Creating Powerful Litigation Complaints
By Thomas Reinke, Consultant, Advisory Services
The first formal step in litigation is drafting a persuasive and well-pleaded complaint. Poorly crafted complaints have a significant negative impact on litigation. They usually result in unnecessary and time-consuming amendments. If they omit a cause of action or factual allegations, they may result in limited discovery or omit significant damages.
Marcum’s litigation support professionals are seeing important, broad-based changes in the state of the art for complaints. These changes range from improvements in the form and content to a more intense focus on the causes of action, factual allegations, damages and resolution or outcomes. A well-crafted first complaint eliminates future amendments, establishes authority with judges, creates hurdles for the opposition, and serves as a roadmap to guide discovery and subsequent actions.
One longstanding limitation of complaints is that, because they are filed early in litigation, there is incomplete information about the matter. Complaints often are based on the litigant’s limited information, and potentially biased view of the economics and relative fault of the parties involved. That information often has a complex, clouded, and incomplete history. A closely related problem is in today’s complex and technical world, disputes arise over highly complex and technical issues. An example is the common failure of IT systems and networks to perform according to contractual specifications.
Another limitation of complaints is that the causes of action, and the nature and extent of damages is not accurately and completely identified and quantified in advance of filing. Complaints may miss the mark in terms of their accuracy and completeness in identifying a tortuous act, failure to perform a legal or contractual obligation, the applicable damage basis in the law, a breach of duty, or a violation or invasion of a trust. This may be due to incomplete information, an inaccurate analysis of available information, or an incomplete understanding of the nature of damages and their relationship to legal causes of action. These factors create a huge burden for attorneys who must develop an exacting and convincing case for damages or resolution that will overcome a countersuit or a motion for summary judgement.
Limited information is particularly relevant in contractual management services agreements, or agreements characterized by complex or technical services. An example is medical billing where billing is outsourced to an outside medical billing company. In technical and complex services attorneys may not fully understand the full and also subtle nature of breaches and exactly the performance terms, or events or failures that lead to the lawsuit. Failure to fully understand and describe the specific elements of what did or did not occur can lead to a misdirected focus on the nature and extent of damages and the cause of action.
Increasingly Marcum’s litigation experts are involved early on in litigation to provide technical analysis and advice on the facts that serve as the basis of litigation. By being involved earlier, they can better assist in drafting exacting or appropriately broad language to define the cause(s) of action as well as identify potential weaknesses in a client’s case to help remediate and strengthen the arguments being advanced.
Financial Analysis and Quantification of Damages
Marcum’s forensics accountants, financial and operating experts play a central role in helping attorneys understand the financial impact of a dispute or lawsuit. The financial basis and information required varies by the nature of the dispute. Common categories of business litigation include purchase, sale and merger transactions, management services agreements, and joint ventures. Each of these categories involves very diverse and complex business arrangements and contractual terms. Likewise, the underlying accounting principles and records vary dramatically. The financial analysis of a merger transaction is much different from that of a management services agreement. Moreover, given the rapid transformations across all types of business relationships financial analysis has become much more complex.
A forensic accountant, financial and operating experts can assist attorneys in the early stages of litigation:
- A brief consultation to review the nature, scope and merits of a financial and business valuation damages presented by a litigant.
- A review of the accuracy of financial statements tax returns, general ledgers, or other financial records. For example, understanding the applicable case decisions, in discussion with counsel, and a full review of the client’s initial understanding of damages. Understanding the overhead absorption or allocation, any saved costs, mitigation efforts impact on damage calculations as well as a host of other possible issues. While the drafting of the complaint is the main focus here, similar concept will apply to any defense of a claim in drafting objections and responses.
- Providing an accurate compilation and presentation of financial statements.
- Provide an authoritative analysis of lost profits or devaluation of a business.
- Assistance to attorneys in presenting the theory or nature of damages.
- Crafting properly worded factual allegations of the accounting or legal basis and scope of financial damages.
Industry-Specific Business Knowledge
An essential element in drafting a complaint is industry-specific knowledge. The entire business world is becoming much more complex and effective complaints must reflect a thorough understanding of the business environment surrounding a lawsuit. That understanding often includes industry regulations, best practices, state of the art systems, performance standards, operational procedures, and technical/scientific processes or procedures. Marcum’s professionals have expertise in many different industries and can assist attorneys in understanding the true nature, the full extent of an adverse event, and the potential outcome or resolution of a matter. This experience enables us to assist attorneys with complaints that properly explain how industry-specific factors contribute to factual allegations of damages.