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Doing the right thing does not supplant a commercial litigation defense

Business interactions can result in seemingly endless commercial litigation disputes. Read on to see why a proactive defense to such claims is imperative.

Although forming a start-up or small business may offer the chance for high profits, it may also mean exposure to legal liability. In that regard, there are a wide variety of business and commercial litigation claims that can be brought against a business entity.

When confronted with a commercial litigation claim,  a company may have concerns that mounting an aggressive legal team might harm its public image. Yet without the advocacy of an experienced attorney, a company’s perceived deep pockets might be taken advantage of, and liability for alleged breaches might not be clearly defined.

BP’s commercial litigation defense strategy

Unfortunately, oil and gas company BP p.l.c. is learning this lesson the hard way. In response to the 87-day oil spill into the Gulf of Mexico in April 2010, BP’s chief executive went on record as saying he wanted to do the right thing. The company put its money behind that statement by forming a $20 billion compensation fund. In today’s litigation era, it also did something shocking: It set up a compensation process that allowed claimants to present their claims without resorting to the court system. The process allowed even those claiming only economic harm to submit their claims. Before long, BP had paid out around $6.3 billion to 200,000 claimants.

Yet not every claimant wanted to avoid the courts. In just a few months’ time, BP was a named defendant in hundreds of cases across the country involving personal injury or economic damages claims. The United States Judicial Panel on Multidistrict Litigation consolidated those cases before a federal judge in Louisiana in August 2010.The presiding judge appointed 15-lawyer committee to oversee the cases, called the Plaintiffs’ Steering Committee for overseeing the cases. The medical portion of that class action culminated in a proposed $7.8 billion settlement.

Perhaps not surprisingly, BP’s litigation woes do not end there. The company also agreed to pay $4.5 billion to settle federal criminal charges brought by the U.S. Department of Justice. In addition, BP also faces billions of dollars in civil pollution fines under the Clean Water Act.

Only recently did BP adopt a more aggressive approach to its defense: It brought a lawsuit alleging that some members of the class action hadn’t been harmed by the spill, yet fraudulently presented claims. Some commentators believe the response may be too late, as BP already agreed to the settlement terms.

Lessons to be learned

Although this is an extreme example, practically any party that a business has dealings with may be a source of potential dispute — and legal problems. Vendors, subcontractors or customers may allege a breach of contract. Customers may also assert that a product was defective or dangerous. If a company has shareholders, it may also have to answer to breach of fiduciary duty claims. Disputes over lease terms, land use or zoning, or environmental issues may arise after a business has already started its operations. Business and trade secrets may have to be protected through non-compete covenants or trademark infringement litigation. With the help of an experienced commercial litigation attorney, such matters can be addressed promptly.

Keywords: business dispute, commercial litigation, liability, environmental impact, trade secrets, non-compete agreements