Oil prices are falling and deals are getting scrapped.  As was the case with the last several business cycles, litigation will undoubtedly ensue.  The old-timers refer to this as “drilling at the courthouse.”  Here are five tips for preparing for possible litigation:

  1. Issue a litigation hold for your documents and emails. Tell everyone in the company –either by email or hard copy document – to preserve and segregate their documents and emails pertaining to the dispute.  Even better, give them a list of key terms and people so that they are assured of complying.  Ask your IT department to affirmatively search for those terms and people in the systems.
  2. Consult outside counsel early, even if you don’t know that you’ll file suit or be sued. Starting early will give you more time to select appropriate counsel, plus give her or him time to prepare.  Consider whether your current counsel may or may not be appropriate for the situation at hand.  Factors that can impact your choice:  venue, legal substance, liability exposure, conflicts of counsel.
  3. Think about who will be a witness – on your side, from the outside, and from the opposing party. For those witnesses under your employment, or who are friendly to you, have counsel interview them to capture their basic memories of facts and their impression of the matters at issue.  An early assessment of whether you have good witnesses or not will be key to your determination of whether to bring, or how to defend, a lawsuit.
  4. Consider arbitration. Whether or not your agreement has an arbitration clause, consider whether it might help.  Arbitration is still far quicker than a court case, and all of those months and years spent slogging through court litigation take a toll – not only in outside counsel fees, but also on your company’s ability to tend to its regular business.  Plus, arbitration is confidential and court cases are not.  Consider entering into an agreement to arbitrate if you don’t have one.
  5. If the public will care about your dispute, think about what you’ll say publicly and how you’ll say it. Many cases don’t trigger public interest, but many do – because of who is involved, how much money is at stake, or because the facts are exciting.  If you’re a plaintiff, think about whether advance publicity will enhance your outcome (but always be mindful of your ethical duties, if you’re an oil and gas lawyer).  If you’re a defendant, you’d better have something more to say than “no comment” when the media call – and that call may come as soon as plaintiff’s counsel promotes the story or files the lawsuit.