How Food Companies Can Reduce Legal Costs, Food Manufacturing

1. Ronald J. Levine
Co-Chair of the
Litigation
Department at
Herrick, Feinstein
LLP
Patrick Johnson
Operations
A recall or private consumer action
isn’t something that happens to
another organization. As recent news
stories have shown, any food
company can be subject to liability
for adulterated or contaminated
products, or claims of false labeling,
and cost millions of dollars to
resolve. Companies are no longer
wondering “if” they are going to be
sued — they are anticipating “when”
the next lawsuit will target them.
As a result, the food industry has a
commonly held belief that outside
legal costs are merely “a cost of
doing business” and are an expense
that cannot be reduced. With the
financial crisis, and subsequent belt-

2. Associate in the
Litigation
Department at
Herrick, Feinstein
LLP
tightening, companies face additional
pressures to cut costs in all litigation
matters, including those involving
outside counsel.
However, when companies leverage
outside counsel effectively, they can drive cost-savings
in the face of (often very expensive) investigations and
litigations. Instead of looking at outside counsel only for
emergencies, food companies should look at them as a
resource who can provide counsel on preventative
measures and steps to control or reduce costs that will
pay off if and when a recall or other products liability
litigation occurs.
Be Prepared with a Quarterback Ready to Jump
Into Action
In the event of an investigation or litigation, it is
essential to coordinate communication across the
company. As part of a crisis management plan, food
companies should have the following information at
their fingertips: information for key internal players as
well as regulatory contacts (for both state and federal
government), a system to retain relevant documents,
adequate and up-to-date insurance coverage, a public
relations plan for key stakeholders and contact
information and CVs for crisis consultants who may be
retained.
An essential part of a company’s plan must be an
attorney at the outside counsel firm who will serve as
quarterback. He or she is the leader of the outside team
of lawyers, puts the crisis management plan into action
and coordinates the other consultants. The quarterback
must be entrusted to make sure any investigation or
litigation is defended smoothly and efficiently. Undue
confusion or mixed signals can be costly and result in
adverse consequences.
Actively Coordinate with Outside Counsel

3. Going into a potential litigation, food companies will
always look at the liability in two ways: possibly
achieving settlement on favorable terms; and if the
case is not going to settle, a successful defense at trial.
The quarterback can provide great value here by
estimating the settlement and trial values of the claims.
Knowing up front how much a litigation will cost, and
the likelihood of success, will shape the entire approach
to a litigation and will allow for management of both
cost and expectations.
Know Your Plans as You Head Into Battle
Civil litigations move through phases — they generally
include a fact-finding (discovery) period, as well as
motion practice before the judge challenging the
underlying legal theories. The quarterback must have
an advance discovery plan and a motion practice plan.
A professional sports team would never go into a game
without plans, and neither should a food companies.
They will never be positive what is going to happen, but
all eventualities need to be mapped out. The discovery
plan should have procedures in place to retain required
records, and food companies should be prepared to
document every step taken during a recall or products
liability claim. These records will likely be discoverable,
and failure to properly maintain and retain these
records could be extremely costly.
Moreover, any company that has faced serious litigation
knows that modern electronic discovery can be costly.
Gathering and reviewing the massive volume of emails
and other electronic data has become a huge expense
in litigation. Know the options: opposing counsel will
often stipulate to limited discovery, or courts may limit
the scope of discovery. Don’t let discovery be a black
hole where tens of thousands of dollars are lost: create
a detailed plan and stick to it.
The quarterback should also be prepared for motion
practice. Be wary of outside counsel who want to make

4. early motions simply because that’s what is expected.
Prod your counsel to explain the pros and cons of such
a motion, including the odds of success versus showing
your hand or receiving an early adverse decision. A loss
on a motion challenging the pleadings — while not on
the merits — can be twisted by the press into a finding
that the company’s products are dangerous, or the
company engaged in fraud. Unless the odds of obtaining
a favorable result are good, litigation resources may be
best allocated elsewhere.
Be Aware of Alternatives
It should be a big red flag if the outside counsel zeroes
in on litigation to the exclusion of other, cheaper
alternatives. The quarterback should explain all of the
options, including alternative dispute resolution through
arbitration or mediation, and a traditional settlement.
Keep in mind that litigating versus settling a claim is a
business decision first and foremost — make sure that
the outside counsel understands that as well.
Save Money through Staffing
Food companies should not allow themselves to become
a cash cow for their outside counsel firm. They should
push their outside counsel to be as efficient as possible
when staffing matters: use junior attorneys where
appropriate, staff the same attorneys for all matters,
use paralegals when possible, and keep projects in-
house whenever possible. Put simply, ensure that the
outside counsel is utilizing resources efficiently and
effectively — food companies should not have to pay to
train junior associates.
Look for Efficiencies
When facing litigation across several states, each firm
should not be independently conducting discovery and
investigating sources of liability. Instead, efforts should
be coordinated: the quarterback should provide each

5. firm with a template approach to discovery and allow
each firm to adapt the template to their state’s legal
nuances. This will not only save time and money, but it
will promote a unified, efficient approach to any
litigations in multiple states.
Cut Deals with Outside Vendors
One avenue for cost savings is for food companies to
cut deals with outside vendors such as court reporters,
electronic discovery firms and photocopiers. By
agreeing that outside counsel will exclusively use a
vendor when working with a company, vendors will
often give a discount on their services. Similarly, many
firms have cut these types of deals with vendors — if a
company’s outside counsel has made such a deal,
ensure that the cost-savings get passed along.
Review Your Bills
Request monthly billing statements from the outside
counsel and review them closely. Do not be afraid to
press outside counsel to explain charges or staffing
decisions. Certainly do not accept an invoice “for
services rendered” that has not been itemized. Instead,
require that outside counsel submit bills that adequately
describe what was performed, and how long it took.
Welcome Outside Counsel to Come Inside
With ever tighter budgets, in-house legal departments
are being asked to trim costs in creative ways. One
such way is to ask the outside counsel to “second”
attorneys in the in-house department. Here, the outside
counsel sends an attorney to work for the company,
with the outside counsel absorbing some of the cost of
this trade.
This practice is a win-win for outside and in-house
counsel. It helps develop valuable relationships with the
outside counsel, and helps outside counsel better

6. understand the company’s needs. When the “seconded”
attorney leaves the department, he or she will be well-
equipped to provide the company with efficient,
effective services going forward.
Take a Moment to Reflect
After the dust has settled, be prepared to conduct a
thorough review with in-house counsel. Determine what
worked and where you and the outside counsel can
improve. Performing this type of evaluation is
invaluable: it will help you respond more efficiently to
future claims, which will lead to more effective and
cost-effective results in the future.
Conclusion
Outside counsel can be a valuable resource to save
money in the long run. Talk to the outside counsel
about the company’s preparedness, and work with
outside counsel to craft an effective litigation strategy.
Leveraging outside counsel in this way not only saves
dollars in the event of a litigation, but also helps the
outside counsel build its relationship and solidifies its
role with the company.
Operations