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September 01, 2011
Cutting Litigation Costs Without Compromise
Litigation budgets are shrinking. That means lawyers need to find ways to serve clients incurring unnecessary costs. Here are some ways to do it.
Let’s face it—litigation is expensive and getting more so every year. In Fulbright’s 6th Annual Litigation Trends Survey Report, published in 2009, the international law firm Fulbright & Jaworski LLP reported its finding that the number of U.S. companies spending $1 million or more annually on litigation has increased from 45 percent in 2007 to 53 percent in 2008 with the most dramatic increases among smaller and mid-sized companies. Although most companies surveyed linked the current strained economy with increased litigation, that same economy has caused about 20 percent of companies to shrink litigation budgets, reduce litigation expenditures, and think twice before initiating litigation at all.
While some in-house departments and law firms have begun to explore alternative fee arrangements, such arrangements have not caught on in the United States as widely as anticipated. Absent such an arrangement, attorneys face increasing pressure from clients to keep litigation costs as low as possible. This article discusses some practical ways for practicing attorneys to keep litigation costs from skyrocketing and, ultimately, to keep clients happy.
Use Your Client’s Assets
One of the most important steps you can take to keep costs down is to develop and maintain an open line of communication with your client. Attorneys often spend hours zealously tackling an intricate problem in a case only to learn that the client had already addressed that same problem successfully in another case. The result? The attorney has demonstrated to his client that the client knows more about the law than the attorney, and the attorney ends up on the hook for a hefty bill that the client is not inclined to pay.
In another common scenario, an attorney presses forward with a brilliant strategy only to discover that his or her client is not on board with it. The attorney’s bullish tactics rack up high legal bills and perhaps push the case down an avenue from which there is no easy extraction.
Even though we have law degrees, years of experience in the courtroom, and the ability to run circles around over-matched adversaries, many of us fail to learn everything we should about our own clients. As part of your pre-suit investigation, interview your client about past cases and claims. Your client may have handled a similar situation before on its own or with prior counsel. Find out what worked—and what did not work—in another case. Inquire about the facts, the witnesses, the jurisdiction, the legal theories.
Once you have the full picture, you can rely on your expertise to assess how that information can be used in your case. There is no value in reinventing the wheel; you add value by making the wheel better. You know that the law can vary from district to district, and even within the same district over time. You may also recognize factual distinctions that would dictate a different outcome in your case.
You might also have success approaching counsel from prior cases involving the same opposing party. Those lawyers can be a rich source of material, even if they were unsuccessful in their litigation—perhaps especially in that situation.
Some years ago, as a young attorney, I took on a pro bono case involving an unscrupulous plaintiff (an attorney representing himself) who attempted to foreclose on a widow’s home based on a rather novel (read: ridiculous) “reference theory” of liability. The plaintiff claimed that the widow’s son had stolen tools from him while employed as his apartment manager. The mother, he theorized, was liable because she provided a good reference for the kid when he applied to be an apartment manager.
Shortly after taking on the representation of the mother, I received several phone calls from attorneys in the area who saw our name pop up on litigation alerts. These attorneys called to report that they had gone up against this particular plaintiff before. They wanted to share the plaintiff’s tactics with me,
explaining his plan of attack and offering me pointers. The information proved invaluable.
More recently, I filed a patent and antitrust case on behalf of a manufacturer who had been harmed through the misuse of a patent by a much larger competitor. That same competitor had previously sued another manufacturer for infringement of the same patent. In the course of that earlier litigation, the defendant had located witnesses in Germany who raised a serious question regarding the identity of the proper inventor of the patent in our case.
Through prior counsel on that related case, we were instantly able to locate and gain access to facts that would have taken months of discovery to uncover—if we had been able to find them at all. As with the helpful attorneys in the widow foreclosure case, counsel in the patent case were not only willing to help, but eager to help put the screws to their former adversaries. Never underestimate the power of grudges.
The client can also be a rich source of staff resources, particularly early on in the case when costs can be significant. The initial pass-through document review can be helped dramatically when you have the client’s technical staff gather the information you need. This is especially true when a review of the client’s files will require an in-depth knowledge of a technical field (as in a high-tech patent case) or when collecting particularized business information (as in a second request from the Securities and Exchange Commission). Of course, sometimes the client’s resources are not just helpful but necessary—for example, when the files to review are in a specialized format not easily understood by most attorneys, such as computer-aided-drafting files and internal databases.
Your client’s engineers and other technical staff can prove immensely helpful in patent cases in particular. They are more familiar with their own patent or products, and they have often spent years analyzing everything else in the field. They know how the patent might apply to the accused products (and how it doesn’t), and they can help locate prior art and avoid traps that would snare uninformed counsel. While you could hire an outside expert or a search firm to perform these tasks, a mountain of avoidable bills comes with those sources. Your client will appreciate both the option of using in-house resources and your efforts to keep costs low.
