Mestaz Law Newsletter – December 2021

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A Year of Change and Success

What a year 2021 has been! In September, I opened the doors to a new law office – Mestaz Law – centrally located in the heart of Phoenix at 40th Street and Camelback. The firm focuses exclusively on commercial litigation, including contract disputes, business divorce disputes, and bet-the-company cases.

Thanks to the incredible support of clients and friends, Mestaz Law was able to succeed right out of the gate! Every case and every client is different, each requiring attention to detail and a customized approach using the firm’s tried and true method of mastering the documents to tell a visual and compelling story.

The firm uses cutting-edge technology to efficiently and effectively master both the facts and evidence, which helps leverage favorable settlements or lead to victories at the conclusion of trials.

I am laser-focused and committed to achieving justice for my clients in 2022. I thank you for your support and trust in me, and wish the clients and friends of Mestaz Law a very happy, healthy, and joyous holiday season!

 

 


The Three Things to Look for When Hiring a Commercial Litigator

If you or your business is about to be in a commercial lawsuit, either as a plaintiff suing someone for perhaps breaching a business contract or as a defendant who has been sued, you will need to hire a lawyer; more specifically, a commercial litigator. With thousands of qualified and experienced commercial litigators, how do you choose the right one?

It’s important to know what commercial litigation involves. Documents… lots of them… thousands of pages. Communication, such as emails and text messages. Contracts and financial records. Of course, there are witnesses too. Bear in mind, this is not even an exhaustive or all-inclusive list, and many more sources of information for your particular case may very well be relevant. Having to process, review, organize, and meaningfully use to the client’s advantage such a massive number of documents can dominate the lawyer’s time and the client’s money. With that in mind, here are the three things to look for and consider when hiring a commercial litigator.

Front Loading

Beware of any lawyer who says that because 90% or so of cases settle, little time will be spent on the case in the beginning because the odds favor settlement. That sounds nice on the surface—why spend a lot of money for the lawyer to work the case if it is just going to settle anyway?

The answer is simple – settlements are not created equal. The 90% statistic says absolutely nothing about the quality of settlement, only the fact of settlement. Leverage is the only path to a good settlement because it shows your opponent that they will probably lose at trial, and have to pay damages and your attorney fees. Gaining leverage requires your litigator to learn all documents related to your case early on, and more importantly, to effectively use them to dominate your opponent and others in their depositions. Testimony given during depositions is “forever”, so to speak, and videotaped excerpts of deposition testimony can be played to the judge or jury at trial. Your litigator must be an expert in preparation, because great depositions tend to produce good settlements, or, failing that, trial victories.

Consider two scenarios.

Scenario 1:

typical lawsuit graph

In a typical lawsuit, the lawyer waits to “see” if the case settles. They do minimal work up front, and without a great handle on the relevant case documents, their depositions are mediocre. The client’s opponent continues to believe they can win a trial. The client, advised by their lawyer or a settlement mediator that going to trial is extremely expensive and risky, will often agree to a settlement that is driven by fear and uncertainty. In other words, this approach usually leads to poor client settlements.

Scenario 2:

litigating to win

A lawyer who is litigating to win gathers and organizes all the relevant documents, analyzes and understands them in great detail, and then uses them to dominate the opponent in a deposition. The client spends a little more up front for this approach, however, with the holy grail of evidence in hand – a dominant deposition transcript – the client’s settlement negotiations are driven by leverage. The methodology of litigating to win usually leads to a good settlement, or, if the opponent is in denial and refuses to settle on favorable terms, a trial victory.

Fast and Effective Visual Display of Documents

Merely understanding the documents and evidence is important and necessary, but not sufficient. A lawyer must meaningfully and effectively use them, in real time, when the situation demands. The litigator may “know” the documents related to your case like the back of their hand, but that doesn’t matter if they cannot find and display them when the time comes (for instance, while examining a witness or arguing to the judge). “Take my word for it” simply does not suffice! The attorney must find and display evidence and important records, contracts, emails, transcripts, and more the moment they are needed, which is often in the heat of battle, while impatient judges or juries watch and wait.

Mestaz Law, for example, uses The Chron, a proprietary technology, to identify and bar code, in chronological order, all of the evidence in a case. When paired with a trial presentation program, such as Trial Director or Sanction, any piece of evidence can be found in The Chron, and then put on the trial presentation screen, within seconds. So, be sure to ask a prospective commercial litigator how they will organize, find, and present the evidence in your case. A vague, non-committal, or “just trust me” answer should raise a red flag.

Attorney Fee Set-up

Commercial litigation typically arises out of a contract, such as a breach of contract action. In Arizona, the “successful party” in such a case is entitled to an award of their “reasonable attorney fees”. But what does it mean to be “successful”? What if you sue for a million dollars and only recover $100,000… were you successful? Courts have written plenty on this issue, but the relevant Arizona statute provides a lifeline of clarity: “If a written settlement offer is rejected and the judgment finally obtained is equal to or more favorable to the offeror than” the offer made, the offeror is the successful party (A.R.S. § 12-341.01). Let’s illustrate this scenario with the following example. You file a lawsuit, believing you have a chance at a million-dollar judgment, but you make a written settlement demand for $500,000. In that case, if you win $500,000 or more at trial, then you should also recover your attorney fees.

