Many of the costs a company incurs
when entering into litigation are
simply not controllable. So rather than wasting time and resources trying to
accomplish the impossible, a strategy to
manage the costs is more prudent.
“There are strategies for managing litigation costs,” says Irena Leigh Norton, a partner in the law firm of Shulman Hodges &
Bastian LLP. “But no lawyer can come in
blind and give you an accurate estimate.”
Smart Business talked to Norton about
effective strategies you can use to manage
litigation costs.
Why should companies be prepared to go to
court?
In today’s climate, every business should
be prepared to be sued. It is part of the
shift in our culture and the ‘litigation lottery’ mentality. However, you can plan for
what kind of litigation you are leaving yourself open to, and you can alter your business practices ahead of time.
For instance, maybe some of your existing procedures or policies are no longer
appropriate under new laws. Since lawyers
— unlike most business managers — monitor changes in the law as it evolves over
time, yours can tell you where the risks are,
where the concerns should be, and then he
or she can offer you preventive advice.
How can a company plan for litigation costs?
Having an ongoing relationship with an
attorney who knows your business can
help determine where you need to allocate
resources. If you wait until you are sued
and then bring in a lawyer as a ‘hired gun,’
you do not have the benefit of those insights. This ongoing investment in the relationship is a way of decreasing the eventual litigation costs when you are sued.
It is important at the beginning of a case
to meet with counsel and determine what
key strategic areas need to be addressed.
Periodically throughout the litigation
process, you should get updated estimates
and discuss strategy as events transpire.
One of the things most lawyers do is to
budget in phases. A settlement after the
trial will add very different costs than a settlement at an early mediation session midway through the discovery process. If the
suit actually goes to trial — and a maximum of 10 percent of civil matters do —
you and your lawyer should have a pretty
good idea what the expected costs will be.
What litigation costs can be managed?
So much of what happens in litigation
depends not only on your decisions but
also on your opponents’ decisions.
Discovery costs, however, are something
that can be managed. There are times
when investment in discovery costs can
pay big dividends. However, one of the
strategies that does not work is postponing
all discovery until just before trial because
you do not have the benefit of early depositions to determine the key witnesses.
Thinking strategically about discovery at
the outset of the case gets you ‘more bang
for the buck.’
Electronic discovery can be very expensive — not so much in retrieving your own
information but in gaining access to information held by the other side, particularly
if you need to involve a forensic technician.
Records over a long period of time may be
involved and some might need to be resurrected because they have been deleted from the server. In contrast, while reports
can be different, the data in computerized
accounting records are not really different
from that in the old ledger books of years
past, so discovery expenses typically will
be a lot less in cases where this information is the focus of discovery.
How does communication enter the picture?
Communication is key. As a preliminary
matter, when you are a plaintiff or a defendant, you should give your lawyer as much
information as possible: key documents,
access to company officers and personnel
with knowledge about the dispute, and
access to electronic records. Once your
lawyer has the universe of information, he
or she can suggest the most cost-effective
strategy and how discovery can be made
both strategically and cost-effectively.
One big money-waster and budget-buster
is the issue of communications between
client and lawyer. Many times — particularly in high-stakes litigation — a team of
executives might individually call the lead
attorney. Each one of those calls adds to
the total cost. As an alternative, you should
have regular strategy meetings involving
the lawyer and your entire team.
Also, certain procedures can be more
effectively handled from a financial standpoint by using the appropriate assistants,
like junior lawyers and even paralegals,
rather than the lead lawyer.
How important is having the proper insurance?
While there are differences between being
the plaintiff and being a defendant, under
the appropriate circumstances, many litigation costs can be carried by the insurer.
One of the key recommendations that
your lawyer should make is to ensure that
you have the right kind of insurance coverage for your type of business and potential
litigation exposure — for example, directors and officers and/or errors and omissions coverages. So it is a good idea to
review insurance coverage with your general counsel as soon as possible. <<
IRENA LEIGH NORTON is a partner in the law firm of Shulman Hodges & Bastian LLP. Reach her at (949) 340-3400.
