Managing Litigation Costs

By Jarret, Joseph G. | Risk Management, February 2003 | Go to article overview

Managing Litigation Costs


Jarret, Joseph G., Risk Management


Litigation. The very mention of the word often evokes fear and loathing from management, and with good reason. It is time consuming and costly, even if your organization prevails. Though traditional risk transfer and risk avoidance practices do not generally apply to litigation, the risk manager can still play an important role in developing an organization's plan for managing lawsuits and achieving early case resolution. Such a plan is essential in an era of soaring attorney's fees, expert witness fees and deposition costs as well as the practice by most jurisdictions of raising filing fees in response to budget deficits.

Alternative dispute resolution systems and presuit agreements or contacts that contain clauses requiring binding arbitration can help prevent lawsuits. But once such measures have failed, it is time to begin your litigation management program.

Selecting Your Attorney

If you serve an organization that has an in-house litigation team, you may not have the luxury of choosing an attorney. In all fairness, you may very well have a team of staff attorneys whose expertise negates the necessity of looking elsewhere. Still, you should not refrain from discussing a particularly complex or technical case with your chain of command and ultimately recommending outside counsel. Certain cases merit the services of specialists, and an overburdened in-house legal staff may lack the time, resources, expertise or experience to handle the myriad cases.

Should you decide to hire outside legal counsel, establish a selection process for judging the qualifications of any prospective attorney:

* Interview the applicant and investigate his or her reputation in the legal community as well as his or her litigation track record.

* Does the attorney have the requisite expertise in the particular body of law at issue? Questions about an attorney's expertise, experience, technical competence and delegation of duties should receive direct answers. Anything less is suspect.

* Discuss in detail the attorney's approach to litigation. Beware of attorneys who strive for quick, lucrative settlements as well as those who seem intent on dragging matters out.

* Know who is doing what at each phase of the case and object to work being improperly assigned. For instance, partner-level trial lawyers should not do work that a less costly junior partner or associate, paralegal or legal secretary can handle. Beware of double billing--the practice of sending two or three lawyers to do the work of one. This scenario often arises when a firm dispatches young lawyers to tag along experienced trial counsel "for the experience." You should not pay a firm to train its staff on your budget.

* Ensure the attorney has a clearly defined theory of the case and works toward achieving clearly defined goals.

Monitoring the Litigation Budget

Some organizations, in an effort to reduce costs, pit law firms against each other by putting their litigation work out to bid. The firms are given a synopsis of the case facts and submit a proposal that outlines trial strategy and detailed budgets. The organization then monitors the law firm it hires, comparing weekly billing updates to the estimates originally proposed. If the law firm exceeds its proposal, it is not paid. Extreme? Yes, but it does work for some organizations.

When reviewing litigation budget proposals, have the submitting firm justify its estimates. Rationales should include research on the length of time such cases take to litigate, recent judge or jury awards for like cases, and the frequency they are dismissed outright or ultimately appealed.

A cost-effective option for more routine cases, such as small claims, collections or foreclosure actions, is outsourcing for a fixed rate per case, rather than getting locked into hourly rate bills.

In order to monitor the proposed budget, insist upon itemized billing that specifically outlines all charges. …

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