Turning a Legal Department into a Profit Center

As the rate of litigation against corporations continues to increase, the majority of lawsuits are still settling out of court as large companies try to buy off their adversaries. Joseph Speelman, Associate General Counsel of Fortune 100 chemical company LyondellBasell, is a prominent exception to this trend. He settles only as a last resort and will simply refuse to pay tribute.

Here, Mr. Speelman discusses how he has transformed the company's legal department into a profit center with an aggressive strategy to fight unwarranted lawsuits and pursue plaintiff actions in B2B disputes when appropriate.

Mr. Speelman began his 12-year tenure with Koch Industries, Inc. in 1980, later becoming General Counsel of Koch Oil Company. Upon joining Lyondell Petrochemical Company in 1993, he was named Associate General Counsel for Commercial Law and Litigation. There, he has successfully participated in the trial and management of litigation related to business activities for several companies, including Lyondell, in disputes with national and international opponents. He also oversees corporate security and compliance matters and has presided over claims involving antitrust, complex environmental issues, mass tort litigation (including lead paint, asbestos, benzene and MTBE litigation), internal corporate investigations, and complex international claims involving entities owned by foreign sovereigns.

Q.: Tell us about LyondellBasell Industries (including the recent merger that created the company). What is its primary business within the chemical industry? What does it produce, distribute, etc?

A.: LBI is a large chemical and refining conglomerate headquartered in Rotterdam, Holland. Our primary businesses are ethylene production, refining, fuels production, and polymers manufacturing.

Q.: We understand you recently spoke at the LMA's Houston chapter meeting about litigation management and strategy. Is litigation the company's biggest legal issue? What other legal challenges affect your work?

A.: Litigation is indeed one of the company's biggest legal problems ' but only because it is a big problem for all companies that have a large U.S. presence. While litigation is a concern, we have drastically reduced our costs in this area because of an aggressive strategy of taking many cases to trial. LyondellBasell has secured enough verdicts and dismissals that are reflected in our bottom line. In addition, I believe this strategy has prevented some suits from ever being filed because plaintiffs counsel know that if they bring an action, there will be no settlement.

Our other problems are the ones companies also typically face while trying to make, buy, and sell things in the U.S. in the current environment: high raw material costs,
low margins, demanding regulatory agencies, and a shaky economy.

Q.: Within litigation, what are the primary types of cases? Where is the greatest volume? Where is the greatest severity?

A.: We have toxic torts, antitrust, commercial disputes, employment, environmental, intellectual property, regulatory, personal injury, property damage, and shareholder suits. The greatest volume is probably toxic tort, which includes asbestos, but most of them are facility cases. Toxic tort is where the greatest severity and risk are, especially lead-related litigation.

Unfortunately, a “settlement culture” dominates tort law. When I joined the company 16 years ago, I realized this philosophy would be financially devastating. Too many decision are made today by accountants, not lawyers. And this “accounting mentality” results in individual decisions that lead a company to bankruptcy, one case at a time.

Because LBI has developed a reputation for refusing to settle frivolous claims, its case count is much lower than most companies ' and certainly much lower than all companies our size.

Q.: How has the merger affected your work? Are there now global dimensions to your work that were not there before and, if so, what steps have you taken to address that?

A.: The merger has resulted in a few more high-profile matters, but not many. It was Lyondell that brought the U.S. litigation to the merger, while Basell brought quite a bit of non-U.S. activities that do not have significant volume or serious types of litigation or claims.

Of course there are global aspects to all litigation. I wouldn't call the post-merger global dimensions “new,” but certainly the cross-border issues involving discovery, investigations, compliance, and antitrust are more complicated and require quite a bit more coordination internally.

Q.: How would you differentiate your litigation strategy and can you give us specific examples of how it's paid off for LyondellBassell?

A.: I would characterize our litigation strategy as philosophy rather than a strategy or a tactic. It is principle-based. We make litigation-related decisions based on a clear set of principles that reflect the core values of the company itself. Importantly, we do not settle cases where we have done nothing wrong. We relentlessly contest frivolous litigation and mass litigation driven solely by the narrow interests of the plaintiffs' bar.

Our strategy paid off recently with the complete vindication of an LBI subsidiary in the Rhode Island lead paint litigation. We had a judgment reversed and rendered in our favor by the Rhode Island Supreme Court. Our strategy likewise paid off with the resolution of 59 MTBE cases for a diminimous amount. While co-defendants, notably including major U.S. refiners, paid over $423 million. LBI paid $449,000, essentially nothing.

