For this hypothetical scenario let us put aside our allegiances. You are a Board member of an AFL football team. The team might face a supplements saga similar to Essendon Football Club. Challenges confront you capable of crippling the Club’s fortunes. Litigation is one option. What do you do?
In this post we will examine the process undertaken by most Boards when considering the prospect of litigation or, particularly, an appeal.
It is paramount that no one should ever sue over a point of principle. And very few large organizations ever do solely for this purpose. Even football clubs. Even Essendon. Board members are appointed to football clubs because they are successful, savvy business people. Some are more aggressive than others in their business approach. All of them though, will have an eye to the bottom line.
And the bottom line is money.
This is because the ‘cost of litigation’ is more than a mantra. It is an equation.
Assessing the cost of litigation
Often it goes like this: The Board will have to authorize legal fees of up to $1.5 million for the trial. It must also accept the risk of paying the other side’s legal fees. As a rule of thumb, this risk amounts to about 50% to 70% of the opponent’s actual costs (the payment of fees is subject to a court scale). The budget allocation for the litigation based on this estimate might be, say, $2 million. These costs will be formally signed off.
One only spends this kind of money if there is a feasible return. In the case of Essendon Football Club, relevant factors before litigating would have included:
- risk assessment of not being able to field a team if anti-doping rule violations upheld (ADVRPs).;
- cost of lost sponsorships and endorsements;
- cost of lost membership fees; and
- financial impact of reputational loss.
Prospects of success will form a key part of the analysis. Lawyers might attend the Board meeting to provide this advice, or they will provide advice in writing. The Chairman might attend Senior Counsel’s chambers and report back. Whatever the mechanism, very few people would ‘push the button’ on litigation unless they have been told they have genuine prospects of success.
It is then a matter of weighing these elements, and engaging in a balancing exercise. The options are always stark: Assess the implications of doing nothing, or press the button.
No complaint can be made if litigation has been pursued after such a process has been undertaken. All litigants assume the risk of losing. One party must lose. This is part and parcel of our adversarial judicial system.
For the losing party, such as Essendon Football Club, the prospect of an appeal should then form part of one’s tool kit. One must again decide whether to do nothing, or press the button.
It has been reported that Essendon has already decided to appeal Judgment. Whatever might be the case for Essendon’s co-applicant, James Hird, it is highly unlikely such a decision has yet been made by Essendon. The Board is apparently yet to meet. What occurs in the heat of the moment after a court loss differs from the full deliberation required before an appeal is formally announced.
Factors relevant to an appeal
When Boards meet to discuss the prospects of an appeal, these are the usual issues they will consider:
- Prospects of success: The process discussed above is repeated.
Some Boards insist on being told a prospect of success in percentage terms: e.g. “We will only approve if prospects of a win are 70%”. One notable Melbourne silk used to say: “I will give you 95% if you want. If we lose I’m still within the 5% scope for error”.
- Cost of litigation: After a loss, the cost becomes cumulative. Accordingly, one must consider ‘sunk costs’ (those already spent) and future costs (costs of an appeal plus further risk of paying the opponent’s costs). The task is to revisit the factors originally motivating the litigation to see whether they remain valid or their impact has changed.
Based on experience, Essendon’s legal fees for an appeal are likely to exceed $500,000. True it is, an appeal is typically shorter than a trial and there are usually no witnesses at an appeal. However, the task of persuading a full bench of three judges that the trial judge was incorrect requires significant intellectual effort. In other words, partner time and barrister time analyzing the relevant issues tends to lead to costs which are less than trial costs but not by much (as a rule of thumb, budgeting 70% to 80% of trial costs for an appeal is a sensible start).
- Prospects of settlement: Sometimes, the prospects advice is not good but an appeal will be instituted with a view to settling the case. Aggressive litigants might decide to try to ‘deep pocket’ the other side. By continuing to litigate vigorously, one’s opponent might start to run out of funds and relent. It’s a bit like bidding strongly at an auction. Before proceeding on this basis though, it is important to remember that one’s opponent will have been galvanized by a win.
Essendon likely has less scope to settle because the respondent is a statutory authority. ASADA is not at risk of being ‘deep pocketed’. ASADA’s capacity to compromise the case is also likely to be constrained.
- Political factors: One does not have an organization without people. And people mean politics. At a corporate level, political factors might include accountability to a parent company or another division. People naturally also want to keep their jobs. Lawyers who ignore the significance of political factors when offering advice do so at their own peril!
Appeal factors specific to Essendon
Essendon’s position differs from the typical litigant because there are so many stakeholders. There are the players, the coaching and support staff, the executive, the Board, the members and sponsors. Essendon is also a member of the Australian Football League, and it must keep a close eye on these contractual arrangements. In the context of the present case, it must also deal with ASADA.
As in the case of all good football teams, with so many stakeholders there are passionate views. Many of these views compete with each other.
The Essendon Board will therefore likely consider additional factors:
- Litigation fatigue: Assuming an initial purpose of the litigation was to help protect Essendon’s membership and sponsorship base, might continuing litigation ultimately undermine it? Do members and sponsors have the energy to support the litigation during an appeal phase? Board members are likely sounding out how people feel about this as we speak.
- Timing: The players are about to begin the off-season. This may be a perfect time to resolve ADVRP issues. The timing of an appeal and judgment will not be in the hands of the Club. A Full Federal Court may not be as swift as Middleton J. Appeals often take six months to be heard, with a decision up to six months’ later.
- Reputational harm: It goes without saying that the anti-doping issues at the heart of the case have not helped the Essendon brand. Essendon, like any AFL club, needs to recruit new members and playing talent. Brand damage can last for years. The task of winning the hearts and minds of young members and new players (not to mention keeping its existing ones) is much harder when the Club is surrounded by a siege mentality.
- What price capitulation? Sometimes there is good reason to defer judgment day and launch an appeal. The reasons might be financial (e.g. ‘we need to budget the payout for the next financial year’). Or there might be other sensible reasons to continue with an appeal, at least for now.
It is very likely that Essendon will debate reasons such as the above at its next Board meeting, and likely many more. One expects that only then will it make a ‘hard hat’ decision about what to do next.
What an appeal involves
For those interested, here is a snapshot of the process in the Federal Court of Australia:
- A notice of appeal must be filed within 21 days.
- The notice of appeal contains all the grounds of appeal and is a detailed document. It takes time to prepare. One therefore does not simply lodge an appeal at the drop of a hat. Often, the lawyers will be working right up to the deadline to fine-tune the text.
- Here is a link to the appeal process available on the Federal Court website.
- Once the notice of appeal is filed, the matter will be allocated a callover date. This is an administrative hearing where a timetable is ordered for the filing of court documents leading up to the appeal. These including documents include appeal books, list of authorities and submissions.
- The next Full Court sitting dates are between 3 and 28 November 2014. Essendon may not be able to have any appeal heard then unless it can convince a court that urgency is needed. The Full Court often has a full list of appeals booked well in advance.
- The following sitting period is in 2015, namely, between 9 February and 6 March 2015.
- An appeal rarely takes longer than a day. Many take half a day.
- Expect judgment within 6 months after the appeal is heard.
The above timeframes might appear lengthy. However they are common in litigation. Justice Middleton was particularly prompt in his own approach to the Essendon and ASADA case.