Risk Analysis and Litigation Avoidance
An employee health insurance plan was plagued with problems, including embezzlement of premiums, deviations in the plan design from the structure and coverage requested, excessive fees and commissions, and careless administration of claims. The plan failed, and multiple claims and suits were made by state insurance regulators, and by plan participants, individually and in class actions, nationwide. We led the investigation into the causes of the failure, and made appropriate claims against those responsible. We coordinated the resolution of outstanding claims of plan participants, resolved the issues raised by various state departments of insurance, located and involved applicable liability insurance protection, and negotiated appropriate settlements to resolve the claims with contribution from multiple parties and entities. We obtained a substantial judgment against the embezzler, and located appropriate counsel to pursue collection of that judgment.
A major component assembly supplier to the automotive industry was unhappy with the quality and the cost of sub-assemblies it was receiving from its vendors under “requirements” contracts. We were asked to evaluate the sub-assembly “requirements” contracts to help the supplier formulate a strategy to deal with the problem that was least likely to result in costly litigation. We provided a blueprint of the requirements for the termination of the contract without liability, and helped our client meet the procedural requirements, and document those facts and findings that would be important in establishing that the contract termination requirements had been met. Our pre-suit contract analysis and experience in the documentation of facts for litigation purposes allowed our client to present a sufficiently compelling case that the contract had been properly terminated, and the potential costly litigation was avoided.
Business Litigation
A national restaurant chain entered into a contract with a major brand soft drink supplier to purchase its “requirements” from that supplier, in return for the supplier’s promise to provide sophisticated marketing services specifically designed for the restaurant chain. The restaurant chain felt that the marketing proposals offered were generic and inappropriate, and sought to terminate the contract. We filed a claim on behalf of the restaurant chain in federal court for breach of the marketing contract, and challenged the sufficiency of the contract language to require the exclusive sale of the soft drink manufacturer’s products. As a result of the litigation, a negotiated settlement terminated the contract on the first day of trial, and our client entered into a far more appropriate and lucrative contract with a competitor of the supplier.
A lawyer developed a medical condition which made it impossible for her to continue to work because of frequent, disabling occurrences, even though she was able to function normally between episodes. She was determined to be totally disabled by the Social Security Administration, and by her long-term disability insurance carrier. Ten years later, the insurance company launched a campaign to seek to remove individuals collecting benefits from the company’s disability roles, and unilaterally terminated her benefits, even though there had been no evidence of a change of condition, and all of her treating physicians continued to maintain that she was totally disabled. We filed suit on her behalf, and negotiated a settlement for a favorable, lump-sum buyout of her disability policy.
An emergency room doctor at a Level 1 trauma center developed a debilitating heart condition which severely limited his endurance. He could not physically tolerate an emergency room practice, where the type and the duration of the medical emergencies were out of his control. He could continue to practice medicine on a full-time basis, but he was forced to abandon his area of specialty and experience, resulting in a dramatically-reduced income. We persuaded the disability insurance carrier, which initially denied his claim, that its policy’s definition of partial disability encompassed a professional who was able to continue to work full time, but only under modified work conditions which resulted in substantial income reduction.
An independent contractor working as a sales company on a commission basis sold computer systems and software programs to school districts. The process required substantial product knowledge, understanding of the public procurement systems and procedures, and a great deal of salesmanship and persistence. Contracts could be for high six-figure and seven-figure totals, and the sales process would typically take many months. The sales company was “too successful,” and the software vendor attempted to avoid the commissions by terminating the sales company just before contracts were signed and/or approved, substituting in-house personnel to conclude the transactions. The written contract did not permit the avoidance of the commission obligation under those circumstances, and Indiana employment statutes imposed potentially-significant penalties for the defendant’s conduct. We were able to obtain full payment of the commission obligation for the sales company.
A large turbine generator at an electrical power plant had internal blades spinning at 3600 revolutions per minute through clearances of fractions of an inch. Balancing the rotors properly was critical, or vibrations could occur which would quickly result in catastrophic failure. When a major electrical utility’s turbine generator crashed, we litigated its claim against the entity whose maintenance error resulted in that failure. While opening statements at trial are normally 10-15 minute short summaries of the anticipated evidence, we asked the court to permit an hour and a half for our opening statement, because we believed that we needed to explain the technology to the jury before the evidence began, for them to understand and follow the technical issues relating to the cause of the crash. The opening statement was persuasive enough to the defendant’s representatives attending the trial that the case was settled following opening statements and before any witnesses testified.
