Well, then we’ll just sue them!

Vinnie

I guess you could save a little money on counsel, if you really want to.

When working with international (especially German) clients, we sometimes get to the point where the client says “well, then we’ll just sue them.” Unfortunately, while filing a lawsuit is easy, winning anything more than a Pyrrhic victory is often hard.

There are a number of reasons for that, some of which international clients are also familiar with. In most countries, I suspect, litigation takes longer than the parties (particularly the plaintiff) might like, and involves more effort than seems necessary. Similarly, the parties are sinking cash into what already seems to be a lost cost, although in many countries they can get back what they’ve put into the litigation if they win (more on that later). Finally, collecting in any country can be a challenge, and can involve making difficult decisions about when to pursue collection and when not to.

In the United States, however, there are some additional things to consider before bringing a lawsuit. After all, bringing the lawsuit itself is markedly easier than it might be elsewhere, but successfully prosecuting one can be a lot harder. Some of those issues include:

  • As noted above, the loser doesn’t pay the fees of the winner. That means that, in calculating the damages you expect to collect, you have to deduct the expense of filing, carrying out, and collecting on the lawsuit from any award. Sure, you have all read about our seemingly generous regime of “pain and suffering” and other punitive damages, but in the average commercial dispute you can expect to knock off anywhere from thousands to hundreds of thousands of dollars from any actual damages you are awarded, and you’re not likely to get any of those extra damages to make up for it.
  • Adding to both that cost and the impact on your business is the US system of “discovery,” which allows both parties to demand documents, depose witnesses, and otherwise intrude on the daily business life of the other party. Given that flying just one executive to the United States for one day of depositions can costs thousands of dollars and three work days, that’s a cost foreign companies have to think a little more carefully about than their domestic US counterparts. And remember, that money is not coming back even if you win.
  • All of the above means that a party who can afford to win the “war of attrition” can make it difficult to collect on even larger amounts due by driving up litigation costs to the point that a smaller vendor can’t maintain the litigation long enough to collect. I suspect that’s true in most countries, but again, the prospect of never recovering those expenditures makes things more problematic.
  • And then there’s collection – an award in one jurisdiction can be hard to collect on in another, and none of that matters if the party you’ve won against has nothing to collect on. It’s important to do some research up front before filing that lawsuit, since a judgement for $250,0000 which cost you $15,000 to get is really just a loss of $15,000 if you can’t collect in the end.
  • Finally, it’s not all about money. The interruption to your business and stress caused by depositions and document collection and review can be significant, and even more so for non-US employees who aren’t used to that sort of thing. Equally importantly for the foreign employer, in some cases US discovery laws may be inconsistent with your own laws, requiring a difficult choice between compliance with US law or accepting a negative result in the US in order to comply with foreign law.

There are definitely times when a lawsuit is the right way to go, but suing “on principle” in the US rarely makes sense. A lawsuit is like any other business decision, so before filing make sure the return is going to be worth the investment.

How will the new H-1B rules impact German companies?

Zeit Online recently ran an article about announcement by the Trump administration that H-1B visas will be more closely screened than before, and that the focus on protecting US workers will increase. While these changes will (eventually) impact some companies, particularly in the tech area, many German investors will be impacted only indirectly by changes to the H-1B program.

Most small to mid-sized German companies (the so-called Mittelstand) look to two other options for their personnel needs in the USA – the L visa and the E-visa. Neither visa has a separate mechanism to protect US workers because of their limited scope and purpose, and because other limitations (such as specific qualifications or business requirements) limit their use. Neither visa has been subject to the same level of alleged abuse as the H-1B visa (although the L visa has suffered some collateral damage), and thus far neither program has been subject to the same level of animosity from the Trump administration.

The L-visa allows current or recent employees of a German company to be transferred to a US subsidiary or affiliate if they meet certain qualifications. Since the visa is for the transfer of an existing employee, and is to further the exchange of knowledge between related companies, typically only a relatively small number of people can qualify. As a result, there should be little threat to US workers on a larger scale, who wouldn’t have the knowledge necessary for the position anyway since it is specific to the transferring company.

The E-visa allows German companies who trade extensively with the US (E-1) or invest in the United States (E-2) to hire a German national in the US to oversee that trade or investment. The idea is that the investment or trade would not happen without the assistance of someone whom the investor trusts, or someone who has at least the same cultural background as the investor/trader. Since the program is limited to nationals of a specific country with specific qualifications, the overall risk posed by the program to US workers is also limited.

This is not to say that the kerfuffle over H-1B visas doesn’t impact German companies at all. First of all, when H-1B visas become difficult to obtain the strain on other visa categories becomes much greater. The L-1B visa for non-managerial workers in particular has been utilized by companies who can’t obtain enough H-1B visas, often in ways which weren’t really intended uses for the visa. As L-1Bs become more difficult to get, more employers seek to obtain the more preferable L-1A (for managers), which increases scrutiny of that category as well. Not surprisingly, all of the extra scrutiny in the L category makes the E-visa a more attractive option for German companies which, in turn, makes those more difficult to obtain.

Of course, German companies who have already managed to establish a subsidiary in the US (especially in the IT industry) often find that their help wanted ads are answered by foreign nationals, who in turn require a visa (often an H-1B) for employment. As one of my clients once mentioned to me, the German headquarters was not at all happy about having established a US entity at great effort and cost, for the purpose of having an “American” presence, only to turn around and hire Indian nationals and spend money on additional visa applications.

Overall, German companies with a solid business plan and a real need can still obtain the visas they need, although with a little more effort and scrutiny. So far, most (but not all) of those German nationals can still enter the US without too much trouble, although sometimes with more scrutiny and effort there as well. The bigger question for the US is whether the constant barrage of bad news and border control horror stories will make Germans reconsider investing in the US at all.