By Tim Schermetzler of CSD Attorneys at Law P.S.

As port attorneys, we spend a lot of our time advising port staff and commissions on ways to mitigate legal risks and avoid lawsuits and the courtroom.  The reality is, when running complex entities such as a port, it is inevitable that you’ll eventually find your port in some kind of litigation.  This month, I’m going to talk about some of the types of litigation a port may find itself in, tips for how ports can prepare for litigation, an overview of typical litigation, and alternative dispute resolution options.

Types of Litigation.

A port has the authority to start a lawsuit; typically, the party starting the lawsuit is called the “plaintiff” or the “petitioner.”  Examples of lawsuits a port may start include a port filing an unlawful detainer to evict a non-paying commercial tenant, a port suing a person for property damage caused by that person to port property; or a port suing a tenant or former tenant under MTCA for releasing contaminants on port property.  A port can also defend against a lawsuit filed against it, typically called the “defendant” or “respondent.”  Examples of lawsuits a port may have to defend against include personal injury claims for persons injured on port property, employment disputes, or public records act lawsuits.  When a port is a defendant, there is also a distinction between insurance company-funded litigation – where the port is being sued, and the port’s insurance company is covering the legal defense costs – and all other litigation, whether the port is a plaintiff or a defendant in a claim not covered by insurance.

Insurance company-funded litigation involves the management of a defense attorney (typically selected and paid for by the insurance company).  Ports should take care to keep their general counsel or risk manager involved because no matter who pays the bill, the lawyer represents the port and only the port.  Litigation funded by a port is a different story.  Here, the port’s general counsel or special counsel who will conduct the litigation is selected and paid by the port.

Some litigation a port may find itself in may have unique statutory or legal requirements.  For example, a port that is trying to develop property and has its permits challenged by an opposition group may find itself in a land use appeal before a hearing examiner or potentially in superior court under the Land Use Petition Act (“LUPA”) – a specific statute concerning litigation over land use matters.  Ports that take advantage of the procedures in Chapter 79.100 RCW to remove derelict vessels from the Port may find themselves in an appeal before the Pollution Control Hearings Board (“PCHB”).  You may recall from last month’s column, my colleague Sara Frase updated you on hearings in the PCHB that WPPA was a party to involving the Industrial Stormwater General Permit (ISGP).   The PCHB is a part of the Environmental and Land Use Hearings Board (“ELUHO”), which is a state-run administrative hearings office that administers quasi-judicial hearings for the PCHB, Shorelines Hearings Board (“SHB”), and the Growth Management Hearings Board (“GMHB”).  Cases before these administrative hearing boards may later be appealed to superior court, but the parties must first “exhaust administrative remedies” before going to court by trying the case in front of the administrative hearing officer or the board.

How a Port Can be Prepared for Litigation?

There are lots of things ports can do to prepare themselves for the inevitable lawsuit.  These include:

• Tort Claim Form Resolution. The port should pass a resolution appointing an agent for tort claims. RCW 4.96.020 requires each local government to appoint an agent to receive any claim for damages. The identity of the agent and the address where he or she may be reached during normal business hours must be recorded with the county auditor.  If a person seeks to sue the port in tort, they must first file with this agent a tort claim form and wait sixty days before bringing the lawsuit.  If the litigant fails to follow this step, their lawsuit may be dismissed.