Accordingly, the litigator should do a deep dive settlement valuation of your case as early as possible. Based on the strength of the case, risk factors, the collectability of the defendant, and other considerations, the client and lawyer should work together to answer a simple but often difficult question: What is the lowest settlement I can live with to avoid going through litigation? Then, make that settlement demand in writing. If it is accepted, the client avoids big attorney fee bills and the stress of litigation. If it is rejected, the amount of the demand is the magic number that the lawyer must match at trial. The lower it is, of course, the easier it is to match, and that incentivizes a reasonable, compromised demand. As a defendant, the issue is simply inverted: i.e., what is the most that the client would be willing to pay to avoid litigation.

Clients should not be afraid to ask a prospective litigator about their approach to these issues. The answers can be very telling and may make the ultimate choice clear and obvious.


Hand Sanitizer Squabbles Lead to $105M+ in Lawsuits

Since March 2020, one of the hottest commodities on the market has been hand sanitizer. When what most people considered the height of the COVID-19 crisis was behind us, demand dippedhand sanitizer somewhat. But now, with the Omicron variant swiftly planting its pandemic flag across the world, it’s a distinct possibility that we might be seeing empty shelves where our 70%-alcohol pump-bottle digit decontaminators used to sit. History tells us that the Spanish influenza pandemic lasted over 2 full years, with suspected cases showing up as early as January 1918 – though the actual “pandemic” classification happened on March 4, 1918 – and by late April 1920 the formerly deadly virus weakened to a usual case of the flu. So, why is it that not 1… not 2… but at least 3 major retailers in the first 6 months of the current pandemic refused to accept delivery of the rather sizeable hand sanitizer shipments that they ordered?

The mystery becomes somewhat more intriguing knowing the chain stores ordered from the exact same manufacturer / distributor – K7 Design Group. One of the brands under K7’s umbrella, Ultra Defense, puts out a product called Sani + Smart Hand Sanitizer. Kroger, Walmart / Sam’s Club, and Five Below are 3 retailers who placed orders with K7, but for some reason (or reasons), refused delivery when pallets of the stuff showed up at their warehouses, and have opted not to pay the bills for their orders also.

Kroger first ordered $5 million worth of the product from K7 and not only let the bottles into the warehouse but was satisfied enough to place another order – this time a $100 million one – of which they accepted hand sanitizer worth $15 million, while the other $85 million was denied access and refused at the warehouse. Sam’s Club (owned by Walmart) ordered “tens of millions of dollars’ worth of hand sanitizer”, but drew a line in the sand when delivery was attempted of $15 million worth. Finally, some pallets were accepted, but with stipulations that cost K7 in both storage fees and lost revenue. Both retailers claimed not to have room in the warehouse, yet both placed their orders in the first few months of the pandemic, and they knew demand was far outweighing supply. They also knew a HUGE order of the hottest commodity since Cabbage Patch Dolls circa 1983 was arriving imminently, but when the tractor trailer showed up, it’s “Oops! We forgot to clear off the shelf units in the ‘this won’t be here long anyway’ part of the warehouse”? Of course, that’s dramatizing a bit, but come on… they ordered a massive amount, so clearly, they each should’ve been expecting a skyscraper’s worth of boxes of hand sanitizer, and have a solid plan on where to put it. Kroger and Walmart / Sam’s Club are being sued in separate actions for $85 million and $16.6 million ($15 million for the refused orders plus $1.6 million for price reductions the retail giant coerced K7 into granting), respectively.

The Five Below situation seems even more bizarre. After requesting a proposal from K7 in April 2020 to provide hand sanitizer and soap products, communication via email from both parties hashed out details like product assortment, timing of delivery, and price. Less than 3 weeks later, Five Below expressed interest in moving ahead with the order as previously corresponded about, which was met with K7 requesting the two parties finalize details, as production for the season was being scheduled. Within a few days, Five Below replied with the order particulars, and although they also requested price negotiations, K7 countered that the quote was final, and asked specifically for both order confirmation and acceptance of the cost. Over the next several months, email was used to ensure all details were attended to, samples were sent for the retailer’s review, Five Below made K7 a vendor in their system, and in mid-September 2020, the order was ready to be shipped. But upon K7’s request of instructions for the delivery, the retailer said the items could not and would not be accepted, and further claimed there was no purchase order issued and the K7 products didn’t pass “testing protocols”. In April 2021, K7 Design Group filed a $2 million lawsuit against Five Below.

Obviously, these are 3 very interesting cases. From the information made public, all the issues seem to stem from – on the retailers’ part – poor planning, over-ordering, and attempts to get out of a good deal on hand sanitizer in exchange for a bit more time on the warehouse floor. And we know that in the middle of a pandemic, when consumers are constantly being told to practice good hand hygiene, it seems odd that the retailers wouldn’t want the popular, flying-off-the-shelves hand sanitizers and equally strange that K7 couldn’t have found another retailer, or buyer, to offload them to for their own stores or selling ventures. But, the cases have not been settled or litigated yet, and there’s as of yet not much publicly said by any entities involved, so we’ll all just have to wait and see how all 3 situations play out.


 

Mestaz Law is a commercial litigation firm serving businesses, business owners, business executives, and entrepreneurs.

The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us, though doing so does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established. Our description of what we believe to be superior technology and how we win cases reflects our typical approach to litigation, which we believe:  (i) gives us a competitive advantage, and (ii) is responsible for any success we have had. But we do not win every case. Other lawyers may have technology or approaches that they believe gives them an advantage. Also, the results that we have obtained in other cases or that are described in our clients’ testimonials do not guarantee, promise, or predict the outcome of your case, which depends on the law, facts, and evidence specific to it.