I believe this litigation philosophy is not a choice, but rather a necessity. When roughly 90% of toxic tort claims are frivolous, for instance, why is it 90% of toxic tort cases are settled? If LBI is not responsible, we simply will not settle.

Q.: Your philosophy is “fight, don't settle, when you've done nothing wrong” ' do you find that message resonates with outside counsel? Do they push back against this notion?

A.: Absolutely. LBI has created a passionate, loyal community of lawyers from many different firms.

We choose lawyers, not firms. The outside counsel who represent us expect and appreciate our philosophy. In fact, the strategy is something they have now come to insist upon in the cases they handle for us. As attorneys, they respect directness and integrity in the litigation decision-making process.

It's a simple but very significant fact: Lawyers want to win. Unfortunately, they find it quite rare that a client will insist on winning. Clients must embrace this philosophy in order for it to be successful, and they need to have the stomachs to see it through. I'm sure that many of these lawyers get frustrated. With us, they are free to be aggressive and to succeed. They are exhilarated to be working with us, and very, very intense in how they go about it.

Q.: Do you find that your litigation philosophy is having any impact on other companies or in-house counsel?

A.: I can't say LBI's approach has had a direct impact on counsel for other companies. In terms of the other companies with which we have direct contact during multi-party litigation, some of their outside counsel have expressed outrage that we would not go along with certain settlements they cooked up. I suspect our approach was making them look like they overpaid settlements, or that they did not assert their clients' interests effectively enough.

I believe the settlement mentality runs deep and there just aren't enough trial attorneys in the field. They understand the long-term financial benefits to fighting frivolous payouts. However, there are other large companies that do share our philosophy. Exxon Mobile, for instance, has also developed a reputation for fighting unnecessary settlements, and they've become less of a target because of it. Once a company proves that it is not easily intimidated, it will be left alone.

Q.: You've said that the LyondellBassell litigation practice is actually a profit center, rather than a cost center. How basically can corporate counsel achieve that?

A.: We take responsibility for all litigation in which the company is involved both as a defendant and plaintiff. The costs and results, either a settlement or judgment, against or for LBI, are accounted for by the litigation group and reported monthly to the senior management of the company.

By rejecting unnecessary settlements, we have reduced costs and the incidence of claims against us, and, at the same time, by assisting in the appropriate assertion of claims in situations where LBI is owed money, LyondellBassell is in a “negative” true cost of litigation.

It is unheard-of for major U.S. corporations, but I maintain that in-house counsel can achieve such results by adopting the resolute principle-based litigation strategy process that we've discussed. And, they should do so, not just with their client's consent, but with the client's active involvement.

Q.: You've used famous plaintiff's firms as part of your litigation strategy. What are your thoughts on the dynamics ' how they differ from traditional firms, how other in-house counsel should consider using them?

A.: Effective plaintiffs' counsel are very aggressive. We pick attorneys based on their ability to see the issues in a matter quickly and they work together in this “virtual firm” we've created. Our firms, like Susman Godfrey, seize on the key points immediately. They are agile and mobile and incredibly efficient. They are trained and accustomed to being very, very efficient because they often are working on their own money. It's in their interest to be cost-efficient. LBI's counsel are recognized for their good work and it's my job to keep people out of their way.

Counsel should use plaintiff firms to do plaintiff work. It is simply common sense.

Q.: Is there any other advice regarding litigation you'd like to offer to other in-house counsel?

A.: Litigation is not a side show. Nor is it something that lawyers can or should avoid in their careers. 2009 is predicted to be “the Year of Litigation” or to put it in the terms common in Chinese culture, I refer to it as “the Year of the Rat and Snake.” This will be especially true for the financial industry in months to come. Therefore, all ' I repeat, ALL ' in-house counsel should spend significant time working in litigation as a practitioner or manager. It trains lawyers to see problems in the same kind of commercial transactions that they themselves will later be negotiating or drafting.

Most important, litigation trains lawyers to use judgment. It trains them to understand what is overreaching, what, in terms of adopting positions and approaching cases, is “too cute by half.” Litigation trains lawyers to understand that, just as certain approaches don't work in litigation, they do not work in other areas of the practice of law either, and do not ultimately serve the client's interests. Litigation promotes maturity and better, more tough- minded attorneys.

One other thing I'd like to say ' Difficult times lie ahead. It will no longer be just an option to confront and fight our adversaries ' It is essential to do so now. In the coming days, it will be increasingly a matter of survival.

But you can't fight if you do not know how. Lawyers must develop the skills, and the philosophy, needed to win. We will face significant consequences if they don't.