• Updating Delegation of Authority to empower Executive Director to Manage Litigation. The port commission is responsible for making port decisions regarding litigation unless authority is delegated to the managing official (executive director) in the delegation of authority.  Requiring commission action for litigation decisions is problematic because the commission can only act in a meeting, which can delay decisions on litigation until a meeting is noticed and held and may require strategic litigation decisions to be made in open session.  Instead, the commission can delegate authority to the executive director to manage and supervise all litigation in consultation with port legal counsel to allow more responsive decision-making and better maintain confidential strategic information concerning the litigation.  Even with this delegated authority, it is advisable for the executive director to keep commissioners appraised of litigation matters because litigation can significantly impact the port.  These updates are often done in executive sessions.
• Know what is required for Executive Session. As noted above, even if the executive director has the delegated authority to manage and supervise litigation, it is important that the commission be regularly updated about the status.  These updates can occur in executive session under RCW 42.30.110(1)(i) for litigation or potential litigation.  The port must have the lawyer present to have an executive session under the litigation provision, publicly announce the purpose for the executive session along with the duration of the session, and the meeting minutes should reflect the exemption used and that the port’s legal counsel is present.[1]  A port does not, however, need to identify the specific legal matter or case that is being discussed in the public meeting before adjourning to executive session.
• Determine whether there is any Insurance Coverage. As noted earlier, some matters’ legal defense costs may be covered by insurance.  Your port’s general counsel can assist your port in tendering a claim to insurance in an appropriate case to determine whether the insurance company will pay for legal defense costs.  Typically, your port’s general counsel will not also act as insurance defense counsel; instead, the port’s insurance will appoint an attorney.  However, ports must keep in mind that the lawyer is working for them and that Washington law prohibits an insurance company from taking any action that puts the insurance company’s interest ahead of the insured port.  One tip is that ports should ask to be copied on the regular written reports defense lawyers send to the insurance company.
• Update your leases, license, and other contracts. Oftentimes, port litigation arises from, or could be impacted by, contractual agreements between the port and another party involved in the litigation.  For example, a port may be named in a lawsuit involving an accident that occurred on a port tenant’s leasehold.  In this instance, an appropriately drafted lease agreement with an additionally insured and an indemnification, release, and hold harmless provisions will help best protect the port from liability exposure.  Ports should work with their general counsel to develop or update form lease, license, and other agreements to ensure these provisions are in port agreements.
• Establish document management protocols. Because of the Public Records Act, ports should have a system for management of documents and records.  Oftentimes, when the port is involved in litigation or threatened litigation, the port will receive a public records request for documents related to the incident.  While responses to public records requests are often part of litigation, there are some important distinctions between public records responses and responses to document requests in litigation.  In litigation, documents are provided as part of the discovery process, which is discussed more below.  Typically, early in a litigation, parties issue a litigation hold letter.  This letter is a written directive to the other party in a litigation to preserve all documents, including electronically stored information and physical documents relevant to anticipated or pending litigation.  Failing to preserve records could result in a court later imposing penalties or sanctions under Court Rule 37 for destruction or “spoilage” of evidence.

What Does Typical Litigation Involve?

Often, before litigation makes its way to the courtroom, there are demand letters sent to the parties and negotiations between the parties to see if an out-of-court resolution is possible.  While many cases don’t settle until after a lawsuit is filed, settling before either party files in court saves money on attorneys’ fees and can reduce the potential for negative publicity.

If out-of-court negotiations aren’t successful, then a party may commence a lawsuit or other action by filing in court or with an administrative hearing officer or board as discussed above.  Note that for certain claims there is a time period during which a party must bring its claim, and if the party fails to timely bring that claim, then they are prevented from pursuing it further.  This is known as the statute of limitations, or SOL.  SOL is an acronym for another phrase which aptly fits this situation as well.  In court, a lawsuit is commenced by filing a complaint (brief summary of the facts and legal basis for the claims) and a summons (an order to answer the claims made in the complaint).  After the complaint is filed, the defendant must file and serve a written answer to the complaint, generally within 20 days, which lists affirmative defenses – reasons why the plaintiff’s claims should fail.  The answer to a complaint can also include claims against the person starting the lawsuit – this is called a counterclaim.  The answer may also try to bring in a third party to the litigation by making claims against that party.  The summons, complaint, and answer are often referred to as the initial pleadings.

