictional Litigation, IN-HOUSE

LITIGATOR, Vol. 21, No. 4 (Summer 2007).4. The plaintiffs’ attorney fees and class

notice and administration costs often will bepaid from the common fund before theremainder reverts back to the defendant.

5. See, e.g., Mangone v. First USA Bank,206 F.R.D. 222, 230–31 (S.D. Ill. 2001)(upholding reversion provision and stating,“Courts have broad discretion in distributingunclaimed class action funds, and where theparties agree on the distribution of unclaimedclass funds, the court should defer to thatmethod of distribution.”); Kronfeld v.Transworld Airlines, Inc., No. 83 CIV. 8641,1989 WL 140341, at *1 (S.D.N.Y. Nov. 13,1989) (“[R]ecapture clauses are common inclass action settlements and are not inherentlyunfair; the provision affects only what defen-dants will pay and not what class memberswho file claims will receive.”); see generally3 NEWBERG ON CLASS ACTIONS § 10:15 (4thed. 2002) (“In a settlement context, subject tocourt approval, counsel for the parties havegreat flexibility in negotiating an agreementconcerning how any unclaimed balance of anaggregate class recovery should be distrib-uted. These parties may agree that any surplusfunds revert to the defendant. . . .”).

6. 28 U.S.C. § 1712.

Practice Tip for Young In-House Lawyers

“Responsiveness. That’s what your in-house clients expect anddeserve. No doubt you are brilliant strategists and excellent

counselors. As I’m often told—that’s what we’re paid for. Howevervaluable those traits, your clients may not recognize them if you’re

perceived as unresponsive. We’re all busy! We can’t get toeverything now! Your clients understand and will appreciate asimple and prompt acknowledgment of their requests (by quickemail or phone call), telling them when they can expect an

answer. Meet your promised deadline and you’ll maintain yourreputation for professionalism.”

By Stewart M. Gisser, Associate General Counsel,Schindler Elevator Corporation


E-Discovery Case Law—Since the New RulesBy Thomas Y. Allman and Courtney Ingraffia Barton

Ayear has passed since the effec-tive date of the 2006 e-discoveryamendments to the Federal Rules

of Civil Procedure. In that time, some ofthe rules, such as Rule 26(b)(2)(B) (infor-mation from sources “not reasonablyaccessible”), have been heavily repre-sented in the decisions, but others, suchas Rule 26(b)(5)(inadvertent waiver ofprivilege) and Rule 37(f),1 have not. Theyear 2007 also brought the second edi-tion of The Sedona Principles, withimportant commentary on the rules andwith some adjustments in key principlesin sympathetic response. In this article,we will take a look at how e-discoverylaw has shaped up over the past year,some of the trends that we are seeing,and what we might expect in the monthsto come.

Rule 34(a) and Rule 37(f):Columbia PicturesOne of the most interesting cases of theyear was Columbia Pictures v. Bunnell.2

In this copyright infringement case, thedistrict court upheld a magistrate judge’sruling that data stored only temporarilyin the defendant’s website’s randomaccess memory (RAM) was discoverableas “electronically stored information” forpurposes of Rule 34(a). Importantly, thecourt also upheld the magistrate judge’sruling that, under the circumstances, noduty to preserve had existed because therequesting party had not raised the issueand the producing party could not haveknown that it had a duty to preserve theinformation. A forward-looking preserva-tion order was affirmed because theinformation was relevant and could bepreserved without undue burden, andthere were no other available means toobtain it.

Columbia Pictures is one of severalcases that have applied the “safe harbor”provision in Rule 37(f). Although bothcourts held that the defendants had anobligation to preserve the RAM data inthe future, the magistrate judge had held

that the failure to retain the data until amotion was filed was not sanctionablebased on a good-faith belief that preserva-tion of the RAM data was not required.3

Rule 37(f) has also been cited in UnitedStates v. Krause, Doe v. NorwalkCommunity College, and Disability RightsCouncil of Greater WashingtonMetropolitan Transit Authority, 4 althoughnone of these cases applied the provision.These last two cases remind us that Rule37(f) “does not exempt a party who failsto stop the operation of a system that isobliterating information that may be dis-coverable in litigation.”5 In Doe, defen-dants also did not appear to have oneconsistent, “routine” system in place.

However, the impact of Rule 37(f) canbe indirectly seen in the emerging line ofcases that increasingly put the onus onplaintiff’s counsel to ensure compliancewith preservation duties. In Cache laPoudre Feeds v. Land O’Lakes,6 the courtheld that a party that continued to statethat it was seeking a nonlitigious solutioncannot expect a party to be on notice ofpending litigation: “Given the dynamicnature of electronically stored informa-tion, prudent counsel would be wise toensure that a demand letter sent to a puta-tive party also addresses any contempora-neous preservation obligations.”7 Thecourt held that the duty to preserve didnot arise until the lawsuit was filed.8

Moreover, the court implicitly endorsedthe conclusion of the general counsel thatit was not necessary in that instance topreserve inaccessible backup media givena rational belief that the information wasavailable elsewhere.

Rule 26(f): Maryland ProvidesSome GuidanceAs envisioned by the drafters of the newrules, Rule 26(f) has become ubiquitousin the case law, and the need for coopera-tion under Rule 26(f) cannot be under-stated. Courts are ordering parties to“work it out”; those who fail, do so attheir peril. For example, in Kentucky

Speedway, LLC v. NASCAR,9 a motion tocompel production of metadata for docu-ments produced in hard copy was deniedbecause it had not been discussed at theRule 26(f) conference. In In re Seroquel,10

the court explained, while admonishing theparties, that there is a heightened need forthe parties to confer about the format ofthe electronic discovery being produced.11

Rule 26(f) sets out distinct areas thatparties must discuss at the outset of acase, including any issues relating to thepreservation of both hard copy and elec-tronic information. But the rule alsorequires a broader discussion of “anyissues relating to disclosure or discoveryof electronically stored information”(emphasis added). Indeed, district courtsin Arkansas, New Jersey, Delaware,Kansas, Ohio, and Wyoming haveadopted local rules or guidelines to helpparties identify exactly what issues tocover. However, in 2007 the District ofMaryland has trumped them all by issu-ing a comprehensive “Suggested Protocolfor the Discovery of Electronically StoredInformation” (Maryland’s DiscoveryProtocol) prepared by a group of lawyers,judges, and information technologists. AsJudge Paul Grimm, chief magistrate judgefor the District of Maryland, and MichaelD. Berman, Esq., stated in their introduc-tion to the protocol, “The lynchpin to thenew rules is the expectation that counselwill confer ‘as soon as practicable’ to‘discuss a discovery plan’”; thus,Maryland’s Discovery Protocol provides“a framework of topics to discuss at theconference.”12

Rule 26(b)(2)(B): InformationNot Reasonably Accessible Due toUndue Burden or CostThe most discussed provision so far thisyear—and arguably the signature reformof the 2006 amendments—has been Rule26(b)(2)(B). Prior to its adoption, thefocus seemed to be on the rule’s “not rea-sonably accessible” language, with com-mentators trying to figure out what type


of data would be implicated and whethera pure “media-based” approach would beautomatically applied. For example inZubulake v. UBS Warburg,13 the courtheld that “whether electronic data isaccessible or inaccessible turns largely onthe media on which it is stored.”However, the case law since the new ruleshas shown a refreshing focus on the“undue burden or cost” that is involvedand whether good cause has been shownfor production despite that fact. Theundue cost and burden analysis isinstructed by two sets of criteria: the con-siderations listed in the Committee Notesto the rule, and the limitations set forth inRule 26(b)(2)(C), often considered the“proportionality factors.”14

Only in one reported case has a courtrefused to order the production of infor-mation it identified as not reasonablyaccessible. In a companion case to thepreceding case, a court felt that goodcause was not shown where discoveryrequests were not narrowly tailored.15 Byfar more typical is the almost automaticimposition of cost shifting. For example,in Haka v. Lincoln County,16 the courtheld that because the potential damages inthe case were low, the costs of searchingfor relevant electronic information amongfour terabytes of data should be orderedin proportion to the available recovery.Plaintiff was required to narrowly tailorhis searches, and the costs were equallydivided among the parties.17 To takeadvantage of the provisions in Rule26(b)(2)(B), however, it is very importantthat practitioners raise the argument earlyby objection or motion and clearly estab-lish that the rule applies in their particularcase.18

Rule 34(b): Form ofProduction—Few Cases but anEvolution in Sedona Principle 12Surprisingly, there were not very manycases over the past year that discussedform of production. Perhaps this is anindication that Rule 26(f) is having thedesired effect—that parties are discussingform of production at the meet and con-fer. In Auto Club Family Insurance Co. v.Ahner,19 the court held that the fact thatinformation stored electronically was pro-duced in hard copy does not in and ofitself excuse a party from producing the

requested information in electronic form.In Schmidt v. Levi Strauss & Co. and inIn Re Payment Card,20 however, partieswere not required to reproduce informa-tion once produced.

