Rethinking Litigation Policy
In good times, the old saw “go along to get along” is often the recommended rule, and companies avoid litigation and the courthouse at all costs. The good times are gone, and as we sink further into the dysfunction of the economy, it is time to reconsider anti-litigation policies.
In the context of upstream exploration efforts, the oil or mining company is often tarred with the brush of the oppressive bad actor, no matter the facts, and fair hearings are rare indeed. In such cases, a policy of avoiding litigation has merit, not only from the impaired ability to mitigate risk in the courtroom, but also from the business standpoint of not wanting to scare away business (leases) or attract extra environmental or other regulatory scrutiny by making a fuss at the courthouse.
In the current and coming environment, however, new development activity has given way to holding on to what you’ve got, and being properly paid for the value you’ve created. The business problems have changed, therefore a rethink of the legal tools available to meet these changed business circumstances is warranted.
Somewhere between good neighborly cooperation, and being a victim of fraud or out and out thievery, there is a line that anybody (individual, business, government agency) must draw, lest they be looted and picked clean. As more and more people (whether individuals or business bodies corporate) become stressed in the deepening economic contraction, more and more people will be moving their line further toward self-protection and self-preservation. In the extreme cases it will be a fight for survival, and there are no “good neighbors” when survival itself is at issue.
There are certainly steps that can be taken that don’t involve the courthouse, but they do require a change in mindset, and they require proactive action. Here are some questions to ponder:
- How long has it been since your joint interest billing accounts have been reviewed?
- What happens if your main product purchaser or principal client goes bankrupt?
- Are you sure you are being fully paid for all of your production?
- What happens if an employee or joint venture partner steals your trade secrets and is then able to compete with you in the market?
- If you own part of a gas well, what is the status of your gas balancing agreement – could you be left without gas or recourse?
- Are your investments or investee companies actually doing well? Have you really checked, or are you relying upon their statements that everything is “ok?”
With all the above questions it is possible to put in place proactive policies that will, in many cases, head off the need for litigation all together, and in others, will bring issues to light in a timely manner so that corrective action can be taken in time to preserve the most value. Being proactively protective does not mean having to be a courthouse bully or have a hair trigger courthouse reflex. It does require, however, a recognition that protection and conservation of value is the new normal, rather than business expansion, and that setting and monitoring healthy boundaries will be the order of the day. Rethinking one’s litigation policy is a part of how those boundaries are set and maintained, and when you’re ready to “check your fences”, we’re here to help.