Heritage Propane Partners, Tulsa,
OK
Heritage Propane Partners, based
in Tulsa, OK, sued SCANA, South Carolina’s largest utility company, in 2003,
over a contract dispute arising over the bidding process and ultimate sale of
SCANA’s propane businesses. DETAILS >
| How to get sued without really trying or
The Seven
Deadly Sins of Business Transactions
By
Ken Suggs, 2005-2006 President, Association of Trial Lawyers of America (ATLA)
As
a trial lawyer who represents companies suing other companies, I have made it
a critical part of my business to understand how juries deal with complex business
transactions. My experience, supported by jury research, shows that while jurors
may understand black-and-white issues, they deliberate in living color.
- What matters least to jurors, as these cases play out
on the courtroom stage, is the plot, as scripted by counsel for each side.
- What
matters most to jurors is the nature and behavior of the characters involved,
as the story emerges.
- Jurors have an unerring eye
for motivation, greed, honesty, common sense, betrayal, valor, courage and common
courtesy.
- They will side with the “good guys”
every time.
To illustrate these points, I use
examples from a case I handled in 2004 for Heritage Propane Partners, now known
as Energy Transfer Partners, of Tulsa, against SCANA, the public utility of South
Carolina. Interestingly, the case involved a dispute over a contract that was
never even signed. (For information about the Heritage case link here). Heritage
sued for fraud and misappropriation, and won a $48 million verdict, including
$___ in punitive damages. This case might never have gone to court—and certainly
would not have yielded the huge punitive award—except for the following
transgressions committed by SCANA:
TOP 1)
Changing the Rules in the Middle of the Game
It’s simple playground etiquette: SCANA set the rules for the bid process.
Heritage followed the rules. SCANA then allowed into the process another bidder
who didn’t have to follow the same rules. Clearly, juries hold businesses
accountable for following rules, especially rules that they, themselves, set up.
2)
Touting Company Values, and Then Acting Differently
What a company says about itself matters. SCANA’s website included a Code
of Conduct, one tenet of which stated, “It’s simple, just do what
your parents’ taught you.” My cross-examination of a SCANA executive
went like this: “You ask a girl to the prom, and you know she’s really
looking forward to it. Then, unexpectedly, the best-looking girl in class asks
you to the prom. You can’t be sure that the second girl won’t back
out at the last minute, so you decide you’re going to keep both dates: First,
you’ll go to pick up the good-looking girl, and if she isn’t there,
then you’ll take the other girl to the prom.
Great plan, right? But,
when you go home and tell your Dad about your plan, what do you think he’ll
say?” From the looks on the jurors’ faces, I made my point. The moral
of the story is, if you put that stuff on your website or in your publications,
you have to live by it. People—including juries—will hold you to those
standards.
3)
Manipulating and Concealing Information
Twice,
SCANA rescheduled the sale’s closing date, denying any problems. SCANA received
the second bid at 5 p.m. on the Friday before the scheduled signing with Heritage
on the following Monday. Not only did they conceal this from my client, but they
also concealed it from Corky Clark, who was president of the companies that were
for sale and the main negotiator for Heritage. E-mails flew all weekend, as Heritage’s
information was sent to the other bidder. Some documents had “Heritage”
scratched out and the new bidder’s name written in. All of this came out
in trial, of course. In this day, when information is transmitted, stored, filed
and copied with the touch of a button, there is no way to eliminate a paper trail.
TOP 4)
Making Money the Motive
As a sale criterion,
SCANA had stipulated that it would only sell to a company that did not compete
in its market, and that had a reputation for retaining employees and treating
them well. The new, winning bidder already was in many South Carolina markets;
in fact, at the time of the sale, the winning bidder faced potential anti-trust
problems and had a self-acknowledged reputation for losing employees. When the
suitor doesn’t fit, the more criteria you choose, the worse it looks—especially
if the obvious motive is money.
5)
Slanting the Process, so it Screams “Unfair!”
SCANA’s confidentiality agreement and memoranda were worded to give the
utility the right to change procedures anytime, to deal with anyone, and to absolve
SCANA from responsibility for giving false information. My client signed it, but
that fact didn’t faze the jury. Jurors find it much easier to hold a company
to a document that seems fair than to one that seems totally one-sided.
6)
Adding Insult to Injury
I don’t think
my clients would have thought about suing if they hadn’t been forced to
cool their heels in SCANA’s lawyers’ office for nearly ten hours before
being told about the sale to another buyer. They were angrier about this experience
than they were about anything else, and the jury obviously agreed. You don’t
spit in the other guy’s dugout, especially after you win.
7)
Forgetting About the Covenant of Good Faith and Fair Dealing
In every jurisdiction, contract law contains an implied clause that every contract
process is entered into in good faith. Juries rule on this point all the time:
In business, not everything goes. The
bottom line: My client never signed a formal contract with SCANA to buy
the propane companies, but that fact didn’t matter to the jury. In the end,
what mattered to those who sat in judgment were fair play and common courtesy.
And that’s how smart businesses avoid lawsuits every day.
Ken Suggs
lives in Columbia, SC, where he heads the South Carolina office of Janet, Jenner
& Suggs, LLC, of Baltimore, MD, a national litigation firm. ATLA is the largest
trial bar in the world, with 60,000 members. TOP |
