My Advocates

The Seven Deadly Sins of Business Transactions

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 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:

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.

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. He is the former president of the American Association for Justice, the largest trial bar in the world, with 60,000 members.

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