Handshake with TearLast Thursday, the Association for Corporate Growth hosted a talk in Dallas about deals that result in a lawsuit or arbitration. Several dozen deal-makers, mergers and acquisitions lawyers, and consultants attended. The Honorable Jeff Kaplan of JAMS, Elizabeth Brandon of Vinson & Elkins, and I gave the talk. Ladd Hirsch of Diamond McCarthy organized and moderated the event. In a little over an hour, we discussed the characteristics that commonly occur in transactions that produce formal claims, offered suggestions on how deal-makers can manage the risk of earl disputes, and answered several thoughtful questions from the audience. I enjoyed the session immensely. Please see my review of the lively discussion below.

Traits of deals that produce claims

Judge Kaplan started by saying that Elizabeth and I handle commercial trial work and that the members of the audience — as deal people — would not want to meet us. I said that — as a trial lawyer who often has the job of taking apart deals that people like them put together — I do want to meet them.

I proposed that a combination of three circumstances tend to recur in deals that go bad. The first circumstance — a clash of cultures — refers to the differing styles, sophistication levels, and mores of buyers and sellers. An entrepreneur who stays with a business after a change in control as an officer or minority owner often has a hard time adapting to the systems, rules, and schedules that the new owners bring to bear in the post-closing world. Even if the founder leaves, the company may remain vulnerable to misunderstandings with the new owners.

The second trait relates to he tendency of buyers and sellers to suppress misgivings that arise during due diligence. The thing that bothers you, especially if it touches on questions of integrity and trustworthiness, probably should concern you. Pushing it out of your mind will not make it go away, and it may well provide the spark for a post-closing blow up.

Disappointment of economic expectations supplies the third trait of deals that go bad. Oil and gas firms and other businesses that depend on commodity prices have more than their share of this characteristic. But many other negative outcomes may occur post-closing and put stress on the parties’ relations.

Any one of the three circumstances will seldom by itself cause a falling out, but combining all three — a clash of cultures, nagging questions about integrity, and poor results after closing — summons a potent mix of dispute-fostering volatility.

Managing dispute risk

Elizabeth and I offered several ways in which deal-makers can lower the risk of a high-stakes dispute over an equity or asset purchase. They included these:

  • Avoid calling the buyer or seller a “partner” or “joint venturer”. Those words imply special duties rather than an arm’s-length deal to which caveat emptor applies.
  • Make sure that letters of intent specify in big bold letters that they do not create any obligation to close a deal and that only a definitive agreement, should one ever come about, will bind the parties to a transaction.
  • Include in the final contract specific provisions about resolving future disputes — particularly WHO will decide the disputes (jury, judge, or arbitrators), WHERE the trial will take place (e.g., Delaware for Delaware entities), and WHAT rules will govern the parties’ contract and legal relations relating to it (often Delaware or New York for commerce-friendly laws).

I noted that a lawyer in a mediation recently told me his case would have two or three times as much value if could trait to a jury instead of to a judge or in arbitration.

Elizabeth pointed out that more than 90 percent of deals involving public companies generate litigation and that the lawsuits average between $500,000 and $1.5 million to defend. I added that few of the cases pose a serious threat and involve weak claims that implausibly question the terms of the deal.

I said that I love juries and believe in them deeply and worry that relegating disputes to arbitration has negative effects on the system of civil justice. I added that “juries focus on doing justice, but you may want them to enforce your contract.”

Questions from the audience

The audience asked several good questions.

One had to do with making sure that arbitration clauses included short deadlines for getting to a final decision. I said that that will work fine in most cases but that you should also include a “blow” clause for the bet-the-company case that may come along. You will want the extra time then, I assured them.

Someone inquired about integration clauses in deal contracts. Elizabeth and I both stressed that courts will enforce provisions that negate promises outside the four corners of the contract, that deny reliance on oral representations, and that waive fraud claims but that they will not reject fraud claims under a general caveat emptor approach. People who do not like how a deal turns out may resort to claims of fraud, and you should protect yourself with specific contract language.

