What is “Bet-The-Company” Litigation?

For many businesses, minor (and even some major) commercial lawsuits are often handled without any severe impact on the company’s model and ability to succeed. However, some lawsuits threaten a company’s ability to survive altogether, and in some cases, even a verdict in favor of the company can cause irreparable damage to the company’s structure and reputation.

These cases, known as “bet-the-company” litigation, are amongst one of the most feared forms of high stakes litigation for any business owner. Bet-the-company litigation can drastically impact a business’ ability to perform (such as cutting off an essential supplier or partner), or yield a judgment so large that a business simply cannot afford to pay it off.

In instances where your company is faced with this form of high-stakes litigation, Wagstaff & Cartmell is here to help. With our experience in handling (and succeeding in) bet-the-company litigation on behalf of our clients, you can rest easy knowing that your company (and its future) is in expert hands.

Examples of Bet-The-Company Litigation

As complex as a bet-the-company lawsuit might be, there are several examples of bet-the-company litigation that can be cited in order to understand what might constitute as this type of lawsuit.

Typically, these lawsuits arise when the financial or practical operations of a company are threatened by an individual or a business partner, or a set of circumstances arises which disrupts the harmony of a business to a degree that it cannot be ignored. These include:

• Minority Shareholder Litigation – The results of this type of litigation can be incredibly destructive to a company, particularly newer companies who may rely heavily on shareholders to fund their ventures. If ruled in favor of the shareholders, parts (or even the entirety) of the company may be sold off.
  
• Trade Secret Litigation – If a company is threatened by a former employee who has left and taken a valuable trade secret with them, any lawsuit following this revelation can be considered as a bet-the-company lawsuit due to the fact that this former employee can disclose invaluable information to competitors if the suit is ruled in their favor.
  
• Intellectual Property Litigation – If a company is told they cannot use a form of intellectual property that is vital to their success, it can severely affect their ability to function and/or succeed in the future.
  
• Joint-Venture Litigation – If a business enters a partnership with another party who, for a number of reasons, decides they no longer wish to pursue a partnership, litigation to dissolve or otherwise reframe the context of their relationship can quickly become overwhelming depending on how much the business depends on this partnership for its survival.

What Happens During Bet-the-Company Litigation?

Bet-the-company cases create unique challenges. Counsel inside and outside the company must respond to several alarmed constituencies, including insiders (management, the board, employees, shareholders, investors); outsiders (customers, vendors, lenders, insurers), and regulatory authorities (to name only a few: SEC, FTC, FDA, EPA, and DOJ and their international counterparts). Counsel must conduct every aspect of the litigation with the needs and desires of these sometimes conflicting constituencies constantly in mind. 

The company may face multiple investigations: congressional, criminal, regulatory, as well as special quasi-governmental commissions and internal investigations conducted by the company itself or by other parties. Counsel must deal with these investigations understanding that decisions made early on can have an enormous impact on the outcomes of investigations, subsequent litigation, and on the ultimate resolution.  

Litigation may erupt in multiple jurisdictions (federal, state, international) and in multiple forms (criminal, civil, administrative, arbitral). The company may face multiple litigation adversaries, including the United States Department of Justice, State Attorneys General, regulatory counsel, and private counsel for adverse parties. Parties aligned with the company will have their own counsel, constituencies and agendas.

The formal and informal coordination of all these proceedings and parties will impact the duration, cost and course of the litigation. The reputation of the company’s lead counsel – in part pre-existing and in part earned over the course of the litigation – will be critical in dealing with all these tribunals, parties, and attorneys. 

How a Skilled Bet-the-Company Legal Team Can Help

Bet-the-company cases require an ability not only to navigate in these different environments but also to see how the moving parts fit together. That, in turn, is the key to a more important ability: to work out, with the client, a plan – a plan that will be constantly adjusted – to get from the chaotic beginning to a satisfactory resolution.

If you are in the midst of a bet-the-company case, Wagstaff & Cartmell are here to help. Contact us today to discuss your case.