As part of the revisions to The SedonaPrinciples (second edition 2007),21 theSedona Conference modified Principle 12to reinforce the nuanced aspects of Rule34(b). Principle 12 now suggests that,absent an agreement or a court order, theform of production should include meta-data that enable the receiving party tohave the same ability to access, search,and display as the producing party whereit is appropriate or necessary in light ofthe nature of the information and theneeds of the case.

AWord about PrivilegeAlthough only one reported case men-tioned new provision 26(b)(5) this year,there were a few important developmentsin other areas related to privilege.22 Mostnotably, Proposed Rule of Evidence 502made its way through the AdvisoryCommittee on Evidence Rules and theStanding Committee on Rules of Practiceand Procedure and was referred, onSeptember 27, 2007, to Congress foraction. The proposed rule, which would,inter alia, provide protection in all federaland state courts for inadvertent produc-tion of information in federal proceed-ings, requires congressional enactment tobecome effective.

Several courts have provided guidanceon how and when email is privileged inthe working context of large corporations,especially in regard to when and how itshould be handled on a privilege log. Inthe case of In re Vioxx Products LiabilityLitigation,23 excerpts from a special mas-ter’s report provide a provocative and fas-cinating insight into the topic. In Muro v.Target Corp.,24 the court dealt with emailchains in a practical manner. While rec-ognizing the labor and expense involvedin itemizing, the court held that the privi-lege log must identify each communica-tion that has been withheld fromproduction because of the assertion ofprivilege—whether that communication isthe entire strand or only one part of thestrand. If only one part of the strand isprivileged, the rest must be produced. Thecourt suggested that parties agree in the

Rule 26(f) meet and confer on how tohandle email strings, taking the issue backto that important meeting.

Admissibility IssuesOne area not directly addressed in thenew rules is the admissibility of electronicevidence over objection. In Lorraine v.Markel,25 Judge Paul Grimm providedwhat is in essence a treatise on the admis-sibility of electronic evidence. For thoseconcerned about the use of that evidenceat trial and the steps needed for admissi-bility also to be considered, Judge Grimmgives a good overview on how to do justthat.

ConclusionOne year later it remains to be seenwhether the rules have accomplished theirgoal of streamlining the e-discoveryprocess. It is clear that those who havetaken advantage of the collaborativenature of the rules are coming out ahead.But many have also noted that the ruleshave often raised more questions thanthey have answered, especially as newand emerging technologies continue todrive the process and the case law.

Thomas Y. Allman is former senior vice presidentand general counsel BASF Corporation and cur-rent editor, The Sedona Principles (second edition2007).

Courtney Ingraffia Barton is vice president,Industry Relations, LexisNexis Applied Discovery.Before joining Applied Discovery, she was a trialattorney with the United States Department ofJustice and, before that, with Arnold & Porter inWashington, D.C.

Endnotes1. On December 1, 2007, unless Congress

acts affirmatively, many of the Federal Ruleswill be renumbered and restylized. For example,Rule 37(f) will become Rule 37(e).

2. 2007 U.S. Dist. LEXIS 63620 (C.D. Cal.Aug. 24, 2007), aff’g 2007 U.S. Dist. LEXIS46364 (C.D. Cal. May 29, 2007).

3. Id. at *55. See also Escobar v. City ofHouston, 2007 U.S. Dist. LEXIS 72706 (S.D.Tex. Sept. 29, 2007) (Sanctions were not appro-priate under Rule 37(f) because evidence wasdestroyed as part of routine operation of com-puter system and in light of the 5th Circuit’srequirement of bad faith for severe spoliationsanctions.).4 2007 Bankr. LEXIS 1937 (Bankr. D. Kan.June 4, 2007); 2007 U.S. Dist. LEXIS 51084(D. Conn. July 16, 2007); 2007 U.S. Dist.LEXIS 39605 (D.D.C. June 1, 2007).


general counsel panelists at the roundtableprogram provided the following advice toreduce that tension and to avoid potentialliability.

Establish credibility. It is moreimportant than ever to establish credibilitywith board members, corporate officers,audit committee members, and otherinfluential members of the company. Thisis critical to ensure that the general coun-sel is included in discussions of poten-tially problematic issues and that thegeneral counsel’s advice is taken seri-ously. To do so, general counsel mustdeliver value by suggesting practical andcreative solutions that fit the client’s need.

Have in place internal processes.Establish a process at the outset for deci-sion making and for identifying potentialproblems and risky behavior. This willenable general counsel to later demon-strate that he or she acted in good faithand that the intended action was appropri-ate.

Hire the right staff. Increasedscrutiny means general counsel must hirethe right staff. It is important to hirelawyers with moral compass, character,and smarts, who can help ensure that thecompany complies with the required codeof conduct and the law. Those hired musthave “intestinal fortitude” because 90 per-cent of what in-house lawyers do tends tofall in the gray area. It is important totrain the lawyers to adeptly spot riskybehavior and eliminate problems at anearly stage.

Hire the right outside counsel.Astrong relationship with outside counsel isessential these days. A second opinionfrom outside counsel is invaluable toaddress unfamiliar issues and to overcomeresistance from the board or senior man-agement. Moreover, even though obtain-ing advice from outside counsel will notalways exculpate an in-house lawyer, itcan provide the comfort level needed tomake an informed decision and can serveas a mitigating factor if that decision latercomes into question. The panelists sug-gest the following steps when hiring out-side counsel: have in place severalexperienced, highly qualified lawyers whocan advise on various issues of law; go

have caused politicians to becomeincreasingly concerned about corporategovernance, corporate accounting prac-tices, and accountability to companyshareholders. As a result, politicians nowdemand increased government oversightof in-house lawyers. Moreover, highlypublicized corporate scandals and theincreased visibility and compensation ofin-house lawyers have caused the publicto become more distrustful of corpora-tions and supportive of criminal andenforcement actions against corporateexecutives as well as corporate lawyers.

Gatekeeper expectations. Like it ornot, government regulators now view in-house lawyers as “gatekeepers” whosejob is to ensure compliance with the lawand to ferret out improper corporate activ-ity. Unlike their counterparts 20 years ago,many general counsel these days partici-pate in corporate meetings and businessdecisions and often serve roles beyond thelegal function. Therefore, government reg-ulators assume that general counsel areknowledgeable of any corporate miscon-duct. In other words, no longer are regula-tors tolerant of in-house lawyers’ attemptto distance themselves by proclaiming“All I did was give legal advice.”

A shift in focus. Prior to Sarbanes-Oxley, government oversight of in-houselawyers had been limited to misconductsuch as insider trading or activities wherein-house lawyers clearly participated inthe criminal conduct. Since the passage ofSarbanes-Oxley, regulators have shiftedtheir focus to roles that lawyers playwithin corporations and to conduct relatedto corporate accounting practices andoptions plans.

Best Practices for the HeightenedRegulatory EraGiven the rising number of SEC investi-gations and DOJ prosecutions, somebelieve that the SEC is, in essence,attempting to deputize general counsel toserve as prosecutors within their compa-nies. As today’s general counsel try tobalance their dual role of serving asenforcement officers and trusted companyadvisors, tension often mounts betweengeneral counsel and their clients. The

with the Committee on Derivative Actionsand Class Actions, presented regionalroundtable programs called “GeneralCounsel Under Attack.” These regionalprograms took place in NewYork onSeptember 18, 2007, and in Silicon Valleyon October 23, 2007.