As the rate of litigation against corporations continues to increase, the majority of lawsuits are still settling out of court as large companies try to buy off their adversaries. Joseph Speelman, Associate General Counsel of Fortune 100 chemical company LyondellBasell, is a prominent exception to this trend. He settles only as a last resort and will simply refuse to pay tribute.

Here, Mr. Speelman discusses how he has transformed the company's legal department into a profit center with an aggressive strategy to fight unwarranted lawsuits and pursue plaintiff actions in B2B disputes when appropriate.

Mr. Speelman began his 12-year tenure with Koch Industries, Inc. in 1980, later becoming General Counsel of Koch Oil Company. Upon joining Lyondell Petrochemical Company in 1993, he was named Associate General Counsel for Commercial Law and Litigation. There, he has successfully participated in the trial and management of litigation related to business activities for several companies, including Lyondell, in disputes with national and international opponents. He also oversees corporate security and compliance matters and has presided over claims involving antitrust, complex environmental issues, mass tort litigation (including lead paint, asbestos, benzene and MTBE litigation), internal corporate investigations, and complex international claims involving entities owned by foreign sovereigns.

Q.: Tell us about LyondellBasell Industries (including the recent merger that created the company). What is its primary business within the chemical industry? What does it produce, distribute, etc?

A.: LBI is a large chemical and refining conglomerate headquartered in Rotterdam, Holland. Our primary businesses are ethylene production, refining, fuels production, and polymers manufacturing.

Q.: We understand you recently spoke at the LMA's Houston chapter meeting about litigation management and strategy. Is litigation the company's biggest legal issue? What other legal challenges affect your work?

A.: Litigation is indeed one of the company's biggest legal problems ' but only because it is a big problem for all companies that have a large U.S. presence. While litigation is a concern, we have drastically reduced our costs in this area because of an aggressive strategy of taking many cases to trial. LyondellBasell has secured enough verdicts and dismissals that are reflected in our bottom line. In addition, I believe this strategy has prevented some suits from ever being filed because plaintiffs counsel know that if they bring an action, there will be no settlement.

Our other problems are the ones companies also typically face while trying to make, buy, and sell things in the U.S. in the current environment: high raw material costs,
low margins, demanding regulatory agencies, and a shaky economy.

Q.: Within litigation, what are the primary types of cases? Where is the greatest volume? Where is the greatest severity?

A.: We have toxic torts, antitrust, commercial disputes, employment, environmental, intellectual property, regulatory, personal injury, property damage, and shareholder suits. The greatest volume is probably toxic tort, which includes asbestos, but most of them are facility cases. Toxic tort is where the greatest severity and risk are, especially lead-related litigation.

Unfortunately, a “settlement culture” dominates tort law. When I joined the company 16 years ago, I realized this philosophy would be financially devastating. Too many decision are made today by accountants, not lawyers. And this “accounting mentality” results in individual decisions that lead a company to bankruptcy, one case at a time.

Because LBI has developed a reputation for refusing to settle frivolous claims, its case count is much lower than most companies ' and certainly much lower than all companies our size.

Q.: How has the merger affected your work? Are there now global dimensions to your work that were not there before and, if so, what steps have you taken to address that?

A.: The merger has resulted in a few more high-profile matters, but not many. It was Lyondell that brought the U.S. litigation to the merger, while Basell brought quite a bit of non-U.S. activities that do not have significant volume or serious types of litigation or claims.

Of course there are global aspects to all litigation. I wouldn't call the post-merger global dimensions “new,” but certainly the cross-border issues involving discovery, investigations, compliance, and antitrust are more complicated and require quite a bit more coordination internally.

Q.: How would you differentiate your litigation strategy and can you give us specific examples of how it's paid off for LyondellBassell?

A.: I would characterize our litigation strategy as philosophy rather than a strategy or a tactic. It is principle-based. We make litigation-related decisions based on a clear set of principles that reflect the core values of the company itself. Importantly, we do not settle cases where we have done nothing wrong. We relentlessly contest frivolous litigation and mass litigation driven solely by the narrow interests of the plaintiffs' bar.

Our strategy paid off recently with the complete vindication of an LBI subsidiary in the Rhode Island lead paint litigation. We had a judgment reversed and rendered in our favor by the Rhode Island Supreme Court. Our strategy likewise paid off with the resolution of 59 MTBE cases for a diminimous amount. While co-defendants, notably including major U.S. refiners, paid over $423 million. LBI paid $449,000, essentially nothing.

