DuPont lawyers and others have been told they have been told they have let too many litigation opportunities slip by. No more.

E.I. du Pont de Nemours and Company’s 2004 spring meeting with its outside counsel was a no-frills affair, with cookies and club sandwiches. The group of in-house and outside lawyers spent much of the one-day conference in a windowless room listening to presentations about the company’s business prospects and its outside counsel’s performance in 2003. But then Lindsey Gauthier and Erin Mariani, corporate counsel at DuPont, unveiled plans for a major strategic shift in the chemical colossus’s legal tactics.

Gauthier and Mariani told the 160 lawyers, outside counsel, and vendor representatives gathered in Wilmington that DuPont lawyers have let far too many litigation opportunities slip by. When suppliers overcharge, customers underpay, or rivals infringe on DuPont’s patents, the company often looks the other way instead of seeking damages, either in court or out. Citing a Deloitte & Touche study commissioned by the legal department, the lawyers told the audience that when DuPont pursued legal claims between 1998 and early 2004, the company recovered, on average, $50 million a year (with 42 percent of that going to outside counsel fees). This year, they said DuPont legal planned to double that take, to more than $100 million, and to collect even more in 2005 and beyond. How? In part by following some well-established paths, including bringing more intellectual property cases and playing hardball with insurance carriers over claims reimbursement.

But DuPont is pursuing novel revenue streams too. The company is in the process of doing something that no other large corporate legal department appears to have done: setting up a formal system to review every class action settlement notice it receives in cases ranging from price-fixing and product defect to securities fraud and supplier overcharges. In these suits DuPont would either be a class member and pursue its share of a settlement, or it would “opt out” of cases and file a separate lawsuit to try to recover a bigger settlement. Already DuPont lawyers are eyeing recoveries of at least $10—20 million annually, starting next year. “I think we’ll find we’re leaving a lot of money on the table,” said Gauthier. He exhorted the audience to look for potential claims and to suggest other opportunities to bring in money. “Think broadly, think differently,” he said. “Think like a plaintiff.”

Here they go again. For 12 years now, DuPont lawyers have been on a relentless mission to stanch the business’s money flow from legal fees. With their widely touted, ever-evolving “DuPont Legal Model,” the company claims to shave as much as 18 percent off its approximately $128 million in annual litigation costs. It does this mostly through discounted hourly rates from the 42 core law firms that receive the bulk of DuPont’s business. Along the way the department, headed by general counsel Stacey Mobley, has sponsored conferences, launched a Web site, and sold a book touting its model [“Staying Power,” April 2004]. In doing so, DuPont Legal has alternately awed and alienated other legal departments around the country.

It comes as no surprise that DuPont lawyers are looking for another creative, high-profile way to bring in more revenue. But even skeptics see the merit in pursuing class action settlements. “Conceptually, we’d be interested” in adopting a similar program, says Theodore Banks, the associate general counsel at Kraft Foods Global, Inc. But Banks and his counterparts at other Fortune 500 legal departments also say that such a strategy can be risky. There are up-front costs associated with scouring through company records; it takes hours of work to collect and vet the notices that accompany these lawsuits. And a cash award isn’t always a given. At the end of the day, says Banks, alluding to settlements that dole out discounts on future purchases rather than cash awards, there’s no guarantee that a company won’t end up with “shoe boxes full of coupons.”

At press time DuPont’s in-house lawyers were still analyzing the class actions that have come to their attention since mid-February. Sager says that most, if not all, will be pursued, but he has yet to decide which ones to ship to outside counsel. A batch of cases that he’s considering allege that Microsoft overcharged for its Windows operating system. He also thinks DuPont’s $14 billion pension fund could pursue claims from various companies accused of accounting fraud. Any recoveries in those cases would not directly benefit the company, but they would go to DuPont’s retirees.

Sager concedes that DuPont lawyers have their work cut out for them, which is why he put Gauthier, a corporate lawyer, in charge of selling the initiative internally. Gauthier, who joined DuPont 12 years ago, has spent recent months describing the department’s new litigation strategy to employees during brown-bag lunches. “What makes this difficult is that we are fighting against a culture [of] being a nice company,” says Gauthier. But he and Sager say that it’s no longer anathema in corporate America to sue customers and suppliers. “There is an irony in that corporations that have complained about the unfairness of the [class action] system and how burdensome it is are now using that very system to their advantage,” acknowledges Sager. But to him it’s not hypocritical. It’s just smart business

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