The panelists for the NewYorkregional roundtable program were HannahBerkowitz, General Counsel of Litigation,UBS Financial Services, Inc.; RobertKhuzami, General Counsel (Americas) ofDeutsche Bank AG; James Lipscomb,General Counsel of MetLife, Inc.;Michele Coleman Mayes, GeneralCounsel of Pitney Bowes (now GeneralCounsel of Allstate Insurance Company);and William Lytton, former Chief LegalOfficer of Tyco. The panelists for theSilicon Valley program were StevenDebenham, General Counsel of AsystTechnologies, Inc.; James Etheridge,General Counsel of Electronics forImaging, Inc.; Barbara Izzo, GeneralCounsel of Digital Chocolate; SmithMcKeithen, General Counsel of CadenceDesign Systems, Inc.; Barbara AnnPollack, General Counsel of Space andAirborne Systems, Raytheon Company;and Bruce Posey, General Counsel ofiPass, Inc.

This article will discuss the panelists’views on the increased scrutiny of corpo-rate counsel by government regulators andprosecutors, its effect on general counsel’srelationship with the client, and best prac-tices for protecting in-house lawyers andtheir clients in this heightened regulatoryera.

The Reasons for MountingScrutinyAlthough there were some SEC and crim-inal proceedings against in-house lawyersbefore the Sarbanes-Oxley Act, theincreased number of cases since the bill’spassage has been astounding. The speak-ers from the roundtable discussion pro-grams identified the following factors ascontributing to the government’s increasedscrutiny of in-house lawyers.

Political interest and increasedmedia attention. Corporate scandals suchas those at Enron, WorldCom, and Tyco

BEST PRACTICES FOR GENERAL COUNSEL IN THE POST-ENRON AND SARBANES-OXLEY ERA(Continued from page 1)

AMERICAN BAR ASSOCIATIONIN-HOUSE LITIGATOR 10

and the company’s legal department toprevent and remedy improper behavior.

Be ready to walk.When aware ofimproper behavior, general counsel muststand his or her ground, even if met withresistance by corporate executives.General counsel has significant power tomake certain that the company takesappropriate actions. If necessary, generalcounsel must report any noncomplianceissues to the CEO, chairman of the boardof directors, or to any other appropriatecorporate entity. When improper conductpersists, general counsel’s ultimateweapon is to report the matter to the boardof directors and resign from the company.

Although an extreme measure, generalcounsel’s resignation will send a clearmessage and will likely forestall the prob-lematic conduct.

In this heightened regulatory era, thereare many risks and pitfalls that generalcounsel must avoid to protect themselvesand their clients from liability. At the endof the day, however, given the increasedimportance of today’s general counsel inCorporate America and the extraordinaryopportunity they have to contribute to thesuccess of their companies, general counselagree that, more than ever, being the toplawyer is rewarding and desirable.

beyond the usual suspects—hire indepen-dent outside counsel who can provideobjective advice; and hire lawyers whotruly understand the company’s businessso they can quickly provide practicaladvice on specific issues.

Follow up.When an in-house lawyersuspects that the advise is not being fol-lowed, the lawyer has an obligation to fol-low up and to remedy any improperbehavior. Simply providing advice with-out a proper follow-up will not insulatecounsel from corporate bad acts. Generalcounsel should establish a process ofchecks and balances involving auditors,compliance officers, financial officers,

SECTION OF LITIGATION WINTER 200811


• In September 2002, the SEC filed civil fraud charges against MarkBelnick for failing to disclose to shareholders the multimillion dol-lar low-interest or interest-free loans that the company providedto the corporate executives and Belnick.3

• In September 2002, Belnick was indicted by a Manhattan grandjury on fraud charges arising out of the same conduct.4 He wasacquitted on the fraud charges, following a jury trial.5

• In May 2006, Belnick consented to being permanently enjoinedfrom violating provisions of the federal securities laws.6 He wasbarred from serving as an officer or a director of a public com-pany for five years, and ordered to pay $100,000 in civil penalties.7

• In August 2006, the SEC filed a civil fraud and injunctive actionagainst William F. Sorin for his alleged involvement in the fraudu-lent backdating scheme.8

• In September 2006, the DOJ charged Sorin with conspiracy tocommit securities fraud, mail fraud, and wire fraud in connectionwith an allegedly fraudulent options backdating scheme.9

• In November 2006, Sorin pleaded guilty to a one-count felonyinformation charging conspiracy to commit securities fraud, mailfraud, and wire fraud.10 He was subsequently sentenced to oneyear and a day in prison and ordered to pay $51.8 million inrestitution.11

• In November 2006, Sorin consented to being permanentlyenjoined from violating provisions of the federal securities law.12 Hewas suspended from appearing or practicing before the SEC as anattorney, barred from serving as an officer or a director of a publiccompany, and ordered to pay over $3 million in civil penalties.13

• In May 2006, Kent H. Roberts was terminated as general counselof McAfee.14

• In February 2007, Roberts was indicted by a federal grand jury inconnection with the fraudulent dating of stock options grants.15

• In February 2007, the SEC charged Roberts with securities fraudfor wrongfully re-pricing stock option grants.16

• The SEC action and DOJ investigation are pending.

• In March 2007, the SEC charged Jordan H. Mintz and Rex R.Rogers with securities fraud and related violations in connectionwith an alleged fraudulent scheme to make material misrepresen-tations in, and to omit material disclosures from, Enron’s publicfilings.17

• The SEC charges are pending.

Mark Belnick,former Chief Corporate Counsel

William F. Sorin, former General Counsel

Kent H. Roberts, former General Counsel

Jordan H. Mintz, former General Counsel ofthe Global Finance Group

Rex R. Rogers, former AssociateGeneral Counsel

Tyco International Ltd.

Comverse Technology,Inc.

McAfee, Inc.

Enron Corporation

CORPORATE SCANDALS INVOLVING CHIEF CORPORATE COUNSELCompany Lawyers Involved Charges

arbitrators, including summary judg-ments. Indeed, simulation research maywork better for identifiable decision mak-ers (e.g., specific arbitration panels or ajudge) than for future juries because thepersonal backgrounds of mock decisionmakers can be closely matched to thoseof the individual decisions makers (e.g.,the arbitrator or the judge). With singledecision makers, theme testing with mul-tiple surrogates usually identifies one ormore who reflect the outlook of the pre-siding judge or arbitrator.

Creative use by law departments ofdecision research in both nonjury andjury contexts can reduce litigation costsand risks. This article outlines the man-agement benefits to in-house counsel ofdecision research and explains emergingtechniques for simulating motion prac-tice, bench trials, and arbitrations.

Management and EvaluationBenefits of SimulationsJury simulations have long been recog-nized as uniquely valuable exercises fortesting settlement value while improvingadvocacy,2 and similar benefits can beobtained in a much wider range of casesby using simplified techniques to simu-late motion practice, bench trials, orarbitrations. Surprisingly, outside coun-sel are often resistant to all types of sim-ulations, citing expense, distraction fromtrial preparation, and limited utility out-side the traditional jury-trial setting. In-house lawyers should be skeptical ofthese reactions.

Simulations often reveal outside coun-sel’s lack of focus, inexperience, orincomplete preparation and cast doubt oncase evaluations that may have beenmade without adequate basis. We areaware of cases in which simulations ledto replacement of outside counsel afterclients were not pleased with the perfor-mance of their advocates in the mock tri-als. Because many outside counsel havelimited actual trial experience and evenless exposure to decision research, theyoften resist the challenge of learningnew techniques. The burden often restson in-house counsel, therefore, to insiston decision research.

Bringing in a second law firm to assistwith a simulation can overcome objec-tions by trial counsel in a tactful way. Oneapproach is for the second firm to preparethe opposing case; experienced co-counselmay also eliminate the need for a juryconsultant. Trial counsel would then pre-pare and present a simplified version ofthe client’s case. Most experienced trialcounsel welcome the chance to “playthemselves” by presenting their core argu-ments to a live audience and testing reac-tions. If necessary, however, a second firmcan prepare both sides of the mock case,requiring trial counsel merely to reviewargument scripts.3 This “outsourcing”approach allows trial counsel to continuepreparing for trial without distraction andalleviates concerns that the simulationmay create embarrassment for anyone.

