The Silver Bullet for Business Success in the New Year: Respond Well
Historically, martial arts practices were a means to defend oneself from a physical threat. With this in mind, a legitimate question is whether martial arts remain relevant in today’s “advanced” society. After all, I find myself in a good ol’ fashion fisticuffs – like most suburbanites – somewhere in the range of never in any given week. And assuming a physical threat presented, it is far more likely to come from a firearm, natural disaster, explosives, or worse, e.g., chemical or biological weapons. While I love to delude myself into believing I’ve got “mad martial arts skills,” it is much more likely that I would end up knocking someone down trying to run away from danger (get out of my way men, women, and children) than taking out a gunman with a flying arm bar.
But I have come to realize that martial arts practice is not simply an instructional cookbook, i.e., if you face attack “A” then respond with “B.” Instead, in the words of my instructor, Sifu Brown, a fundamental purpose of practicing martial arts is to learn how to “respond well” to any situation (I encourage anyone interested in this concept to go to the source). Responding well is essentially shorthand for the Zen expression “mushin no shin,” which means mind of no mind. Mushin is a state martial artists sought to achieve where the mind and body operate in unison. This state can also be analogized to how athletes explain a phenomenal performance as a result of being in the “zone.” Regardless of the label, a required precursor for achieving mushin/responding well/the zone is physical and mental preparation.
The same mindset should be applied to business challenges. And the rationale — whether facing business challenges or physical threats — is straightforward: Simple problems tend to become monumental challenges in times of crisis. Further, in a time of crisis people freeze when action is needed or react instead of responding, i.e., assessing the situation and choosing the appropriate response. And Business Leaders simply can’t afford inaction or taking the wrong action where budgets are already anemic. (For a great concurrence, see InHouse Blog’s Corporate New Year’s Resolutions in a Tight Economy. While being able to sit in a full lotus position is optional, achieving “business mushin” or “responding well” must be a top Resolution for Business Leaders in the New Year. In this regard, the following areas pose significant risks to a business organization’s overall bottom line:
- E-mail/E-discovery Budget Busters: For any company dragged into litigation in 2009, e-mail and digital information (e-discovery) will likely be the KO punch companies don’t see until it is too late. See The Big Data Dump (Noting that “A deluge of electronic information may overwhelm American civil justice.”). For both the business organizations and their insurance carriers on the hook for insuring claims, e-discovery done wrong will destroy a litigation budget. And there are any number of ways e-discovery can go wrong. For example, in Goodbys Creek, LLC v Arch Ins Co, 2008 WL 4279693 (MD Fla Sept 15, 2008), the court ordered the defendant to re-produce – at its costs – documents previously produced as TIFF images. The basis of this “judicial re-do” was that defense counsel failed to comply with the e-discovery rules regarding the production of digital information. In another “judicial e-discovery production redo,” the estimated cost was $206,000. See PSEG Power New York, Inc v Alberici Constructors, Inc, 2007 U.S. Dist. LEXIS 66767 (NDNY Sept. 7, 2007). These cases raise an expensive question: Who pays for the re-do?” In the PSEG Power case, counsel for the producing party blamed the mistake on a software issue or malfunction on the part of the e-discovery vendor. And even if technological incompetence does not rise to the level of a “mistake,” it is still costly. For example, in defending an employment claim, the prior attorney either failed to effectively communicate the e-discovery search and retrieval obligations to the client’s IT professional or the IT professional misunderstood. In any event (and setting aside questions as to this delegation of e-discovery) the end result was that the corporate IT professional essentially wasted approximately two weeks focusing on reproducing back up tapes and related information where there was arguably no legal relevance and obligation to do so given the facts and claims of the case. The bottom line is that litigation takes place against the backdrop of technology. And if attorneys and business organizations aren’t able to address the technological side of litigation, it could be a long, expensive year when it comes to litigation.