I also suggested that lawyers who draft mergers and acquisitions contracts should consult with dispute lawyers about dispute resolution and negation-of-fraud language. The trial people have more intimate knowledge of how courts handle the relevant provisions.

I mentioned the importance of clarity and directness in drafting agreements. I noted that a lawyer recently told me that he sometimes considers creating ambiguity in a contract a win for his client. I said that that is like a third marriage — a triumph of hope over experience — and that, although I understand the strategic thought behind the tactic, it represents a clear win only for me.

We offered a plug for the Delaware court system, especially the Court of Chancery for its expertise on complex corporate and commercial matters. We praised its reliability and the high quality of its judicial officers.

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Photo of Barry Barnett Barry Barnett

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck…

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck Redden).

Barnett is a Fellow in the American College of Trial Lawyers, and Lawdragon has named him one of the top 500 lawyers in the United States three years in a row. Best Lawyers in America has honored him as “Lawyer of the Year” for Bet-the-Company Litigation (2019 and 2017) and Patent Litigation (2020) in Houston. Based in Texas and New York, Barnett has tried complex business disputes across the United States.

TRIAL COUNSEL
Barnett’s background, training, and experience make him indispensable to his clients. The small-town son of a Texas roughneck and grandson of a Texas sharecropper, Barnett “developed an unusual common sense about people, their motivations, and their dilemmas,” according to former client Michael Lewis.

Barnett has been historically recognized for his effectiveness and judgment. His peers chose him, for example, to the American College of Trial Lawyers and American Law Institute. His decades of trial and appellate work representing both plaintiffs and defendants have made him a master strategist and nimble tactician in complex disputes.

Barnett focuses on enforcement of antitrust laws, the “Magna Carta of free enterprise,” in Supreme Court Justice Thurgood Marshall’s memorable phrase. “Barry is one of the nation’s outstanding antitrust lawyers,” according to Joseph Goldberg, a member of the Private Antitrust Enforcement Hall of Fame. Named among Texas’s top ten antitrust lawyers of 2023, Business Today calls Barnett a “trailblazer” among the “distinguished legal minds” who “dedicate their skill and expertise to the maintenance of healthy competition in various sectors” of the Lone Star State’s booming economy. Barnett is also adept in energy and intellectual property matters and has battled for clients against a Who’s Who list of corporate behemoths, including Abbott Labs, Alcoa, Apple, AT&T, BlackBerry, Broadcom, Comcast, Dow, JPMorgan Chase, Samsung, and Visa.

Barnett commands a courtroom with calm and credibility and “is the perfect lawyer for bet the company litigation,” said Scott Regan, General Counsel of former client Whiting Petroleum. His performance before the Supreme Court in Comcast Corp. v. Behrend prompted the Court to withdraw the question on which it had granted review. The judge in a trial involving mobile phone technology called Barnett “one of the best” and that his opening statement the finest he had ever seen. Another trial judge told Barnett minutes after a jury returned a favorable verdict against the county’s biggest employer that he was one of the two best trial lawyers he’d ever come across—adding that the other one was dead.

COMPLETE PACKAGE
A versatile trial lawyer, Barnett knows how to handle a case all the way from strategic pre-suit planning to affirmance on appeal. He’s tried cases to verdict and then briefed and argued them when they went before appellate courts, including the Second, Third, Fifth, and Tenth Circuits, the Supreme Court of Louisiana, and (in the case of Comcast Corp. v. Behrend) the Supreme Court of the United States.

Barnett is a sought-after public speaker, often serving on panels and talking about topics like the trials of antitrust class actions and techniques for streamlining complex litigation. He also comments on trends in commercial litigation and the implications of major rulings for outlets such as NPR, Reuters, Law360, Corporate Counsel, and The Dallas Morning News. He’s even appeared in a Frontline program about underfunding of state pensions, authored chapters on “Fee Arrangements” and “Techniques for Expediting and Streamlining Litigation” (the latter with Steve Susman) in the ABA’s definitive treatise on Business and Commercial Litigation in Federal Courts, 5th, and commented on How Antitrust Enforcers Might Think Like Plaintiffs’ Lawyers.