When research is properly designedand conducted, it should give the client areasoned basis for setting settlement valueand formulating the most effective argu-ments for use in motion hearings, arbitra-tions, or trials. Often the results are alsouseful in framing arguments for media-tions. No other technology, the authorsbelieve, can do as much to avoid tacticalmiscalculations4 and improve the outcomein complex hearings or trials. If in-houselawyers had more exposure to decisionresearch and experience with these bene-fits, we believe that simulations outsidethe traditional jury-trial context wouldbecome more common, potentially pro-moting settlements or more efficient adju-dication proceedings.

Simulation DesignIn-house counsel should have an activerole in the design of any simulation toensure that it will achieve the client’sobjectives, which may differ from those ofa consulting research firm or outside coun-sel. Well-planned simulations have thepotential to predict and shape the behaviorof a specific arbitration panel, arbitrator, orjudge with amazing effectiveness. Theycan also be used to evaluate or improvethe performance of outside counsel. Thetool must fit the job, of course, and thefirst question is whether the case will sup-port the cost of a simulation exercise.

Starting with Cost-Benefit AnalysisSimulation research adds incrementalexpense,5 and cost-benefit analysis shouldbe the first step when deciding whether toundertake the effort. Settlement probabil-ity is the most critical single factor in thisequation. Obviously, there is little needfor a simulation study if a case or arbitra-tion can be settled efficiently without thisexpense. The vast majority of civilcases—well over 90 percent in virtuallyall American jurisdictions—are resolvedby settlement.6 Moreover, some disputescarry so much risk that they must be set-tled at the best price that can be achieved;a sure loser can often be identified with-out the need for extensive study. Evenwhen settlement is likely to be the ulti-mate outcome, however, a simulationstudy probably constitutes the best toolfor predicting the likely outcome,7 thusgreatly enhancing a party’s confidence inits valuation of a dispute during negotia-tions. Simulating dispositive motions canalso refine settlement strategy by suggest-ing whether settlement before or after aruling is likely to be more favorable. Inour experience, mediation argumentshave often benefited from insights gainedin simulations.

Simulation studies may be especiallyuseful for cases that turn on uniqueissues. For example, few insurance com-panies spend money to simulate workers’compensation cases because a body ofactual experience allows statistical predic-tion of jury behavior in these recurringcases. Likewise, experienced trial lawyersunderstand the arguments that haveworked well when they try cases that aresimilar to those they have tried in thepast. The same may be true for repetitivemotion practice or arbitration patterns,such as those in employment cases orbroker-dealer disputes with investors. Farfewer precedents are available, however,to evaluate the likely outcome or enhancethe advocates’ themes for complex arbi-tration proceedings, such as purchaseprice adjustments or disputes based onprolix contract language. Differencesbetween the perspectives of the deci-sion maker and the advocates can be an

SIMULATING MOTIONS, BENCH TRIALS, AND ARBITRATIONS(Continued from page 1)


additional factor that favors decisionresearch. Issues of cultural perception orprejudice may be especially difficult toevaluate in international arbitrations, forexample. Simulations can, for these rea-sons, have particular value when legalissues present matters of first impression.

Understanding Group DynamicsIn-house lawyers need to be aware thatmanagement and evaluation benefits ofsimulations are no longer limited to casesthat will be resolved by jury trials.Adaptations of the traditional approachalso permit effective simulation researchfor panels of arbitrators or appellatecourts as well as for judges or single arbi-trators. Group dynamics facilitates pre-trial jury research because the actualidentities of the jurors are not known, andobservation of mock deliberations hasbecome a major tool for extracting infor-mation about the mental processes ofmock jurors. That historical accident maylead to the incorrect assumption that sim-ulations are not appropriate unless a jurywill decide the case.

Simulation studies actually workbetter for arbitration or appellate panelsthan for anonymous jurors. Jury researchrests on the social science premise thatgroups of consumers or jurors willbehave in predictable ways when theyare drawn from a known demographicsample and presented with a uniformstimulus. Random variations can, ofcourse, cause the actual jury to differsubstantially from the generic panels thatwere used in research.8 When threeneutral arbitrators or appellate judges willdiscuss the issues and reach a majorityvote, group dynamics can be simulated inprecisely the same ways that have beenused for jury research. Indeed, once theactual arbitrators or appellate judges canbe identified, the attitudinal backgroundsof mock panels of arbitrators or judgescan be matched more closely to the actualdecision makers than can generic groupsof jurors selected in advance of a jurytrial. Deliberations of a group of neutralsurrogate arbitrators (or a panel of mockappellate judges) can be observed usingthe same techniques that work well injury research, such as observationthrough one-way mirrors in a consumerresearch facility. Group interaction can

also be simulated with three-memberarbitration panels in which each partyselects one arbitrator and those twoparty-appointed arbitrators select a third“neutral.”9

Even if group dynamics will not playa major role in the decision process, sim-ulation studies may still be designed toproduce valuable insights. For singledecision makers, a panel of surrogatescan be presented jointly with the casebackground (known as the “stimulus” injury research),10 but information onresponses must be gathered from eachindividual. Various techniques have beendeveloped to “calibrate” each surrogatewith the actual judge or arbitrator, allow-ing greater weight to be given to reac-tions of those surrogates who appear toreproduce most reliably the perspectiveand attitudes of the actual trier of fact orlaw. The entire panel can then be allowedto discuss the outcome, much like a jurydeliberation, to promote further develop-ment of useful arguments.

Tailoring Design to Emphasize Valuation,Advocacy, or Counsel TestingIn-house counsel should forcefully dic-tate what they need to learn from a simu-lation study rather than leaving that issueto outside counsel or the research firm.Design of a simulation study can empha-size reliable outcome evaluation, maxi-mum advocacy improvement, testing ofcounsel’s performance, or other goals. Abalance can also be sought among severalobjectives. The best valuation resultsoccur, for example, when a balanced pre-sentation of the most likely case for eachside is repeated before a number of pan-els. Greatest enhancement of argumentscan be achieved if an opponent’s presen-tation is held constant while the sponsorof the simulation varies its themes in aseries of one-day studies to produce thebest result. A hybrid approach can also beconstructed, with part of the presentationheld constant for several panels (such asthe opening statement), followed by vari-ations in the simulated evidence or clos-ings to test different themes. Counselmay be tested more effectively if differ-ent lawyers are assigned to specific partsof the case and pointed questions areasked to the surrogate decision makersto evaluate each lawyer’s performance

(i.e., persuasiveness, clarity, passion, andarticulateness).

Although many outside counsel preferto use a simulation primarily to seek thegreatest chance for victory at trial, theclient may have a greater need to set asettlement value or decide whether achange of counsel is needed. Use of asecond law firm to support or conduct theresearch may contribute to the objectivityof these evaluations. In any event, thelegal department must define the objec-

tives and review the blueprint for thestudy to be sure the client receives themost value for any investment in simula-tion research.

Research ImplementationOnce a sound design for the simulation iscreated, certain fundamental principles ofsocial science research should beobserved when implementing the plan.First, the attitudes and biases of the simu-lated decision makers should be matchedas closely as possible to those of theactual decision makers. Factors that affectattitudes, rather than demographics alone,are particularly important. Matching thecareer patterns, ages, and political inclina-tions of mock arbitrators or judges withthose of actual decision makers is particu-larly critical. Lawyers who spent most oftheir career with small law firms do nothave the same outlook as those who haveworked only at large firms. Personalinjury lawyers do not have the sameworld view as transactional lawyers orbusiness litigators. An arbitrator who hasrepeatedly failed in his or her attempts toachieve political office may carry insecu-rities that should be carefully replicated inthe group of surrogates who will betested. Judicial experience seems to shiftattitudes, so a panel with former judges

When possible, thesimulated arbitratorsshould come from thesame city, or at leastthe same country, asthe actual arbitrators.


should be simulated, if possible, by a sur-rogate group that includes the same num-ber of former judges with the same generaltenure on the bench. Regional and geo-graphic attitudes are also important, partic-ularly with international arbitrations. Whenpossible, the simulated arbitrators shouldcome from the same city, or at least thesame country, as the actual arbitrators. Ifnonlawyers are included on the actualpanel, simulated arbitrators with the sametype of education and employment historyas those individuals should be sought.When excellent matches are found, thepredictive results are sometimes uncanny.11

A second research goal is to keep thesimulated arbitrators from knowingwhich party sponsored the research. Weoften tell the simulated arbitrators thatour law firm arranged for the simulation,but we do not tell them—at first—whichparty we represent.12 Interestingly, simu-lated arbitrators often guess incorrectlywhen they try to determine which party

is paying for the exercise.13 Even if theysuspect the probable sponsor, however,the lingering uncertainty will make themmore objective.

