Controlling Litigation Costs

While the legal costs associated with complex litigation have always been of concern to corporate legal departments, the recent precarious state of the economy has certainly heightened those concerns. Fortunately, there are proven practices and approaches that can be utilized to control costs. This article summarizes a few of the more effective techniques, most of which can be implemented with minimal disruption to the in-house legal department.

Insist Upon Continuity In Outside Counsel's Case Team

At the outset of the case, in-house counsel should work with the company's outside attorneys to select a case team tailored to the size and nature of the case. Definite cost savings can be realized by ensuring that the team is staffed with the appropriate number of attorneys at appropriate seniority levels, and includes attorneys with prior relevant experience. Equally important is requiring your firm to maintain, to the greatest extent possible, the continuity of their team throughout the life of the case. In-house counsel have every reason to be upset by firms that staff cases with a constantly revolving set of attorneys, each of whom must spend time "getting up to speed."

Some firms seek to justify this by claiming that they have groups of attorneys that specialize in particular aspects of litigation - discovery experts, brief writers who handle all motions and appeals, settlement negotiators and trial attorneys. While such specialization may make sense in some instances, typically this type of staffing leads to greater fees, as each sub-team spends time familiarizing itself with the case. The supposed trade off for such increased cost is an improvement in the quality of the representation, by having each task performed by a specialist. However, apart from the fact that most litigators can and should be trained to handle all aspects of a case, such specialized staffing carries a risk that the quality of the representation could actually decrease, especially if it is a large, complex case. Specifically, as the case is shuttled from one sub-team to another, precious case experience, perspective and lore may be lost irretrievably. As the level of specialization increases, so too does this risk.

Trial counsel may be an exception to the foregoing, given the great importance of trial counsel and the fact that some attorneys have a special gift for trying cases. However, unless the case is very simple, trial counsel should be involved in the case long before trial so, by that time, they will be fully versed in the details and nuances of the case. While there may be some talented trial attorneys who are able to digest fully the intricacies of a complex case in a matter of days, such prodigies are rare.

Probably more common than intra-firm specialization is the practice of having one law firm handle proceedings in the trial court, and then retaining another firm to handle appeals. Sometimes this is done because of dissatisfaction with trial counsel, but frequently it is simply the policy of the corporate law department to retain new counsel for appeals. Proponents of this practice argue reasonably that appellate specialists can bring objectivity, a fresh perspective and a more developed sense of what arguments will be persuasive to an appellate court. On the other hand, "switching horses" like this always increases fees and places the case in the hands of attorneys who have less knowledge of the case than trial counsel. Ultimately, the particular circumstances of the case should dictate this decision. For example, bringing in appellate counsel certainly makes sense when the case was tried by a boutique firm that specializes in trials, but new counsel is usually unnecessary in cases that were tried by a national law firm with full litigation capabilities, including substantial appellate experience.

Don't Ignore Early Settlement Opportunities

Too often, companies and their counsel do not even begin seriously to think about settlement until the case is far advanced and legal fees have already become very large. In most cases, this is a mistake. There are cases where a company may have little or no interest in settling at any time. For example, the company may have an unassailably strong case or it may want to send a message to would-be litigants that it will "fight to the finish." However, the overwhelming majority of cases settle, so it is foolish, and potentially very expensive, to defer unduly the consideration of the issue.

Throughout the case, and especially as the case moves from one phase to another (e.g., preliminary investigation, pleadings, document discovery, fact depositions, expert discovery, dispositive motions, etc.) client and counsel should evaluate how strong their case now looks, how much has been spent to date, whether further litigation is likely to strengthen, or weaken, the case and how much more is likely to be spent in the future. Such a phase-based settlement analysis can also blunt the perception by one's adversary that raising settlement "too early" is a sign of weakness. Specifically, a settlement approach can explicitly be tied to escalating costs faced by both sides - e.g., "Now that we have finished document production and are about to start costly depositions and expert discovery, it is in both our interests' to explore whether there is any possibility of a reasonable resolution."

Communicate Regularly With Outside Counsel And Closely Monitor The Case

One of the foremost means by which in-house counsel can control litigation costs is to remain involved in the case and in contact with outside counsel. At the outset, there should be discussion with outside counsel about the company's litigation goals and what resources it will be able and willing to devote to the matter. In conjunction with such discussions, outside counsel can be asked to prepare a litigation plan and budget, which will focus company and counsel on these considerations. Outside counsel should also be required to submit monthly bills with detailed descriptions of the services rendered and an itemization of expenses. New technology permits electronic tracking of actual billing against the budget, so that an automated alert is sent when billing reaches certain percentages of the budget (25%, 50%, etc.). This facilitates correction of inefficiencies in the representation, or revisions to the budget, before it is too late.

Throughout the case, in-house counsel should be consulted on all strategic and significant tactical decisions and should, whenever possible, review drafts of important suit papers. Advances in technology make it easier than ever for in-house counsel to stay in-touch and informed. For example, it has become common practice in larger cases to establish an extranet - a secure, private computer network, accessible through the internet to both outside and in-house counsel - where case filings, as well as document productions, can be placed for easy reference.

In order to ensure a regular line of communication, it is frequently a good idea, especially in large cases, to hold a regularly scheduled meeting or conference call every week. I worked on one case that was so large, and on such an expedited schedule, that in-house counsel and I had a fixed time at the end of every day for a status call. That case was exceptional; indeed, in most cases, a required daily call would likely constitute unnecessary micro-management, wasting the time of both in-house and outside counsel. However, this exception demonstrates the rule that the frequency of communication should be tailored to the complexity and pace of the litigation.

Use Technology To Reduce Billable Hours

The increasing importance of electronic or e-discovery has made the use of information support technology crucial in all but the smallest of litigations. Many of the tools available in this regard can quickly perform tasks that might otherwise have required hundreds of hours of attorney or paralegal time. Both the company and outside counsel should keep abreast of the latest developments in litigation support technology, so they know what new tools have become available, and at what cost. For example, recent years have seen the introduction of technologies that rapidly eliminate duplicate e-mails and e-mails from irrelevant senders. There is also now available technology that permits conceptual, rather than word, searches of documents. Such technology uses linguistic algorithms to group documents by content, allowing the reviewer to very quickly isolate documents that have a common theme or are conceptually similar.

Of course, substantial sums of money can also easily be wasted on purchases of technology that is more sophisticated than necessary, or inappropriate for your needs, or has already been shown to have flaws. Accordingly, one must be an informed and careful consumer of technology. Similarly, when using an outside vendor to perform e-discovery services, make sure that, before committing to the vendor, you get a complete statement of the services to be provided and the estimated time and cost of those services.

Do It Yourself

Another way to reduce litigation costs is to do as many things in-house as the company's resources permit. While companies with only a small in-house legal department will likely have to rely entirely on outside counsel, larger companies with well-staffed legal departments may be capable of doing many tasks traditionally performed by outside counsel. Indeed, in smaller cases, there may be no need for outside counsel at all, as large companies sometimes assign in-house attorneys to serve as sole counsel of record in certain types of cases.

However, even in larger cases where capable outside counsel is essential, much still can be done in-house. Among other things, in-house counsel can supervise document sweeps, identify relevant witnesses and other sources of information, recommend or select experts and consultants, handle relations with insurance carriers and brokers, participate in settlement negotiations and, as already discussed, play an active role in case strategy and cost management.

Published .