HARD GRADERS
Clients and other hard graders have praised Barnett for his courtroom skills and legal acumen.

A client in a $100 million oil and gas case, which Barnett’s team won at trial and held on appeal, said Barnett and his team “presented a rare combination of strong legal intellect, common sense about right and wrong, and credibility in the courtroom.” David McCombs at Haynes and Boone said Barnett “has a natural presence that goes over well with juries and judges.”

Even former adversaries give Barnett high marks. Lead opposing counsel in a decade-long antitrust slugfest said “Barry is a highly skilled advocate. He understands what really matters in telling a narrative and does so in a very compelling manner.”

CIVIC ENGAGEMENT
Barnett relishes opportunities to collaborate with all kinds of people. At the Center for American and International Law (CAIL), founded by a former prosecutor at Nuremberg in 1947 and headquartered in the Dallas area, he has served on the Executive Committee, co-chaired the committee that produced CAIL’s first-ever strategic plan, supported CAIL’s Institute for Law Enforcement Administration and other development efforts, and proposed formation of a new Institute for Social Justice Law. CAIL’s former President David Beck said “Barry is extremely bright” and is “very well prepared in every lawsuit or professional task he undertakes.”

Barnett is also a Trustee of the New-York Historical Society, a Sterling Fellow at Yale, a member of the Yale University Art Gallery’s Governing Board, a winner of the Class Award for his work on behalf of his college class, and a proud contributor to the Yellow Ribbon Program at Harvard Law. Barnett’s pro bono work includes leading the trial team representing people who are at greatest risk of severe illness and death as a result of being exposed to the novel coronavirus SARS-CoV-2 while being detained in the Dallas County jail—work for which he received the NGAN Legal Advocacy Fund RBG Award.

At Susman Godfrey, Barnett has served on the firm’s Executive Committee, Employment Committee, and ad hoc committees on partner compensation, succession of leadership, and revision of the firm’s partnership agreement. He also twice chaired the Practice Development Committee.

KEEPING PERSPECTIVE
Barnett understands that clients face many pressures. Managing the stress is important, especially in matters that take years to resolve. He encourages clients to call him whenever they have a question or concern and to keep the inevitable ups and downs in perspective. He wants them to know that he will do his level best to help them achieve their goals. He also strives to foster trust and to make working with him a pleasure.

Cyrus “Skip” Marter, the General Counsel of Bonanza Creek in Denver and a former Susman Godfrey partner and client, said Barnett is “excellent about communicating with clients in a full and honest manner” and can “negotiate for his clients from a position of strength, because he is not afraid to take a case through a full trial on the merits.” Stacey Doré, the President of Hunt Utility Services and a former client, said that Barnett is “an excellent trial lawyer and the person you want to hire for your bet-the-company cases. He is client focused, responsive, and uniquely savvy about trial and settlement strategy.” A New York colleague said, “Barry is a joy to work with as co-counsel. He tackles complex procedural and factual hurdles capably, efficiently, and without drama.”

PERSONAL
Barnett’s wide-ranging experience and calm, down-to-earth approach enable him to connect with clients, judges, jurors, witnesses, and even opposing counsel. He grew up in Nacogdoches, Texas. He co-captained his high school varsity football team as an All-East Texas middle linebacker while also serving as the Editor of Key Club’s Texas-Oklahoma District, won the Best Typist award, took the History Team to glory, and sang in the East Texas All Region Choir. As Dan Kelly of client Vistra Corp. put it, Barnett is “a great person to be around.”

Barnett is steady and loyal. He has practiced at Susman Godfrey his entire career. He and his wife Nancy live in Dallas and enjoy spending time in Houston and New York. Their daughter works for H-E-B in Houston, and their son is a Haynes and Boone transactions lawyer in Dallas.

As a member of Ivy League championship football teams in his junior and senior years at Yale and a parent of two Yalies, Barnett has no trouble choosing sides for “The Game” in November. And he knows how important fighting all the way to the end is. On his last play from scrimmage, in the waning minutes of The Game on Nov. 22, 1980, he recovered a Crimson fumble.

Yale won, 14-0.