Finally, any decision research studyshould be designed to extract informationas the stimulus unfolds. This can usuallybe accomplished with questions that themock arbitrators are asked to answerindividually after each module is pre-sented, such as following an openingstatement, after witnesses (or videodeposition excerpts) are seen, and fol-lowing the closing.

Practical Simulation TechniquesEach simulation must be tailored to thespecific case, of course, but certain meth-ods are consistently effective in a numberof situations. In-house counsel may wishto consider some of these approaches

as a checklist during the design phase.Some proven simulation techniques arediscussed below that can apply in anysimulation.

Testing Argument Themes with“Clopenings”The classic format for jury research—knownas the half-day “clopening”—works rela-tively well for arbitrations, bench trials,and motions. In a typical “clopening”study, the plaintiff’s case is presented ina narrative of less than an hour inlength that combines elements of theopening statement and closing argu-ment. Defendant’s case is presented next,also in a “clopening” format. The plaintiffis allowed a short rebuttal, then the simu-lated decision makers are given simplifiedinstructions and asked to deliberate. Withluck, all these steps can be accomplishedin about four or five hours of simulatedhearing time.

A “clopening” study produces a largevolume of information at affordable cost.Frequently, jury cases are simulated by“clopening” studies and followed by full-day mock trials (including video deposi-tion excerpts) and then by actual jurytrials. More often than not, the results ofthe “clopening” studies were consistentwith the more extended studies and withthe actual jury results. Yet the “clopening”uses less lawyer time and generates muchlower consulting fees than a full-daymock trial approach. Similar resultsappear to hold with arbitration simula-tions, based on disputes that have beensimulated and then actually tried to anarbitration panel. For trials to judges,including appellate or motion simulations,the mock decision makers are often askedto read briefs to prepare for the “clopen-ing” arguments.

The “clopening” exercise can alsoshow the evolution of the decisionprocess. A snapshot of individual attitudescan be taken at the end of a “clopening,”and a baseline established on the attitudesof individual mock panel members,allowing for experimentation with subse-quent argument variations. An illustrationmay be helpful here. Assume, for exam-ple, that three surrogate panels arerecruited to study the probable behaviorof an actual arbitration panel. If identical“clopenings” are presented to all three

mock panels, the attitudes of each surro-gate arbitrator can then be tested. In thishypothetical study, assume that the actualarbitration panel consists of a retiredjudge, an engineer with no legal training,and a tax lawyer. Each simulated panelshould have a nearly identical mix ofindividuals. If the three retired judges(one on each mock panel) all stronglyfavor the plaintiff at the end of three iden-tical “clopenings,” that consistentresponse suggests that the elements of the“clopening” stimulus have a predictableeffect on the member of the panel who isa retired judge (assuming other factors arecontrolled correctly).

If the study is extended to include sim-ulated witness testimony and further argu-ment, the post-“clopening” evidence ofthe party conducting the study can thenbe varied for each of the three mockhearings to see whether attitudes shift.By way of illustration, if an excerptfrom a video deposition is edited in onemock hearing to show aggressive cross-examination of the plaintiff, attitudes ofthe surrogate panelists who favored theplaintiff can be tested after that addi-tional stimulus to see whether their lean-ings change from those they expressed atthe end of the “clopenings.”

Sometimes the “clopening” phase sug-gests that study results are not likely to bereliable or predictive. In the hypotheticalpanel described above, if the three engi-neers had different reactions when pre-sented with supposedly identical“clopenings,”14 much less confidence canbe ascribed to the shifting views of one ofthose mock panelists who changes his orher vote after seeing a particular videoexcerpt or hearing a new argument.

“Clopenings” can also be followed byfocus group sessions. Traditional juryresearchers prefer to have focus discus-sions occur before any votes are taken ina mock deliberation,15 but most jury con-sultants will concede that many benefitsof a focus exercise can still be obtainedafter a “clopening” deliberation hasoccurred. In our view, the value of focusgroups is limited, even under ideal condi-tions, and most of that value can beobtained by including a short focus period(usually about 30 minutes) after each sim-ulated arbitrator or judge concludes his orher analysis process. After individual


A “clopening”study produces

a large volume ofinformation at anaffordable cost.

responses are elicited, the entire panel canthen be combined, even if that will neverhappen in a bench trial or arbitration, toobserve the discussion by the panel. Thus,eliminating a threshold focus group studyand moving directly to simulations cansave substantial cost without causing sub-stantial loss of value.

In summary, a “clopening” module is atraditional foundation for almost any sim-ulation. Whether additional features aretested must depend on the nature of thecontroversy and the goals of the client.Even though the process is abbreviated fora half-day “clopening” exercise, the bene-fits may be substantial.

Using the Full-Day FormatSome additional data—at increasedcost—can be obtained by expanding to afull-day mock hearing format with simu-lated witness testimony and additionalarguments. This is obviously not neces-sary for a mere motion simulation, but itworks well for a jury trial or bench trial.Hearing testimony is normally composedof excerpts from video depositions. Ifvideo depositions do not exist, videotapedor live “testimony” can still be createdusing witnesses under the control of theparty conducting the study.16 Evenadverse witnesses can be portrayed usingactors if necessary.17 In this approach,each side makes opening statements,some form of testimony is presented tothe surrogate panelists, closing state-ments are made, and mock deliberationsare conducted. Individual attitudes ofeach mock juror, arbitrator, or judge aretested repeatedly during the session totrack shifts. This process usually requiresa full day.

Theoretical benefits of the full-dayapproach are extensive. The mock hear-ing format allows testing of reactionsafter each witness has spoken, to rate thecredibility of that particular witness andto gauge the shifting leanings of individ-ual arbitrators as the evidence unfolds. Intheory, this input allows lawyers todecide which witnesses they wish toshowcase at the hearing and which theyprefer to relegate to minor roles. Thecredibility scores may also inject a doseof humbling reality into a client’s confi-dence in the persuasive powers of a par-ticular spokesperson for the client’s case.

Finally, the results of these studies canfacilitate witness enhancement.18

In reality, the theoretical advantagesof mock evidentiary hearings over mere“clopening” sessions may fall short inpractice. The ability of a lawyer to con-trol the role of particular witnesses, forexample, is frequently limited by theopponent’s tactics. Often the informa-tion provided by witness evaluations islittle more than the conclusions thatexperienced trial lawyers had alreadydrawn themselves (e.g., bad witnessesare certified as bad witnesses). Thegreatest value of full-day mock trialsarises from the greater credibility thatclients seem to attach to the results fromthese exercises. In a major case, the full-day format is often worth the extra cost,particularly for case evaluation on theeve of a dispositive motion hearing ortrial if settlement remains a realisticoption.

Using Simulations to Select the MostFavorable PanelWhen the budget permits, simplified“clopening” studies may be conductedat the stage when arbitrator candidatesare known but the final panel has notbeen selected. Assume, for example, aconstruction dispute between the prop-erty owner and the general contractor inwhich the list of potential arbitratorsconsists of architects, lawyers, and realestate developers. The owner might wishto conduct research to see whether onetype of professional responds in a par-ticularly favorable or unfavorable way tothe owner’s themes. A series of simula-tions may provide empirical evidence toconfirm or refute the owner’s expecta-tion that architects will favor its positionwhile developers will tend to side withthe general contractor.

Although they are valuable, preselec-tion studies are difficult to achieve. Thewindow for selection of arbitrators froma specific list of candidates is usuallynarrow, making it necessary to recruitsurrogate arbitrators in a very shortperiod of time and arrange the simu-lated hearing, all before selections aredue. Some preplanning is possible, butthe process is inherently hectic. Further,the results of this study will probablyhave little value in testing the attitudes

of the final panel. In major matters,however, the information acquired froma preselection study may produce thewinning edge.

Adding Value Through MeasurementDevicesFor relatively little cost, additional mea-surement devices can increase the infor-mation obtained from the surrogatepanelists. Opinion meters, for example,are useful persuasion-measurementdevices derived from advertising research.Mock decision makers (whether jurors orpanelists) are given dials or keypads con-

nected to a computer and asked to twistthe knobs (or punch a specific key) asthey feel more persuaded. Some practiceis usually conducted with radio or televi-sion commercials to teach the panelists touse the dials. Computer graphs of themeter readings can be correlated withvideotapes of the “clopenings” to showthe effects of certain arguments on eachmock decision maker. Results of thesetests can help lawyers focus their themesor avoid arguments that offend particularindividuals.

