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Greater Baton Rouge Business Report
Strange bedfellows - Companies embrace old foes in pursuit of affordable litigation.

By Steve Clark, Business Report staff

Not so long ago, a corporate CEO would cross to the other side of the street to avoid saying "hello" to a trial lawyer: Trial lawyers brought lawsuits. They were the enemy.

That relationship is morphing to some degree, as large and small firms--desperate to control costs--have concluded it's to their advantage to hire trial lawyers on a contingency-fee basis to bring litigation against other businesses.

Contingency means if the trial attorney you've hired to sue somebody loses, you don't have to pay, unlike the traditional firm that charges by the billable hour.

For smaller companies with a beef against a much larger organization, say a breach-of-contract dispute with a Fortune 500 company, hiring a high-end plaintiffs' lawyer on a contingency-fee basis can mean the difference between getting satisfaction and simply having to write the experience off as the cost of doing business.

Pursuing litigation against a deep-pocketed corporate giant can be prohibitively expensive for companies whose only option is to hire a full-service law firm that charges by the billable hour, says J.E. Cullens, a plaintiff's attorney in commercial litigation with Moore, Walters, Thompson, Thomas, Papillion & Cullens.

Cullens, a defense lawyer in New Orleans before switching sides and moving to Baton Rouge six years ago, says CEOs are realizing that by hiring somebody like him, they can go after a large corporation and have a good chance of getting results without having to pay massive legal bills.

Basic arithmetic is challenging the stigma of companies doing business with trial attorneys, he says, though he concedes the phenomenon isn't as common here as in other parts of the country.

Still, it is happening, and it has allowed Cullens to carve out a commercial litigation niche within a firm whose major focus was personal injury lawsuits. An advantage of the contingency approach with regard to his clients is if he loses the case the client isn't out much if anything.

If Cullens wins he'll get a handsome percentage, perhaps 20% in very large verdicts, the smaller the award, the higher the percentage. And the client will also have every reason to be pleased, since commercial litigation cases typically have verdicts and settlements in the tens of millions of dollars.

"Our fates are tied together," Cullens says.

Phillip Preis, of Preis, Gordon & Griffin, spent 20 years as a defense lawyer representing big insurance companies before switching sides in 1996. He saw a need for business lawyers to do contingency work plus he was tired of defending insurance companies.

Suing on contingency against a commercial interest over an alleged fiduciary wrong--especially when great sums of money are involved--tends to be more exhilarating than a typical personal injury case. While insurers are used to paying out settlements in personal injury cases, business-to-business disputes over millions of dollars is "a fight from the start," he says.

"The highs and lows are lot more dramatic," Preis adds. "It's not boring."

Unlike personal injury cases, which normally limit the damages a plaintiff can receive, creatively crafting the damage model can result in very large judgments in commercial litigation, he says. When that damage model is creative enough and the defendant realizes his business could be in serious trouble if he goes to court and loses, settlements are usually forthcoming, Preis maintains.

What is the incentive that's convincing trial lawyers and CEOs to share the same side of the street? Besides the attractiveness of the contingency-fee arrangement to businesses, tort reform is a driving factor--more specifically, it's impact on trial attorneys. The fact that tort reform places limits on things like medical malpractice awards has driven some plaintiff's attorneys to commercial litigation, where the judgments can be quite large.

According to Cullens, while Louisiana has had malpractice caps since the mid-'70s, other kinds of tort reform under former governor Mike Foster has had the same effect locally. "It's driving high-end plaintiffs' attorneys to look at areas they wouldn't have traditionally looked at and try to market themselves into this area," he says.

Jerry McKernan, a plaintiffs' attorney for 40 years, ventured into commercial litigation at the request of clients and found he liked it. No wonder: McKernan says he just won a $116 million contingency case involving fraud and deception against stockholders, a multi-state case in which Cullens was also involved. It was hugely labor intensive, however, which is why he doesn't think a broad movement of plaintiffs' lawyers into commercial litigation will take place: It's simply too much to handle for many of them, McKernan says.

"You're dealing with a lot of paper," he says. "You're dealing with big numbers."

Still, it's an innovative legal solution for businesses that will only increase, he says.

"I think you're going to see more of it as corporations find out that plaintiffs' lawyers are not demons," McKernan says. "We're not bad guys, and we're just doing our job."

Gary Bezet, a managing partner with Kean Miller Hawthorne D'Armond McCowan & Jarman, says companies hiring trial lawyers to pursue commercial litigation would, by definition, take business away from traditional defense firms like Kean Miller. At the same time, Bezet says he's not seeing much of it here and doesn't expect it to become a significant trend in Louisiana.

Commercial litigants are better served by full-service firms due to the complexity of such cases, though Bezet says he understands what pushes companies to go the contingency-fee route: rising legal costs colliding with corporate budget anxiety.

While some trial lawyers may be capitalizing on that anxiety, the pressure is being felt by traditional defense law firms to the point that they're exploring alternatives to the billable hour structure to meet the needs of companies desperately seeking predictability in what they pay their lawyers.

Traditional litigation is anything but predictable, Bezet points out, noting cases can be settled in 10 days or drag on for 10 years.

"There is tremendous pressure on corporations to control costs of litigation," he says. "They are seeking alternative billing practices, like fixed fees for defense, reduced fees, blended rates--all in an effort to control the cost of litigation. That is a trend that I think is here and I think will only increase."