After the initial pleadings are filed, the parties engage in the discovery process.  Discovery is designed to allow each party to fully understand the other party’s position and to see what evidence the other party may have concerning the dispute.  Each side can send written questions – “interrogatories” and seek documents – “requests for production.”  A party must answer these questions under oath.  Increasingly, lawyers are asking for all electronic documents in the possession of a port using both the court rules and the Public Records Act.  Care should be taken to preserve all relevant documents when a port first senses possible litigation and then devote sufficient staff time to get the answer correct and produce all relevant documents.  As the written discovery progresses, the parties will seek to question the other party, their employees, and other witnesses under oath before a court reporter and sometimes a videographer – a “deposition.”  Since a port can’t “speak,” the other party submits a list of topics and the port is required to designate a person to be a “speaking agent” on each topic.  These speaking agents are also called Court Rule 30(b)(6) witnesses.  They literally answer the questions by saying “the port . . .”  Each 30(b)(6) witness is required to understand the collective knowledge of the port and its past and present employees on the assigned topic.  So, they have to review all relevant documents and talk with anyone in the port with information on the topic prior to the deposition.  The lawyers help prepare the documents and prepare the 30(b)(6) witness.   Individual port employees may also be placed under oath and deposed as to their personal knowledge.  In those instances where not called as a 30(b)(6) witness, the port staff should not speak on behalf of the port.  Here again, care should be taken to work with the port’s attorney to prepare for these depositions because the written transcript and the videotape can be used at a later trial.

Alternative dispute resolution (“ADR”) typically refers to negotiation, mediation, and arbitration – or alternatives to proceeding to trial.  Negotiation occurs between the parties or their attorneys, trying to reach a settlement to a dispute.  Typically, these negotiations are done with the understanding that discussions and offers made to settle a matter will not be used against a party later in court should the parties not reach an agreement.  Evidence Rule 408 bars the use of settlement offers and statements in court proceedings to prove or disprove the validity of or amount of a disputed claim.  Mediation is a non-binding process where an uninvolved individual – the mediator – facilitates settlement discussions in an attempt to get the parties to agree to some resolution.  Arbitration is more formal than mediation and often has a binding resolution or decision issued following a hearing by a person serving as an arbitrator.  ADR can happen at any stage of litigation, but often mediation or arbitration occurs following discovery when the parties have a better understanding of the evidence, claims, and exposure in a case.  If an agreement is reached in negotiations or mediation, then a written settlement agreement is signed by the parties.  If a matter proceeds to arbitration, the arbitrator will issue a decision, similar to a court decision, awarding relief to the prevailing party.

After discovery is underway, a party may file a dispositive motion, sometimes referred to as a summary judgment motion.  A summary judgment motion is brought by a party on all or some of the claims in a case.  For the claims that a party seeks summary judgment on, that party must show that the claim can be decided by the judge based on the law and undisputed facts of the case.  This is a difficult standard to meet because any disagreement about a relevant fact to that claim can defeat this motion.  If a party prevails on a summary judgment motion, then the case may be entirely decided, or the issues for trial may be narrowed.

If there are claims remaining following dispositive motions, that means those claims involve a dispute over facts – which requires a trial to resolve.  The purpose of a trial is to have the trier of the facts (either the jury or the judge in the case of a bench trial) hear from witnesses, review the evidence, and decide or resolve any disputes the fact.  Once these factual disputes are resolved, the law can be applied to those facts to render a final decision.  A trial is the end of the road for litigation unless an appeal is filed.  Typically, appeals must be filed within 30 days following the final decision.  Appeals are typically heard first by the Court of Appeals and then, if further appealed, by the Supreme Court at the state level.  At the appellate level, the parties cannot introduce new issues or claims and must argue based only on the factual record created during trial.  There are no juries on appeal; rather, the case is decided by a panel of judges (typically three judges) or by the entire panel of judges (also referred to as en banc, meaning “on the bench”).  These judges vote on the decision, with the majority vote prevailing.  Decisions at the appellate level courts are written and can carry precedential value, meaning that they could establish a binding legal rule of law for future courts to apply to similar cases.

It is rare that a case makes it to trial, and even more unlikely that a case will reach the appellate courts, but understanding the possible path a case may take through litigation, along with the associated risks and costs, often helps parties make informed decisions about how they manage litigation.  Avoiding litigation altogether is not likely given the work of ports; however, understanding the basic processes can help ports best prepare for and manage litigation effectively.

As always, if you have questions, work with your port’s legal counsel to address your specific questions.  If you have a question for Knowing the Waters, please e-mail me at tschermetzler@csdlaw.com.

[1] RCW 42.30.110(2).