Ranking of key facts is another usefulexercise. One method, for example, pre-sents pairs of facts to decision makersand asks them to select the fact that ismore important to them in each pair.19

Each fact is presented in several combi-nations. Using statistical techniques,researchers can then rank these facts totell the trial lawyers which ones are mostimportant. The statistical ranking is oftensurprising and always useful. Jury consul-tants rarely promote this ranking process,however, because the effort and technicalcompetence required are substantial.Despite that resistance, lawyers may wishto insist on the necessary tests. In nonjury

Opinion meters areuseful persuasion-measurementdevices derived fromadvertising research.


simulations, this process is equally usefulfor ranking a party’s “good list” of posi-tive points.

As in jury research, mock judges orarbitrators should be encouraged to sug-gest analogies and metaphors. Sometimesthe analogies emerge spontaneously. Inone jury simulation, for example, a groupof mock jurors was struggling with thedefinition of estoppel as explained in asimplified verdict form. Finally, one jurorsaid, “Oh, I get it; it’s like poker—youcan’t pass and then raise.” Several other

jurors immediately agreed, and the estop-pel question was answered “yes.” Thefocus exercise after any mock deliberationcan be used to draw out analogies ormetaphors that support the positions ofyour client. The resulting suggestionscan be used in arguments to “empower”favorable jurors, as the consultants liketo say.

Finally, much can be learned bywatching a surrogate decision maker’sattempt to agree on a simplified award.Damage findings, in particular, shouldusually be included on a simplified awardform to force quantification. Jury consul-tants resist verdict forms because mockjurors want to leave promptly, and longforms may cause the mock juries to dis-perse before they complete the delibera-tion phase. When simulating motions,arbitrations, or bench trials, however,deliberations often move more quickly,and compromising behavior may beclearly articulated.

Several other techniques may beemployed to extract particular types ofinformation to meet specific needs. Afterthe substantial investment of time andmoney to assemble and “stimulate” a

surrogate panel of judges or arbitrators,every effort should be made to get asmany useful measurements as possiblefrom the perishable resource of thatpanel’s perceptions.

Improve FairnessWe believe that decision research pro-motes fairer results and may reduce costs.There is nothing inherently manipulativeabout the use of social science techniquesto study the reactions of decision makers.Whether dealing with jurors, arbitrators,or judges, decision research merely for-malizes procedures for accomplishingtasks that have traditionally beenachieved in other ways. Every advocatemust identify issues, frame the most per-suasive arguments, organize the evidence,and evaluate a case. Traditionally, thesesteps were completed without the benefitof psychologists and surrogate decisionmakers, but the result is the same.

Lawyers may have more difficulty indetecting the knowledge, cultural biases,and attitudes of arbitrators or judges thanof jurors. For example, in a technicalarbitration over alleged breach of aGerman gene patent, a Houston lawyermay have a more limited understandingof the perspective of a French biochemiston a panel in Frankfurt than that lawyerwould have for a typical Texas juror inDallas. Such gaps in shared assumptionscan be greatly reduced when the lawyerattempts to explain his or her case toanother French biochemist—or, betteryet, to three surrogate panels that eachcontains a French biochemist.

A well-designed simulation exercisehelps to eliminate irrational factors thatcould skew results unfairly, includingpoor advocacy. By sensitizing advocatesto cultural differences or linguistic chal-lenges, for example, the simulationprocess should improve the efficiencywith which key concepts in a case arecommunicated. More reliable communi-cation should ensure that results are likelyto turn on the merits of a controversy.Otherwise, decisions may be distorted bytranslation errors, cultural bias, or otherextraneous factors. Clear communicationwith the decision maker is particularlycrucial when appeal rights are limited,as in arbitrations or bench trials. In-housecounsel can also ensure that they are

getting the best possible advocacy fortheir positions. With only one chance toget it right, simulation studies improvethe chances that a party can take its bestshot when it matters most. Moreover, ifboth sides conduct simulations, the over-all quality of advocacy should improve inthe proceeding, and settlement valuationsmay converge. If seeing ourselves “asothers see us” in a simulation study savesus from only one “blunder” or “foolishnotion,” that alone may make the gaingreater than the pain.

Ralph I. Miller is a partner in the Washington,D.C., office of Weil, Gotshal & Manges LLP. Hispractice focuses on complex commercial litigation.Mr. Miller is a co-head of the firm’s complex com-mercial litigation practice. He is listed inWoodward/White, Inc.’s Best Lawyers in Americaand in Chambers USA.

Alejandra Montenegro Almonte is an associate inthe Washington, D.C., office of Weil, Gotshal &Manges LLP. Her practice focuses on interna-tional arbitration and complex commercialarbitration.

Endnotes1. Marc Galanter, The Vanishing Trial: An

Examination of Trials and Related Matters inFederal and State Courts, 1 J. EMPIRICAL

LEGAL STUD. 459, 462 (Nov. 2004) (showingthat the number of federal civil jury trials fellfrom 4,279 in 1992 to 3,006 in 2002).

2. Anthony J. Bocchino et al., What JuriesWant to Hear II: Reverse Engineering™ theVerdict. 74 TEMP. L. REV. 177, 198 (2001)(Jury simulations can provide lawyers “accu-rate jury reaction to their case and the abilityto improve their trial theory and presentationstrategies on many levels.”).

3. If possible, trial counsel should beencouraged to observe the research sessions,which typically consist of observing the surro-gate decision makers explain their thoughtprocesses behind one-way glass mirrors in afocus-group facility. Both videotapes andaudiotapes are usually made of these sessions,however, and trial counsel may review the tapeswhile traveling if they cannot spare time fromtrial preparation for a day to observe the mocktrial or hearing. In addition, reports to analyzethe research results are usually prepared by theresearch sponsor, and these can be reviewedquickly by trial counsel and clients.

4. One frequent finding from decisionresearch is that arguments, metaphors, orvisual aids favored by trial counsel are offen-sive or counterproductive. Surrogate decisionmakers may also embrace arguments that trialcounsel or the client feel are not especiallypersuasive. This prioritization guidance aloneoften justifies the cost of the exercise.

5. The major cost in most arbitration sim-ulations is the cost of the surrogate arbitra-tors. This differs from jury research, where


A well-designedsimulation exercisehelps to eliminate

irrational factors thatcould skew resultsunfairly, includingpoor advocacy.

the mock jurors are often a relatively smallpart of the cost. If an outside consultant isused, minimal costs are likely to exceed$30,000 for the consultant’s fee alone.Substantial incremental lawyer time is alsorequired to prepare, conduct, and analyzeany simulation exercise.

6. ADMINISTRATIVE OFFICE OF THE U.S.COURTS, JUDICIAL BUSINESS OF THE UNITED

STATES COURTS, 2006 ANNUAL REPORT OF THE

DIRECTOR, at 186 (showing percentage ofcases reaching trial); see also, James A.Scarpone and Jennifer A. Leighton, FederalPre-Trial Procedure: An Obstacle to CaseResolution, THE METROPOLITAN CORPORATE

COUNSEL, Nov. 2007, at 19.7. Empirical studies of simulation effec-

tiveness are particularly difficult to conductfor arbitrations because the outcomes are usu-ally confidential, and variations in arbitrationformats are substantial. In theory, actual arbi-tration panels can be matched more closelywith simulated panels than can generic juries.Users of such simulations at Weil Gotshalhave found arbitration studies to be highlypredictive, but these observations are inher-ently anecdotal.

8. Jury research often adds value to thejury selection process, of course, by identify-ing those types of jurors who are most likelyto be favorable to the sponsor’s case. We haveconducted similar research before an arbitra-tion panel was selected to find the most favor-able arbitrators. Most simulation research atthe trial level is conducted after substantialdiscovery has occurred, however, which is atime when the actual identities of judges orarbitrators are usually known.