I believe this litigation philosophy is not a choice, but rather a necessity. When roughly 90% of toxic tort claims are frivolous, for instance, why is it 90% of toxic tort cases are settled? If LBI is not responsible, we simply will not settle.

Q.: Your philosophy is “fight, don't settle, when you've done nothing wrong” ' do you find that message resonates with outside counsel? Do they push back against this notion?

A.: Absolutely. LBI has created a passionate, loyal community of lawyers from many different firms.

We choose lawyers, not firms. The outside counsel who represent us expect and appreciate our philosophy. In fact, the strategy is something they have now come to insist upon in the cases they handle for us. As attorneys, they respect directness and integrity in the litigation decision-making process.

It's a simple but very significant fact: Lawyers want to win. Unfortunately, they find it quite rare that a client will insist on winning. Clients must embrace this philosophy in order for it to be successful, and they need to have the stomachs to see it through. I'm sure that many of these lawyers get frustrated. With us, they are free to be aggressive and to succeed. They are exhilarated to be working with us, and very, very intense in how they go about it.

Q.: Do you find that your litigation philosophy is having any impact on other companies or in-house counsel?

A.: I can't say LBI's approach has had a direct impact on counsel for other companies. In terms of the other companies with which we have direct contact during multi-party litigation, some of their outside counsel have expressed outrage that we would not go along with certain settlements they cooked up. I suspect our approach was making them look like they overpaid settlements, or that they did not assert their clients' interests effectively enough.

I believe the settlement mentality runs deep and there just aren't enough trial attorneys in the field. They understand the long-term financial benefits to fighting frivolous payouts. However, there are other large companies that do share our philosophy. Exxon Mobile, for instance, has also developed a reputation for fighting unnecessary settlements, and they've become less of a target because of it. Once a company proves that it is not easily intimidated, it will be left alone.

Q.: You've said that the LyondellBassell litigation practice is actually a profit center, rather than a cost center. How basically can corporate counsel achieve that?

A.: We take responsibility for all litigation in which the company is involved both as a defendant and plaintiff. The costs and results, either a settlement or judgment, against or for LBI, are accounted for by the litigation group and reported monthly to the senior management of the company.

By rejecting unnecessary settlements, we have reduced costs and the incidence of claims against us, and, at the same time, by assisting in the appropriate assertion of claims in situations where LBI is owed money, LyondellBassell is in a “negative” true cost of litigation.

It is unheard-of for major U.S. corporations, but I maintain that in-house counsel can achieve such results by adopting the resolute principle-based litigation strategy process that we've discussed. And, they should do so, not just with their client's consent, but with the client's active involvement.

Q.: You've used famous plaintiff's firms as part of your litigation strategy. What are your thoughts on the dynamics ' how they differ from traditional firms, how other in-house counsel should consider using them?

A.: Effective plaintiffs' counsel are very aggressive. We pick attorneys based on their ability to see the issues in a matter quickly and they work together in this “virtual firm” we've created. Our firms, like Susman Godfrey, seize on the key points immediately. They are agile and mobile and incredibly efficient. They are trained and accustomed to being very, very efficient because they often are working on their own money. It's in their interest to be cost-efficient. LBI's counsel are recognized for their good work and it's my job to keep people out of their way.

Counsel should use plaintiff firms to do plaintiff work. It is simply common sense.

Q.: Is there any other advice regarding litigation you'd like to offer to other in-house counsel?

A.: Litigation is not a side show. Nor is it something that lawyers can or should avoid in their careers. 2009 is predicted to be “the Year of Litigation” or to put it in the terms common in Chinese culture, I refer to it as “the Year of the Rat and Snake.” This will be especially true for the financial industry in months to come. Therefore, all ' I repeat, ALL ' in-house counsel should spend significant time working in litigation as a practitioner or manager. It trains lawyers to see problems in the same kind of commercial transactions that they themselves will later be negotiating or drafting.

Most important, litigation trains lawyers to use judgment. It trains them to understand what is overreaching, what, in terms of adopting positions and approaching cases, is “too cute by half.” Litigation trains lawyers to understand that, just as certain approaches don't work in litigation, they do not work in other areas of the practice of law either, and do not ultimately serve the client's interests. Litigation promotes maturity and better, more tough- minded attorneys.

One other thing I'd like to say ' Difficult times lie ahead. It will no longer be just an option to confront and fight our adversaries ' It is essential to do so now. In the coming days, it will be increasingly a matter of survival.

But you can't fight if you do not know how. Lawyers must develop the skills, and the philosophy, needed to win. We will face significant consequences if they don't.