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Rising Litigation Boosts Lawyers' Roles in Firms

January 20, 1986|Associated Press

NEW YORK — If current events are a forecast of things to come, you might soon find more lawyers running some of the country's big companies.

More and more, it seems, business decisions are being made in courthouses rather than in board rooms. And many of those decisions have a bigger impact on sales and earnings than the marketplace itself.

Some of the legal problems affect entire industries, such as tobacco or insurance. Even when limited to individual companies, such as American Telephone & Telegraph, the impact is enormous.

The breakup of AT&T, so decreed by a federal court, is the biggest of the cases during the past few years, but more recent situations involving Texaco, E. F. Hutton and Eastman Kodak also are of earthquake proportions.

Texaco, the nation's third-largest oil company, is fighting for its life after a jury found that Texaco interfered with Pennzoil's plans to merge with Getty Oil and awarded Pennzoil $11.1 billion.

E. F. Hutton, a securities firm, suffered a mammoth blow to its image and probably to its sales after pleading guilty to mail and wire fraud. And recently Kodak was forced from the instant camera market by a court decision.

Manville Corp., once a mighty manufacturer of asbestos products, sought protection under the bankruptcy laws because of an anticipated avalanche of suits connected with asbestos deaths.

Union Carbide, its attention distracted by the likelihood of scores of suits resulting from a chemical factory accident in Bhopal, India, barely escaped being taken over by GAF Corp., a much smaller chemical concern.

While it isn't unusual for corporations to be involved in litigation, some of the legal situations endanger the very existence of companies, including airlines and banks.

Electronics and computer manufacturers are in almost constant court suits to protect products from piracy.

The health insurance industry is in a dilemma about its legal liabilities in AIDS cases. And tobacco industry stocks have been depressed by worries over possible liability judgments.

Judging from the past, legal problems are likely to put more lawyers into top executive positions.

When profits were pressured in the 1970s, for example, finance people soon found their route to the top became faster.

Whether attorneys can anticipate and divert legal problems while making money is another matter, because the job seems to require them to have the foresight of seers and the agility of football running backs.

The potential for legal problems seems to broaden every year. Consumers sue. Corporate raiders launch unfriendly takeover attempts. Competitors infringe on patents. Regulators threaten. Foreign governments protect markets.

With such a huge potential for legal problems, it is nearly impossible to foresee where trouble might erupt. Who would have thought, for example, that the Goodyear blimp would be suing the Fuji blimp for trademark infringement?

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