9. Although popular with some transac-tional lawyers, the party-selected-arbitratorformat has many drawbacks that extendbeyond the difficulties it creates for simula-tion studies. Most trial lawyers dislike theinability to observe and counteract any advo-cacy that may occur in private if one party-appointed arbitrator proves more strident thanthe other during deliberations. Further, thereis no international consensus regarding thedegree of neutrality that party-appointed arbi-trators should observe, and the party whoselects the more ethical designee may sufferif an opponent appoints a blatant advocate.10. The stimulus is normally presented to

an entire group at once for two reasons:First, most of the expense is in the presenta-tion phase, and doing it once is obviouslycheaper. Second, having all the surrogatesobserve one “show” ensures that variations inattitudes are being tested rather than changesin the presentation. In appropriate cases, sev-eral versions of the stimulus can be used, asis often done in jury research, to find themost effective way to structure a motion ornonjury case. For example, a defendant maywish to devote one day of research to a mocktrial in which both liability and damages arecontested and then contrast those results witha second day of research in which liability is

admitted but the defense concentrates onreducing damages.11. A real-world experience illustrates this

point: An arbitrator on an actual panel ofthree neutrals had a lackluster record of atten-dance at third-rate schools, bouncing fromsmall firm to firm, losing a race for a minorpolitical office, and finding that only arbitra-tions could provide regular work. A goodmatch with a similar undistinguished recordwas found for the simulation, including a lossin running for a different minor politicaloffice. This mock arbitrator asked a question,drawn from an inapposite metaphor withinsurance law, that reflected a complete mis-understanding of the legal issues. At theactual arbitration, the real arbitrator askedprecisely the same inane question. Fortunately,the simulation had provided practice on theway to correct the confusion and direct thearbitrator back to the path of relevance.12. Care must be taken, of course, to

ensure that conflicts are cleared for simulatedarbitrators who are lawyers. This can beaccomplished by asking the mock panelmembers to clear conflicts for both parties inall capacities, ensuring that they can becomecounsel for the sponsoring party at the con-clusion of the exercise. As in jury research, aninitial privilege should be created by havingthe surrogate arbitrators agree to serve as con-sultants to the sponsoring law firm, even ifthey do not know the identity of that firm’sclient at first.13. One of the entertaining parts of a typi-

cal arbitration simulation occurs when each ofthe panelists is asked, after they have concludedall their deliberations, “Who do you think ispaying for this exercise, and why do you thinkthey are doing it?” Sometimes, for example,the simulated panelists speculate that the simu-lation is a mediation tool being conducted byboth parties to promote settlement. Often theydisagree on the probable sponsor. Usually,however, a majority will see some clue thatgives away the identity of the sponsor.14. For example, if one engineer strongly

favored plaintiff, a second strongly favoreddefendant, and a third was undecided afterpresentations of “clopenings” that wereintended to be identical, some doubt would becast on the predictive value of the exercise.This type of inconsistency may result fromfailure to obtain good attitudinal matches forthe surrogate panelists, from unintended vari-ations in the “clopenings,” or, alas, from aclose case on which reasonable engineeringminds can differ. In any event, varied resultsobviously suggest more risk to a party thanconsistent victories but hold more hope thanconsistent losses.15. Once a mock juror has “voted” before

his or her peers, many jury researchers feelthat individual is less likely to express narra-tive opinions freely. In theory, a mock jurorwho has taken a strong position during simu-lated deliberations will express only thoseviews in a subsequent “focus” discussion that

are consistent with his or her “vote.” If so,this phenomenon should limit researchinsights that might otherwise be obtained by“focusing” the mock jurors before theyexpress individual opinions. Whether arbitra-tors feel the same theoretical need for per-ceived consistency is debatable, but thispostulated tendency to demonstrate consis-tency before one’s peers does not appear toconstrain discussion by simulated arbitratorsat the end of the exercise. At the end of thestudy, many lawyers, for example, seemdelighted to outline arguments that woulddirectly contradict the position they took dur-ing mock deliberations.16. If, for example, a video deposition was

taken of the defendant but not the plaintiff,lawyers representing plaintiff can create asimulated video deposition of plaintiff to beused as a foil for the excerpts from the defen-dant’s deposition. Care must be taken, how-ever, not to create a witness statement thatmust be disclosed to the opponent.17. In one arbitration simulation, for

example, the general counsel for petitionerhad met extensively with respondent’s prin-cipal during mediation. A simulation wasconducted before the panel was selected todetermine whether lawyer or nonlawyer arbi-trators would tend to favor one side. At thetime of this early study, no depositions hadbeen taken, so the general counsel played therole of the opposing principal, attempting torestate the contentions made by that individ-ual in negotiations. The simulation was laterrepeated using excerpts from the real wit-ness’s video deposition. The lawyer’s actingproduced questionnaire responses by mockpanelists that were strikingly similar to thoseobtained in the later simulation whenexcerpts from the actual deposition ofrespondent’s principal were shown to othersurrogate arbitrators.18. In the “witness enhancement” ritual,

jury consultants purport to change the imagethat key witnesses project by person-to-persontherapy with the witnesses. Executives whoseem harsh, for example, may be softened bysessions that practice changes in their vocabu-lary, body language, and dress. This process,like most therapy, faces hurdles of denial bythe patient, and reactions of mock jurors orsurrogate panelists can assist the consultantsin persuading the witness that an image issueexists. This process probably has less valuewith panels composed of well-educated arbi-trators than in trials before typical jurors,who may be more visceral than intellectual.19. These facts need not have any logical

relation to each other for ranking to work.For example, one pair might ask “Is it moreimportant to you that defendant is a largecorporation or that plaintiff is an Americancitizen living in Bolivia?” A later pair mightinquire “Is it more important to you thatplaintiff is an American citizen living inBolivia or that defendant failed to performthe structural tests on its own checklist?”



5. Disability Rights Council, 2007 U.S.Dist. LEXIS 39605, at *22; Doe, 2007 U.S.Dist. LEXIS 51084, at *15.

6. 2007 U.S. Dist. LEXIS 15277 (D. Colo.Mar. 2, 2007).

7. Id. at *29.8. Id. at *33.9. 2006 U.S. Dist. LEXIS 920028 (E.D. Ky.

Dec. 18, 2006).10. 2007 U.S. Dist. LEXIS 61287 (M.D. Fla.

Aug 21, 2007).11. Id. at *16. See also, The Scotts Company

LLC v. Liberty Mutual Ins. Co, 2007 U.S. Dist.LEXIS 43005 (S.D. Ohio June 12, 2007) (par-ties ordered to meet and confer on form of pro-duction); Rebman v. Follet Higher EducationGroup, Inc., 2007 U.S. Dist. LEXIS 32601(M.D. Fla. May 3, 2007) (parties ordered tomeet and confer to narrow requests).12. See http://www.mdd.uscourts.gov; and

Maryland’s Discovery Protocol, with anIntroduction by Paul W. Grimm, ChiefMagistrate Judge, District of Maryland andMichael D. Berman, Esq., published byLexisNexis Discovery Services, 2007; see alsoO’Bar v. Lowe’s Home Ctrs., Inc., 2007 U.S.Dist. LEXIS 32497 (W.D.N.C. May 2,2007)(adapting the discovery plan in that casefrom the Maryland Discovery Protocol).13. 2003 U.S. Dist. LEXIS 7939 (S.D.N.Y

May 13, 2003) (Zubulake I).14. See, e.g., W. E. Aubuchon v. Benefirst,

2007 U.S. Dist. LEXIS 44574 (D. Mass. Feb. 6,2007) (although court used media-basedapproach to Rule 26(b)(2)(B), ultimate decisionwas based on showing of “good cause” asdefined by Rule 26(b)(2)(C) and CommitteeNote); In Re Veeco Instruments, Inc., 2007 U.S.Dist. LEXIS 23926 (S.D.N.Y. April 2, 2007);see alsoAmeriwood Industries, Inc. v.

Lieberman, 2006 U.S. Dist. LEXIS 93380 (E.D.Mo. Dec. 27, 2006) (direct access to hard drivesthat are “not reasonably accessible due to undueburden or cost” granted given good cause).15. See Ameriwood Industries v. Lieberman,

2007WL 496716 (E.D. Mo. Feb. 13, 2007).16. 2007 U.S. Dist. LEXIS 64480 (W.D. Wis.

Aug. 29, 2007).17. Id. at *7; see also Guy Chemical Co. v.

