The Business of Litigation
It happens all the time—people enter into contracts with others for services, products, or interest in property. They believe that the contract is a legally binding protection against wrongdoing by the other party. It is a basic principle of law that when someone fails to perform the terms of an agreement, then that person is obligated to pay damages to the other party. Most people do not understand, though, that enforcing an agreement or seeking damages against the wrongdoer comes at a high price to the injured party.
When an individual walks into a law firm demanding justice for the breach, the attorney has the professional duty of counseling the person on his or her legal rights, if a lawsuit is commenced. An attorney should also advise the person on the business aspect of litigation, although that is not obligated by most states’ rules of professional responsibility. Contracts typically contain provisions requiring performance of certain duties or promises, and provide for an award of attorneys’ fees and costs in the event of a breach by the other party requiring enforcement by the “injured” party if he or she prevails. However, obtaining and collecting on a judgment that includes an award of costs and attorney’s fees will come at a high price, which your client may not understand.
It has been my experience that clients have an eye on the principal of the dispute, not on the personal cost. In most cases, the emotions run high, even if only money is the center of the dispute, because the idea in the client’s mind is “justice must be served” or “it’s just not fair.” Though it may be true that it is not fair for someone to renege on his or her agreement, or defraud another, at the core of lawsuits is the high cost of litigating. In addition to paying for court costs, such as filing fees, runner services, court reporter fees, or witness fees, there are attorneys’ fees that must be paid. Every minute a law firm spends preparing the case, appearing at hearings, or conducting discovery is billed to the client. Although many firms are beginning to change their fee structure to bundled services or flat rates, the cost of litigation remains high.
As an attorney, you must make it your responsibility to advise your client early on that the cost of litigation to him or her personally may be more than your client is willing or able to spend. To protect both you and your client the costs should be clearly presented in writing when the client first retains you. If your client has a clear understanding in the beginning, then the $30,000 attorneys’ fees bill will not be as much of a shock a year into the case. Additionally, whether or not there is a potential for an award of attorneys’ fees, the likelihood and cost of collecting a judgment must also be clearly stated to your client. This should become your standard of practice for every case.
Some attorneys have the idea that it is not our duty to counsel clients on business decisions in litigation. Rather, many believe that attorneys should only give advice on clients’ legal rights and positions. When it comes down to strategizing on your client’s case, assess the financial cost to your client in continuing to trial. Certainly your client will ask for an estimation of legal fees and court costs of taking the case to trial or beyond, if he or she has not already asked. Anticipate the question and present that information to your client as part of representing his or her interest. By doing so, you will appear to have a personal interest in your client’s well-being. Your client will feel like a person, not another paycheck.
The best decision for some cases may be to settle early in the case or before trial. Your client should understand that settling for less than what is owed may be the best business decision for him or her, especially if he or she is a low- or fixed-income client. Take the emotional aspect out of the case, and present settlement as a business cost-benefit analysis. Although your client may have a strong case, where the damage award may exceed $100,000, the cost of obtaining the award may be half that; then your client must pay for collecting a judgment. Thus, when a settlement offer of $75,000 is presented to your client who has expended less than $20,000 in attorney’s fees and costs, it may make more business sense to accept the offer, rather than pursuing a judgment, which may or may not be paid in the future. This concept is the same for any type of lawsuit.
Your first object should be to keep a mind on your client’s interests, not the increasing amount of fees heading toward you or your firm. Your clients will thank you for it later.
Candice A. Garcia-Rodrigo is an associate attorney at Betty-Auton Beck, A Professional Law Corporation, in Redlands, California. Her practice focuses on civil litigation and probate.
© Copyright 2010, American Bar Association.