Israeli Business: Manage Litigation in the United States 

 

Israeli companies doing business in the United States are in a challenging legal environment.  Israeli business leaders are responsible to avoid litigation, and if a lawsuit is filed, to be smart in determining the correct path forward.  This article provides guidance, from the perspective of an American business trial attorney, on how Israeli executives should work with counsel to make the “right choice.”  (Of course, everything in this article applies to almost any non-U.S. business entity in the American market.)

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Habits to Avoid Litigation.  Israeli companies should have qualified counsel create standard form contracts for regular transactions and have all proposed changes reviewed by an attorney.  There are many capable Israeli attorneys who have sufficient knowledge of English and transactional experience to protect against most risks.  If there is an impending breach of contract, get an experienced attorney involved to manage the situation.  It is worth investing a small amount of money to obtain the advice which might avoid a lawsuit. 

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Challenge Your Attorney Before You Sign the Contract.  Before signing a contract, ask your attorney: “What will happen if the other party does not perform?”  Ask your counsel whether you will be able to compel performance.  Just as unwritten cultural understandings may cause a dispute between international parties, an Israeli judge and an American judge may take a different approach to adjudicate the same dispute.  Ask the worst-case scenario: “If this contemplated arrangement goes to court, can my business expectations be enforced?”

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Litigate in Federal Court.  In the United States, there are usually two courts with potential jurisdiction: a state court and a federal court.  There is statistical evidence that federal courts make decisions which are more “fair” to foreign parties than the decisions made in state courts.  So, if an Israeli company is filing the lawsuit, generally, I recommend filing in federal court.  However, there are excellent state court judges.  So, if the Israeli company is the defendant in a state court action and a good judge has already been appointed, it may be best to stick with the good judge.

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Consider Before Agreeing to Jurisdiction in State Court.  Israeli companies should never agree to state court jurisdiction in a contract with an American company.  Instead, at least insist on arbitration in a neutral location.  For example, if the contract is with a company in Silicon Valley, insist on arbitration in Los Angeles.  If the other side will not agree, then consider walking away from the deal. 

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Monitoring American Counsel.  If the Israeli company has a general counsel, the general counsel should monitor the litigation, review pleadings and discovery, review bills and participate in strategic decisions.  Properly done, monitoring counsel also provides linguistic and cultural translation so that the United States attorney and Israeli client accurately understand each other.

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Gathering Information.  American courts tend to be paper-intensive.  The attorneys will generally read all the emails, one by one, looking for information which tends to prove or disprove each element of the case.  Israeli companies need to budget significant time to gather information. It’s best to organize the information in date order.  The sooner the information is provided to your attorney, the faster your attorney can marshal the evidence for trial.

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The Trial.  In Israel, a trial is often a series of one-day hearings over several months.  A trial in the United States generally goes straight through until completed.  The entire case needs to be prepared and organized before trial.  This is expensive for the parties but more efficient for the judge. It provides a distinct advantage for the company which is better organized.  The intensive nature of the process means that preparation is critical.  

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Opportunity for Success.  Legal outcomes change financial results. With the right approach to legal matters, the Israeli company doing business in the United States can avoid litigation.  However, if there is a lawsuit, then the Israeli company should not hesitate to make its case.  Decision-making in the legal arena is an opportunity for distinction.

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Nathan Wirtschafter, Esq. is a California business trial attorney.  His law practice encompasses a broad range of business matters, and he represents clients in state and federal courts, arbitration and mediation.  He can be reached at (818) 660-2518 and ndw@ndwlaw.com.

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