A better way of nipping business legal disputes in the bud: Cut the crap and just exchange the relevant information

A few years back, mentioned a few minutes ago, the CEO of Blue Jeans Cable, a former litigator, responded pretty forcefully to a cease and desist letter from Monster Cable, alleging various forms of infringement. One of the things I liked about the Blue Jeans response was its detailed requests for additional information; the Blue Jeans Cable CEO said, “If you expect to persuade me, you had better start making full, open and honest disclosures; I will find out the facts sooner or later in any event ….” (Emphasis added; hat tip Jeff Nolan at Venture Chronicles.)

Lawsuit discovery games can be a huge waste of time and money

The Blue Jeans Cable approach recognizes one of the expensive realities of U.S. litigation, which is the American legal system’s premise that “the law is entitled to every man’s evidence.” The discovery rules allow adversaries’ lawyers to demand copies of each others’ relevant documents — with “relevance” being largely in the eyes of the requesting lawyers, at least to begin with — and to interview potential witnesses in depositions. Not wanting to be accused later of having overlooked something important, litigation counsel are likely to err on the side of demanding more documents and more depositions. That, though, may well trigger a screeching match discovery dispute over the legitimacy of the document request. Worse, discovery disputes can get in the way of the parties’ coming to a sensible business resolution to the dispute. The parties and their lawyers get ticked off: at each other, and about the money they’re spending on legal fees. As a result, they can sometimes have their judgment clouded about the true legal merits of their positions.

Just turn over the information (under NDA, of course)

In commercial litigation, it often makes sense for both sides to just cut the crap and exchange documents under a nondisclosure agreement, even before a lawsuit is filed. This lets the lawyers and management evaluate the case in a less stressful environment. It also improves the chances of coming to an agreeable settlement (not just a nuisance settlement) before the parties’ backs have stiffened.

When I was a software-company general counsel, I used this basic approach in quite a few disputes. It didn’t matter whether we were the potential defendant or the potential plaintiff: If preliminary due diligence suggested that the other side and its lawyers could be trusted to honor a nondisclosure agreement, I’d tell them something more or less like this:

• If our company is in the wrong, we want to know it early.
• We hope the same is true for you.
• If litigation were to come to pass, we’d each get the information we wanted during the discovery process anyway.
• So let’s put a nondisclosure agreement in place, and we’ll give your lawyer whatever s/he wants to look at that we can conveniently collect, as long as you agree to do the same for us.
• And then let’s talk, before we’ve both spent a ton of money on legal fees.

That approach generally worked out pretty well.