Litigation Cost Control : Civil Litigation Lawyer & Attorney : Fred Fresard Law Firm : Alternative Billing, Retainer Contracts

Other than attorney’s fees, one of the most expensive components of complex litigation is expert consultant fees. In a high exposure product liability case, for example, the attorney may retain experts in various disciplines such as accident reconstruction, toxicology, biomechanics, economics, mechanical engineering, failure analysis, etc. With each expert having an hourly rate well into the three figures, expert fees can add up quickly. In the past, when clients complained of exorbitant expert witness invoices, the typical outside counsel response was, “Well, that’s what he costs.” No more. We owe it to our clients to provide them with predictability and reasonab

leness in their litigation costs. It is our job, as the team member dealing directly with the experts, to control our clients’ outlays by getting the expert to commit to a budget, and then holding the expert to those original cost estimates.

The first step in controlling expert costs is at retention. Upon retaining an expert, the cost-conscious trial attorney should require a budget from that expert as part of the retention agreement. Litigation budgets for experts are best broken down by phases. The expert should be able to provide a reasonable estimate of the time and costs that the expert and his team will incur for the initial review phase of file materials. If a scene or product inspection is required, travel costs, travel time and inspection time can all be estimated with reasonable certainty. The next phase is the actual discovery phase. In this phase, the expert must prepare an expert report or assist in preparing responses to expert interrogatories. In addition, the expert will likely be required to give a deposition. Of course, prior to the report or the deposition, any testing or demonstrations that the expert intends to present at trial must be performed and included in the budget. The final expert budget phase is the trial preparation and trial phase. This portion of the budget involves preparation for trial testimony, attendance at trial, and testimony at trial. Again, estimating travel time and attendance time is not overwhelmingly difficult. If the expert is kept on the stand longer than anticipated, supplemental budgets can be e-mailed to the client from the war room during trial.

Both the client and counsel must understand and be receptive to the occasional need for expert budget supplementation based on unforeseen developments. Budgets are by definition best estimates based on the preparer’s experience in similar situations. Reasonable clients understand that sometimes events take unexpected turns, and additional unforeseen work is required. Accordingly, the trial lawyer must have an understanding with his client and with his expert as to the circumstances under which amended or supplemental budgets may be submitted, and the factors that will be considered on whether to approve them. With a trusting and open relationship, client and counsel can work together to control litigation costs while ensuring a successful outcome.
 

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Law department management expert Rees Morrison extolls the virtues of decision-tree budgeting in a    recent   post. Mr. Morrison is a recognized authority on in-house counsel cost control techniques, and his endorsement of this very effective cost containment tool speaks volumes. (Mr. Morrison also has an earlier post on the software available for creating these decision tree budgets.)

Virtually all corporate clients now require some kind of litigation budget for hourly work. As I have discussed in previous postings, it is a challenge to craft a budget that takes into account all the vagaries of high stakes litigation. The decision-tree method is an excellent tool for addressing these challenges. Decision-tree budgeting provides the client with a road map of the range of litigation costs she is facing. The tree breaks the case down into segments and allows the client to see what it will cost to get to various stages in the litigation.  The client can then strategize in advance how to respond to significant events, such as denial of a motion for summary judgment. The client thus gets predictability and control over her litigation costs, which is the goal of any cost-conscious litigation management professional.  

Decision trees also help the litigation attorney solidify his overall strategy in the case. When an attorney sits down and crafts a decision tree budget, the case plan takes shape. Future "if-then" decisions become readily apparent, and everyone on the case team knows where they are going. The entire case is now reduced to writing, allowing informed decision-making with regard to tactics and expenses.  Also, budget amendments can be limited to specific sections of the "tree," so both client and outside counsel have a clear understanding of what was changed and how much it changed.

Decision tree budgeting, then, accomplishes both goals of an effective litigation cost control program: it preserves the quality of the legal representation while allowing the client to predict and contain the costs of the litigation. And that's why people like Rees Morrison rave about it.  

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Robert C. Mattern of Mattern & Associates LLC has an excellent piece on Law.com about how well-managed firms can survive and thrive in the current climate.  In his article, entitled How to Face a Triple Threat: The impact of economy, cost recovery and alternative billing on Big Law, Mr. Mattern outlines the three threats facing firms today, and how a nimble management structure can allow a firm to take advantage of these challenges:

While everyone is talking about the current economic situation and the impact it has had on attorneys, it is only one facet of a three-pronged attack on the operational side of law firms and how they manage the practice of law. The other issues law firms are facing are the changes in the cost recovery landscape, and the increase of alternative fee arrangements. As with the current economic situation, both of these areas represent opportunities for the firms that embrace and adapt to the changes that are occurring in the marketplace.

Mr. Mattern notes that in the current economic climate, firms must gear their services and use of technology to respond effectively to the ups and downs of turbulent financial conditions.  He also points out that while many firms have moved to scanning and printing documents rather than copying them, most firms have failed to institute new cost recovery programs to recover the cost of scanning and printing.  Finally, he discusses the challenges in dealing with cost recovery under flat fee and performance-based billing arrangements.

Mr. Mattern's article captures three of the serious challenges being faced by law firms today. Add to these burdens inflated associate compensation structures, ever increasing outside vendor costs and decreased matter volume, and it is clear that law firms have their management hands full.  