- Business Organizations in the Crosshairs: Thanks to high profile cases like Qualcomm Inc. v. Broadcom Corp., No. 05-cv-1958-B, slip op. (S.D. Cal. Jan. 7, 2008), Business Leaders and their companies face increasing willingness by courts to impose extraordinary and costly sanctions for e-discovery violations. In the Qualcomm case, the court imposed $8,568,633.24 in sanctions against Qualcomm and referred its counsel to the State Bar of California for further investigation and possible imposition of sanctions. The Qualcomm debacle underscores that both the client and its attorneys will be on the hook to ensure that a reasonable inquiry is performed to identify and produce relevant e-discovery. Additionally, it was reported that 25% of the approximately 138 reported electronic discovery opinions issued from Jan. 1, 2008 to Oct. 31, 2008, concerned sanctions. See Kroll Ontrack’s Report.
- Data Breaches – A Patchwork of Liability: There were 646 data breach incidents reported in 2008, a 47% increase over 2007’s total of 446 breaches. There is also an increasing amount of statutory and regulatory compliance that companies must address with respect to protecting private and confidential information. For example, in 2007 Michigan joined approximately 44 states that have enacted some type of data breach notification law. Click here for a listing of these state laws. Under Michigan’s statute a company must be able to assess its obligations and risks regarding a security breach of any database or data that includes personal information. A breach may require the company to provide a notice of the security breach to each individual whose information was accessed or acquired and subject the company to a to a fine of $250 for each failure to provide notice with the cumulative liability for multiple violations arising out of the same security breach limited to $750,000. The problem for business organizations, however, is that triggers for notification, obligations for responding to a breach, and the content of disclosure letters vary from state to state. Thus, if a company finds a data breach compromising someone from Michigan and also someone from California, they have different obligations. For a list of breaches, click here. For a great summary of security risks see Top 5 Security Issues for 2009.
- Unfair Competition/Misappropriation Litigation. Misappropriation of business critical information (e.g., trade secrets and confidential and proprietary information) claims are likely to increase as a significant risk due to the (im)perfect storm of a down economy adding to an already cut-throat competitive market, an increasingly mobile, technically savvy work-force, and technologies to facilitate the easy downloading/transfer of significant amounts of information. From my own experience, I’m seeing more claims by companies seeking to restrict their competitors from hiring away key employees or restricting former employees from starting up a competing business. It will, therefore, be important to assess and, where necessary, update your company’s plan for protecting against misappropriation claims and assess your defensive measures to guard against a claim brought by a competitor for doing the same. In this regard, the Computer Fraud and Abuse Act is likely to be increasingly relied upon by companies to obtain injunctive and monetary relief against a departing employee and the departing employee’s new employer. See Adding to the Playbook.
- Employment Litigation: E-discovery in employment litigation always poses serious risks for business organizations because e-discovery is not evenly distributed between the parties. And employers will likely have plenty of opportunity to test this hypothesis because employment related litigation continues to increase across the board. See EEOC Charge Statistics. This trend will likely continue due to the number of job losses and this past year saw the U.S. Supreme Court issue a series of pro-employee decisions. One of the more significant opinions, CBOCS West Inc. v Humphries, opened up a new avenue for filing retaliation claims, which provide plaintiff’s attorneys with a longer statute of limitations, no EEOC review requirement, no restrictions for filing against small companies exempted from Title VII, and no cap on damages. It is also worth noting that in 1992, retaliation claims comprised only 15.3% of the EEOC’s discrimination charges. This number, however, has steadily increased and in 2005 retaliation charges approximately doubled to 29.5 percent. Another significant employment opinion, Sprint v Mendelsohn, ruled that trial courts have significant discretion to admit “me too evidence” of discrimination from employees who were under supervisors different from those a plaintiff worked under. The impact on employers was previously addressed in my prior post: Employers Will Need More than a White Belt to Survive “Me Too Evidence” Avalanche.
Winston Churchill observed, “In war, there is no guarantee of success. But we can make sure we deserve it.” Mr. Churchill’s words are especially appropriate for business leaders preparing to “respond well” to increasing regulatory and statutory obligations pertaining to a digital workplace. I wish you well in this New Year and it is my resolution to continue to be a resource for business leaders in working for success in the digital workplace.