We have two clients who specialize in helping companies identify and implement different strategies for minimizing sales, use, and/or inventory taxes. They provide their services on a contingent fee basis, where they are paid a percentage of the tax refunds they obtain, and the reductions in tax liability they are able to generate over a two-year period, by their recommendations. Because modifications in operational strategies affecting tax have potential consequences beyond the tax savings, it is necessary for them to provide their clients with detailed information concerning how the tax savings are to be obtained, after their client executes an appropriate agreement to pay the contingent fee if the proposed strategies are implemented and result in the promised tax savings. Both clients experienced occasional problems with clients who received the consulting services, implemented them on their own, and refused to pay the fee, alleging loopholes in the agreements for compensation, or asserting that the proposed new tax strategies were “obvious,” despite of the fact that they had not been recognized or implemented before. Ironically, the more successful the proposed tax strategies proved to be in generating large tax savings, the more reluctant some companies were to pay the contingent fee for their generation. We were able to resolve the unpaid tax consulting fees issued, and we were able to recommend modifications to the engagement letter our clients had drafted which eliminated ambiguities and loopholes.
Commercial Real Estate Litigation
A landmark Indianapolis commercial real estate property experienced short-term financial issues, largely as a result of 9/11. “Angel investors” were brought in to get past the business turndown, for which those investors received a healthy premium. But when the business had recovered financially, and the angel investors had been repaid, a dispute arose concerning the extent to which the angel investors would be entitled to additional and ongoing payments. We brought an arbitration proceeding on behalf of the general partner, challenging the angel investor group’s interpretation of the ongoing obligations under the agreement. The arbitration proceeding was resolved by a restructuring of the relationships among the angel investors, the general partner, and the original group of limited partners, which benefited all three groups. The angel investors received an appropriate return on their investment and the termination of the litigation. The general partner regained control over the business and much greater flexibility in future financing and potential sale of the property, and the original limited partners regained the opportunity for additional appreciation of their original investment, which they thought had been lost permanently when the angel investors were originally necessary.
A real estate investment trust specializing in medical properties owned a number of licensed, specialized health care facilities. These facilities were partially protected from competition by state regulations which limited the number of such entities that would be allowed to provide services to Medicaid patients. The real estate investment trust leased the operation of its facilities to licensed operators, under contracts intended to protect the facility’s valuable government certifications. A group of the operators reached agreements with the State to de-certify our client’s properties, and effectively transfer the economic value of Medicaid certification to new facilities owned or controlled by those operators. We filed suit in federal court to obtain damages for the lost certification rights. The multi-issue, multi-state, and multi-party litigation resulted in a satisfactory settlement with respect to multiple facilities, and is ongoing with respect to others.
Shareholder Disputes
The minority shareholder in a two-shareholder business enterprise had received a 10% ownership interest in the company, in return for agreeing to take over as the chief operating officer of a stagnating direct-sales business. Over a period of years, he transformed the company into a highly-successful finance company for its modest sales business, and for similar direct-sales businesses, increasing the company’s earnings and value dramatically. But when the majority owner reached retirement age, he terminated the minority owner and tried to invoke a buy-sell agreement right to buy out the minority interest at a “book value” price, which was only a fraction of the fair market value of the proportionate interest in the business. We filed suit on behalf of the minority shareholder, which was ultimately decided by the Indiana Court of Appeals. The Indiana Court or Appeals agreed with our interpretation that the language utilized in the buy-sell agreement required a market value analysis, and that compound interest, not simple interest, was to be added to the unpaid portion of the buyout. Our client was able to realize the benefit of the increased value of the business generated by his efforts, which was a significant sum.
A law firm partnership dissolved, shortly before the successful termination of a very substantial contingent fee matter. The written partnership agreement did not deal with accounting for contingent fee work in progress upon partnership dissolution. The dispute over the accounting went to trial, and was appealed, because it was one of the first cases to deal with the obligations of partners upon dissolution in the context of law firm contingent fees. Our client’s position was successful at trial and on appeal, and the decision remains one of the landmark cases defining the application of partnership law to law firm dissolutions.
Federal Litigation
A co-op sponsored an ERISA self-insured health insurance plan designed to cover the employees of the cooperative’s member companies. Within two years, the plan was insolvent and numerous employee claims could only be paid by special assessments of the members. On behalf of the co-op, we filed suit against the plan designer and the plan administrator. The federal court jury found that the plan had been badly designed, and that material information concerning the plan had been concealed from the co-op. Had that information been revealed, the co-op would not have agreed to sponsor the plan, and other arrangements for the member companies’ employees’ coverage could have been obtained. The jury also found that the administrator had failed to make timely and accurate reports to the co-op of the plan’s financial condition, resulting in severe under-reporting of the amount of outstanding and unpaid claims. This failure prevented the co-op from identifying the plan’s structural flaws, and taking timely action to minimize plan losses. The jury awarded the co-op a significant sum to recoup those losses.
Appeals Practice
A private water utility had been a wholesale customer of a rural water company. When the water company raised its rates precipitously, the private water company decided to build a small reservoir and furnish much of its own water for distribution to its customers, to cut back on its purchase of wholesale water at the inflated rate. The rural water company sought to enjoin the private utility from producing its own water supply, relying upon a federal statute which protected rural water companies from competition while they were recipients of outstanding federal loans. After the Federal District Court enjoined the private water company’s development of its own water supply, we were successful in reversing that ruling on appeal to the 7th Circuit, and our client was able to develop its own water supply and reduce the rates charged to its customers.