Romaco AG, 2007 U.S. Dist. LEXIS 37636(N.D. Ind. May 22, 2007) (in analogous Rule45(d) case, cost of $7,000 for third party to pro-duce documents made that information “not rea-sonably accessible”).18. See Knifesource v. Wachovia, 2007 U.S.

Dist. LEXIS 58829 (D.S.C. Aug. 10, 2007);Peskoff v. Farber, 2007 U.S. Dist. LEXIS62596 (D.C.C. Aug. 27, 2007); Best BuyStores, LP v. Developers Diversified RealtyCorp., 2007 U.S. Dist. LEXIS 7580 (D. Minn.Feb. 1, 2007).19. 2007 U.S. Dist. LEXIS 63809 (E.D. La.

Aug. 29, 2007).20. 2007 U.S. Dist. LEXIS 69791 (N.D. Cal.

Sept. 10, 2007); 2007 U.S. Dist. LEXIS 2650(E.D.N.Y. Jan. 12, 2007).21. Available at http://www.thesedona

conference.org.22. See Pinnacle Pizza Co. v. Little Caesar

Enterprises, Inc., 2007 U.S. Dist. LEXIS 48845(D.S.D. July 3, 2007) (noting that Rule26(b)(5) took “middle of the road” approach toinadvertent disclosure by providing that it didnot automatically result in a waiver).23. 2007 U.S. Dist. LEXIS 60299 (E.D. La.

Aug. 14, 2007).24. 2007 U.S. Dist. LEXIS 41442 (N.D. Ill.

June 7, 2007).25. 2007 U.S. Dist. LEXIS 33020 (D. Md.

May 4, 2007).

Yuri Mikulka is a cochair of the ABA Section ofLitigation’s Committee on Corporate Counsel andis a partner at the Irvine, California, office ofHowrey LLP. She specializes in securities andcomplex commercial litigation. Alexis Hunter is anassociate in the Securities Litigation, GovernmentEnforcement, and White Collar Defense Group inthe New York office of Howrey LLP.

Endnotes1. See Yuri Mikulka & John M. Horan,

General Counsel under Attack: Criminal andEnforcement Proceedings, Investigations, and theTravails of In-House Counsel (Oct. 17, 2007),available at http://www.abanet.org/litigation/committees/corporate/docs/2007_materials_underattack.pdf.

2. Id.3. SEC Litigation Release No. 19682, SEC

Settles Litigation with Former Chief CorporateCounsel of Tyco International Ltd. (May 2,2006), available at http://www.sec.gov/litigation/litreleases/2006/lr19682.htm.

4 News Release, District Attorney—NewYork County (Sept. 12, 2002), available athttp://www.manhattanda.org/whatsnew/press/2002-09-12.htm.

5. Brooke A. Masters & Carrie Johnson,Former Tyco Executive Acquitted, WASH. POST(July 16, 2004), available at http://www.washingtonpost.com/wp-dyn/articles/A53295-2004Jul15.html.

6. SEC Litigation Release No. 19682.7. Id.8. SEC v. Jacob “Kobi” Alexander, Civil

Action No. 1:06-CV-03844-NGG-RER(E.D.N.Y. Aug. 8, 2006) (Complaint), availableat http://www.sec.gov/litigation/complaints/2006/comp19796.pdf; see also SEC LitigationRelease No. 19796, SEC Charges FormerComverse Technology, Inc. CEO, CFO, andGeneral Counsel in Stock Option BackdatingScheme (Aug. 9, 2006), available athttp://www.sec.gov/litigation/litreleases/2006/lr19796.htm.

9. DOJ Press Release, Former Executives ofComverse Technology Inc. Charged withBackdating Millions of Stock Options andCreating a Secret Stock Options Slush Fund(Aug. 9, 2006), available at http://www.usdoj.gov/opa/pr/2006/August/06_odag_517.html.10. U.S. Attorney’s Office (E.D.N.Y) Press

Release,William F. Sorin, Former GeneralCounsel of Comverse Technology Inc., PleadsGuilty to Securities Fraud Charge (Nov. 2,2006), available athttp://www.usdoj.gov/usao/nye/pr/2006/2006Nov02b.html.11. Ex-Comverse Lawyer Going to Jail in

Options Backdating Plan, N.Y. TIMES (May 11,2007), available athttp://www.nytimes.com/2007/05/11/technology/11comverse.html.12. SEC Litigation Release No. 19964, SEC

Settles Options Backdating Case Against William

F. Sorin, Former General Counsel of ComverseTechnology, Inc; Relief Includes Officer-and-Director Bar and Over $3 Million in CivilPenalties, Disgorgement, and PrejudgmentInterest (Jan.10, 2007), available athttp://www/sec.gov/litigation/litreleases/2007/lr19964.htm.13. Id.14. McAfee, Inc., Press Release,McAfee,

Inc. Announces Departure of General Counsel(May 30, 2006) (Ex. 99.1 to McAfee, Inc. Form8-K (filed May 30, 2006); available at http://www.sec.gov/Archives/edgar/data/890801/000127528706003048/mc6026ex991.txt.15. U.S. Attorney’s Office (N.D. Cal.) Press

Release, Former McAfee General CounselIndicted for Stock Options Backdating (Feb. 27,2007), available at www.usdoj.gov/usao/can/press/2007/2007_02_27_roberts.indictment.

press.html.16. SEC v. Kent H. Roberts, Civil Action No.

1:07CV00407 (D.D.C. Feb. 28, 2007)(Complaint), available at http://www.sec.gov/lit-igation/complaints/2007/comp20020.pdf; see also SEC LitigationRelease No. 20020, SEC Charges FormerGeneral Counsel of McAfee, Inc. forFraudulently Re-Pricing Option Grants (Feb. 28,2007), available at http://www.sec/gov/litigation/litreleases/2007/lr20020.htm.17. SEC v. Jordan H. Mintz and Rex R.

Rogers, Civil Action No. 07-1027 (S.D. Tex.Mar. 28, 2007) (Complaint); see also SECLitigation Release No. 20058, SEC Charges TwoFormer Enron In-House Lawyers with SecuritiesFraud and Related Violations (Mar. 28, 2007),available at http://www.sec.gov/litigation/litreleases/2007/lr20058.htm.

BEST PRACTICES FOR GENERAL COUNSEL IN THE POST-ENRON AND SARBANES-OXLEY ERA(Continued from page 11)

E-DISCOVERY CASE LAW—SINCE THE NEW RULES(Continued from page 9)

IN-HOUSE TOP 10

By Theodore K. Whitfield Jr.The In-House Top 10 provides insightful comments from the ranks of in-house counsel put in DavidLettermanesque list form. This edition’s Top 10 comes from Theodore K. Whitfield Jr., vice president, generalcounsel, and secretary, Chattem, Inc.

Top 10 Tips for Managing a Small Legal Department

10. Understand the expertise and strengths of the various outside counsel firms and attorneys withwhom you work to ensure you have the right team in place for a specific matter.

9. Delegate appropriate matters to outside counsel so that your time can be effectively focused onissues that have a material impact on your company.

8. The demands of litigation can overwhelm a company. Make your outside counsel aware ofthe need for them to anticipate and manage these demands and to prevent litigation surpriseswhenever possible.

7. For quick and cost-effective response, insist that your outside counsel firm(s) provide you withseveral attorney contacts in multiple practice areas. If your primary contact person at your outsidecounsel firm does not trust other attorneys in his or her firm to have direct contact with you, thenyour trust in this firm might not be well placed.

6. Hire a well-trained, motivated, and capable administrative assistant or paralegal to keep thedepartment running smoothly.

5. Consider moving compliance functions outside the legal department to conserve the department’sresources, avoid conflicting roles, and preserve legal privileges.

4. To avoid receiving inconsistent information or directives, consider appointing a single point ofcontact on legal issues for each business unit or department.

3. Have regular and frequent status meetings with your company’s senior leadership.

2. Do not separate yourself from your company by thinking of the company as “the client.” Instead,think of yourself as a collaborative problem-solver for the company.

And the number one way to manage a small legal department:

1. Learn your company’s business from the ground up and choose outside counsel firms that arecommitted to understanding your company’s business with you.

If you are on the inside and would like to submit your own Top 10, please contact Christopher Akin, coeditor, at(214) 855-3081 or by email at [email protected]. Topics can be instructive, humorous, or anything of interest to thecommittee’s membership.

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