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I often hear litigation attorneys talk about how they know how to budget a case for workup, but when it comes to trial, “all bets are off.”  I have worked up hundreds of complex cases under controlled fee arrangements, and tried dozens, and I couldn't disagree more.  Like a plumber or a doctor, any lawyer who knows his business knows how much it costs to do things.  An experienced trial lawyer should have no problem estimating how much it will cost to try a case.  

Trials have a certain starting date, a reasonably predictable ending point, and a defined team. Discovery, on the other hand, can take a lot of twists and turns. When preparing a budget for the discovery phase of a case, the litigation attorney is faced with the challenge of anticipating events that may occur over several years. Much of what will be done depends on what opposing counsel does. You might be in court on motions every week, you might not. If things really heat up, you might need to add bodies to the team. The potential scenarios are infinite, and even the most experienced litigator sometimes finds himself sheepishly asking the client to approve an amended discovery budget.

A trial budget is easier to prepare.  You are dealing with a finite period of time and a pre-determined number of people on your trial team. Every trial judge I’ve ever had has demanded that the parties tell him how long the trial will take.  If we can stand up in court and say it, why can’t we say it in a budget?

So, every trial budget should have a starting and ending point – the day the trial starts, and the day we tell the judge it will end. Combine the set period of time with your known trial team and you are are on your way to a budget.  For example, let’s say we told the judge trial will take four weeks. Now we’ve got our time box. Then we put together our trial team. Three attorneys and two paralegals will do just fine. Now we know how many people will be billing at what rate (the client is paying hourly in this example) for how many days. Everyone deserves a day off, so let’s say 6 days per week for 4 weeks. Nobody can reasonably work more than 16 hours per day. Now it’s simple math.  Billable rate times 96 hours per week for each timebiller. Then multiply by four.  Ta da!  You’ve got your legal fees budgeted. Yes, it’s that easy.

Trial costs are no more difficult. The hotel gives you room rates, you know what plane tickets cost, and you know what it costs to feed the team. Every expert in the business is now capable of preparing budgets for prep and testimony time. I have had no problem getting budgets out of my courtroom technology gurus, exhibit preparation companies, copy services and jury consultants. Add up these numbers, and now you’ve budgeted your trial costs. Add the fees and costs together, and now your client has a reasonable idea what it will cost the company to try this case.

Of course, all budgets are subject to amendment.  Things can happen that were unforeseeable and beyond our control.  I once had a trial budgeted for four weeks that went five months due to the judge's poor docket control.   But those instances are rare.  We owe it to our clients to apply our experience and advise them what it’s going to cost to try a case. It’s our job to put them at ease and give them predictability and control over trial costs. If you can’t prepare a trial budget, you are sending a message to your client that you don’t know your own business -- and that’s a message nobody wants to send or receive.    

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Imagine you need to hire a courier service for your law firm.  A business associate gives you a name, and you call the courier in for a meeting.  He tells you he is the best courier in the business.  You ask how much to deliver a package across town.  This is where is gets weird.  He says he can't tell you.  It's too unpredictable.  He could get caught in traffic.  The recipient office could be closed, and he may have to go back twice.  He might have other jobs that day.  But, he says, if you agree in advance to pay him whatever it ends up costing, he'll send you an invoice after he does the job.  You, of course, are outraged.  Does he not know his business?  Does he not know his overhead so he can calculate a fair price?  You throw him out of your office and call someone else. 

When clients hire you, why should their expectations be any different?  Why can't they get a handshake and a price up front, before they hire you?  Without a doubt, managing complex litigation requires hard work and exceptional management skills. Those of us who are hired to handle such cases must manage our case team, our client, our witnesses, our judge, our opponent, the avalanche of documents, and ultimately the jury.  Historically, we had the luxury of not having to worry too much about the fees and expenses. After all, this was a huge case for our client, and they knew lawyers were expensive. They wanted to win, whatever the cost.

Those days are gone. No client who wants to stay in business in this era of global competition will give you a blank check and send you to war.  Our well-managed clients know that lawyers are no different than anyone else from whom they buy services – whether they be plumbers, paper suppliers, or couriers. Just as when they hire any other supplier to provide goods or services, our clients are entitled to a price from us up front.  It is our job to then manage the case in a way that gives them superior legal representation at the price we accepted when we looked them in the eye and shook hands.  

“But litigation is too unpredictable!” you say.  “I don’t cheat my clients and I don’t have time to spare. Every hour I bill to that file is legitimate,” you contend.  “Our firm can’t operate without tracking billable hours,’ you argue.  Objections noted. Overruled. Clients want predictability, accountability and reasonableness in their legal bills. Give them a firm price and firm handshake, or watch the work go to someone who will.  Is it easy?  Not by a long shot.  Do you have a choice?  Not at all.  But don't take my word for it.  Look into the Association of Corporate Counsel Value Challenge, and take a peek at how Burger King and AT&T are managing their legal costs.  

It's not easy, but it can be done.  I've been doing it for years.  And that's what I blog about on this site.  This blog is devoted to lawyers who, like me, have to manage and win high exposure, complex cases while keeping a vigilant eye on what the client is spending to get there.  I look forward to sharing my experiences with you, and learning from you how you do it in your practice.

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