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February 15, 2017

Sample litigation statement of work: Early case assessment

By Mike Egnatchik, LegalBizDev, in collaboration with several clients

 

Hypothetical Facts

ClientCo acquired the assets of a company Carpart which manufactures high performance parts for cars. One product line was a battery that goes into fuel cells, which are sold and incorporated into engines of electric vehicles. The asset acquisition agreement (“agreement”) shows the acquisition was of assets only, and the liabilities were expressly not assumed. The agreement also contained representations and warranties that there were no warranty claims against the business. ClientCo paid $50,000,000 for Carpart’s assets, which has been distributed to Carpart’s shareholders.

After the sale, ClientCo also hired the bulk of Carpart’s employees. A customer of Carpart had been complaining to Carpart employees about failures in the fuel cells shortly before the sale. The employees continued to deal with Customer to help determine whether there was a defect in the batteries. Soon after the purchase, ClientCo discarded the battery business, preferring to focus on parts for gas and diesel engines. Nevertheless, some of the employees continued to work with Customer and discovered that the batteries were not compatible with the design of the fuel cells. The fuel cells are beginning to suffer catastrophic failures.

Customer has made warranty claims against Carpart and ClientCo. ClientCo never sold any of these batteries after acquiring the assets of the company. However, Customer had previously sold over 20,000 fuel cells to an electric car company, GreenCar, which installed the fuel cells in all of its 2010 models. When advised of the problem, GreenCar had already produced and sold 20,000 cars. The cost to recall vehicles and install a new fuel cell is $5,000 per vehicle.

 

Legal action

A complaint has been filed by GreenCar against Customer, ClientCo, and Carpart. The lawsuit seeks: (i) direct and consequential damages; and (ii) indemnity from car owner complaints.

ClientCo has asked you for a proposal to undertake this entire representation on a fixed fee basis to defeat all claims. All parties will file cross-claims against each other. While there are many different cross-claims, they will all be adjudicated in one proceeding.

You have explained to ClientCo that it is not possible to provide a meaningfully accurate fixed fee for the entire case at this time, but you have agreed on a fixed fee to perform an early case assessment.

 

Statement of work for early case assessment

In the early case assessment, we will prepare a written report to ClientCo covering:

  • Determination whether the case has merit
  • A cost/benefit analysis of possible legal strategies with likelihood of success for each
  • Cost estimates for recommended options and other phases of the case including:
    • Pleadings and motions
    • Court-mandated conferences
    • Discovery
    • Settlement/ADR options
    • Summary judgment
    • Trial
    • Post-trial motions

This statement of work will include fact investigation and development, review of key transactional documents, interview of key players, legal research regarding potential liability of all parties, initial review of warranty, and contract issues.

This phase will conclude with one or more meetings with ClientCo to review findings and recommended options contained in the report and decide on next steps.

 

Assumptions and exclusions

  • The representation will be limited to the complaint filed by GreenCar and related cross-claims of all parties
  • Specifically excluded are litigation holds for evidence preservation and insurance investigation and tender, which have already been performed
  • No more than 10 hours of interview will be required with key players
  • No more than 20 hours of legal research will be required
  • ClientCo will provide individuals with expertise who will orally summarize technical fact

 

Reproduced with permission. This post was adapted from the recently published fourth edition of The Legal Project Management Quick Reference Guide.

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