Yes, You Can Control Litigation Costs

By Grant K. Riley, Esq., Riley & Associates CA/NV

Without a doubt, budgeting and controlling the cost of complex litigation matters is extremely difficult. Although experienced counsel can provide his or her client with the approximate cost of an individual task that is within the control of that attorney, it is not that easy when one takes into account the numerous variables that arise in connection with any complex case. First, most fee budgets are typically requested at the inception of a case – when the attorney knows the least about the case. Second, it is impossible to anticipate the attitudes and approach of opposing party and their counsel. Third, it is oftentimes difficult to ascertain whether the judge assigned to the case will facilitate early resolution or allow the case to wallow. Fourth, outside counsel generally have no idea, at least at the inception of the case, whether controlled or third party witnesses are apt to provide testimony that helps or hurts the case let alone where they are located.  These variables, and countless others obviously impact the budgeting process and, as a result, must be dealt with prior to creating a meaningful budget. 

Notwithstanding these problems, litigation costs can be controlled by implementing the following guidelines:

Use in-house counsel to their best advantage.  Most in-house counsel have detailed knowledge of their bank's operations and personnel. Likewise, in-house counsel are oftentimes familiar with both the factual and legal issues that arise in a particular type of case. Most important, however, is that in-house counsel can save a client significant fees and costs by identifying witnesses and documents and by providing outside counsel with a detailed overview of the facts of the case. Oftentimes, cases are assigned to outside counsel unaccompanied by the transmission of pertinent client data. This approach is a mistake and all but guarantees the unnecessary expenditure of fees and costs. 

Focus on the factual, legal, procedural and practical issues impacting the case and budget from there.  When asked to prepare a budget, most outside counsel take a two prong approach.  First, they add up the anticipated hours for each component of the case and multiply it by the attorney's hourly rate. Second, the attorney looks at the total fees and asks him or herself whether those fees match up to their expectations based on experience. Unfortunately, this approach is oftentimes the budgetary equivalent of the blind leading the blind and will render most litigation budgets meaningless. The better approach is to require outside counsel to confer with his or her client to analyze the factual, legal, procedural and practical issues impacting the case before preparing a budget. Besides analyzing the obvious questions of what happened when, where and how, outside counsel and his or her bank counterpart should work together to outline the case with the goal of determining what will be required to prove the bank's case. Requiring outside counsel to prepare a budget before this overview is accomplished will likely result in a budget that is based on erroneous assumptions and, hence, constitute a waste of time. 

As time passes, demand more and more fiscal accountability. On the assumption that outside counsel will know much more about a case three months in then they did when the case was filed, bank clients interested in fiscal control can and should ask for quarterly budgetary reviews. Periodic budget review conferences are critical to fee control and can be used to assess the status of the case and the prospects of a favorable result. These conferences allow bank clients to determine whether outside counsel are adhering to their budget and if not, why not. Any material and unexplained variance between actual and budgeted fees must be seen as notice that the case, for whatever reason, is not being managed properly. In such an event, responsible bank clients must immediately meet and confer with outside counsel in an effort to refocus the budget and overall management of the case. 

Encourage settlement. It is an irresponsible client that says “I will never settle this case”. The fiscally responsible client is the one that is willing to analyze the pros and cons of a case and is willing to compromise for the sake of reducing fees and potential long term exposure. Although the question of when and on what terms to settle is something that must be decided on a case by case basis, settlement is impossible absent a willingness to initiate mediation at all stages of the case. Although a willingness to discuss settlement is oftentimes seen as a sign of weakness, that perception is inaccurate. Having the confidence to discuss settlement is a sign of strength. Settlement discussions indicate a willingness to listen, they provide a basis to analyze the strengths or weaknesses of each side's case and oftentimes provide counsel with an opportunity to preview the opposing parties litigation strategy. 

Budgeting the complex case is a difficult task. However, with effort, focus and discipline, community banks and their counsel can use the budgeting process not only as a means of controlling costs but as a means of managing the litigation process in a manner designed to result in an favorable resolution be it through settlement or trial. 

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