Legal Definitions - sandbagging

Sandbagging refers to two distinct legal tactics, one in trial litigation and another in corporate takeovers.

• In the context of trial litigation, sandbagging occurs when a lawyer observes a potential procedural error or mistake made by the court or opposing counsel during a trial but deliberately chooses not to raise an immediate objection. The lawyer's intention is to remain silent, hoping that if the error is not corrected, they can later use it as a basis to appeal the trial's outcome if their client loses. However, courts generally require attorneys to object promptly to give the trial judge an opportunity to correct any mistakes. Failing to do so often means the issue cannot be raised on appeal.

  • Example 1: During a criminal trial, the prosecutor accidentally asks a witness a question that clearly violates a pre-trial ruling prohibiting discussion of certain past events. The defense attorney immediately recognizes the improper question but remains silent, allowing the witness to answer. The defense attorney's strategy is to let the error stand, believing it could be strong grounds for appeal if their client is convicted, rather than objecting and allowing the judge to instruct the jury to disregard the testimony.

    This illustrates sandbagging because the defense attorney knowingly allowed a procedural error to occur without objection, intending to preserve it as a potential issue for a later appeal rather than seeking an immediate remedy from the trial judge.

• In the context of corporate law, particularly concerning mergers and acquisitions, sandbagging is an anti-takeover defense strategy. It involves a company targeted for a hostile takeover engaging in prolonged, often insincere, negotiations with the hostile bidder. The target company pretends to seriously consider the offer and engage in due diligence, but its true aim is to delay the acquisition process, exhaust the bidder's resources, or buy time to find an alternative, more favorable buyer (a "white knight").

  • Example 2: A large pharmaceutical company launches a hostile bid to acquire a smaller biotech firm. The biotech firm's board, unwilling to be acquired by this particular company, publicly announces it will "carefully evaluate" the offer. Privately, however, they instruct their legal and financial teams to drag out negotiations, repeatedly requesting additional documentation, scheduling meetings that yield little progress, and raising minor contractual issues, all while discreetly searching for a different, friendly buyer.

    This demonstrates corporate sandbagging because the biotech firm is intentionally prolonging negotiations in bad faith, not with the genuine intent of reaching a deal with the hostile bidder, but rather to delay the takeover and explore other options.

  • Example 3: A private equity firm makes an unsolicited offer to buy a publicly traded retail chain. The retail chain's management believes the offer undervalues the company and wants to remain independent. They agree to enter into an "exclusive negotiation period" but then repeatedly postpone key meetings, provide incomplete financial data, and introduce new, complex conditions for due diligence, effectively stalling the private equity firm's ability to finalize its offer.

    This is an example of sandbagging as the retail chain is using the negotiation process as a delaying tactic, creating obstacles and slowing progress to deter the bidder or buy time to implement a different defense strategy.