You should also consider using your client to call on others in the industry who might contribute to the case. We have all dealt with businesspeople who are wary of talking openly with lawyers, perhaps for fear of getting overly involved or exposing some self-incriminating facts. But when a competitor, customer, or even a complete stranger in their same position in the industry calls, these same businesspeople often prove open and insightful.
Your client’s well-honed negotiation skills may provide another way to reduce litigation costs. The client may have spent years negotiating the best deals for his or her business. In many cases, for example, the client may already have an effective information technology group or vendor with whom they have negotiated special lower rates. Use that relationship to take on as much of the document review process as you can.
The client’s connections in the industry often make it easier to find qualified expert witnesses or services that can provide helpful presentations for use at trial. For example, the client might be aware of a video production service that is already familiar with the client’s products, thereby decreasing the cost of developing explanatory videos for use in a product-liability, trademark, copyright, or patent case. Similarly, the client’s marketing professionals (whether in-house or outside) can be a cost-effective source of graphics, surveys, or data that may otherwise have to be created from scratch.
Focus Case Strategy
Perhaps the single greatest cost-saving measure you can take is establishing your overall case strategy early on so that it informs your output. A thorough pre-filing investigation is necessary. Through this investigation, you will identify the relevant facts and witnesses, the appropriate legal theories under which the case might travel, and, perhaps most importantly, whether the availability and measure of damages in the case make it worth your client’s pursuit of it at all. That last question—whether the case is worth it at all—is a difficult one to present to your client, especially if your client is anxious to file suit but you believe that the available damages do not justify the litigation costs required to get to that result. By engaging your client in an objective cost-benefit analysis of the overall case value, you demonstrate to your client your willingness and ability to help your client minimize litigation costs in every possible way. Most clients will prize that trait and reward it with repeat business.
If you and your client do decide to pursue the litigation, your pre-suit investigation will enable you to draft a narrowly tailored complaint that will help contain your client’s costs and naturally reduce the likelihood that you will have to defend against a motion to dismiss or a motion to strike. Defendants can use early case investigation similarly to narrow the scope of their answers. Your client does not benefit from an answer that contains every possible affirmative defense for every type of case, regardless of the actual case at issue.
By keeping the initial pleadings clean and simple, you lay out a clear road map for your case, you save money at the filing stage, and you minimize the chance that you will have to deal with dozens of discovery requests, a mountain of motions and letters, and hours of unnecessary deposition testimony.
Your simplification of the case also makes it much easier for the jury to rule in your favor. Juries don’t want to hear a dozen different theories of why the law says your client should prevail. They want to hear your client’s story. The simpler the story, the easier it will be for the jury to understand and buy into your theory of the case.
Once litigation begins, identify your goals before engaging in motion practice. If you think the case lends itself best to summary judgment, consider forgoing motions to dismiss, which might tip your hand and cost a lot of money.
Motions to dismiss may be effective in delaying the start of litigation, but they rarely succeed in knocking out the most damaging claims. The most likely outcome of a motion to dismiss is that the plaintiff will understand where his or her case needs more work, and the court will grant leave to amend. Congratulations! You have now spent thousands of dollars and months of your client’s time to fight a battle that has resulted in an amended complaint. Your client is now obligated to answer the complaint (as it was all along), which may have become much stronger.
Unless you have a surefire winner that will result in dismissal with prejudice, consider keeping your strategy to yourself. Rather than using a motion to dismiss to point out that the plaintiff has not adequately pled fraud, for example, point that out in a motion for summary judgment, when it is too late for the plaintiff to fix the mistake. By waiting to raise the issue, you save money by not bringing the motion to dismiss, by not having to deal with the issue in discovery, and by ending the case at the summary judgment stage.
Still, it is likely that you will have to file or reply to a motion at some point during the litigation. When you do, save costs and impress the court by presenting only your best arguments, rather than briefing every possible argument that might possibly relate to your case or motion. This strategy accomplishes at least two things: First, judges genuinely appreciate reasonable attorneys who manage to refrain from throwing every conceivable case at the judge in the hope that something might stick. In reality, your third- and fourth-tier arguments will not put your motion over the top; by including them, you run up the bills to present a brief that will not help your client. An overloaded brief may bury your strongest argument in a mountain of garbage, dooming you and your client.
Second, by bypassing the more marginal issues, your brief can focus on the real winners. With that extra time and space, your brief can be more concise and compelling. The court will appreciate a brief that gets right to the heart of the argument without wasting time on extraneous issues. Moreover, by narrowing the focus in the motion to those issues that really matter, you simplify your task going forward, presenting the parties and the court with a clear picture of the core arguments; you no longer have to waste time and money pursuing superfluous issues.
To narrow your focus properly, you need to identify the key issues. Jury instructions provide an outstanding guide to the key issues of law and fact that need to be developed during the case. By referencing the jury instructions applicable to your case, you will quickly identify what you need to prove, whether you have the evidence to prove it, and what the jury needs to see at trial to rule in your favor. By keeping these things in mind from the beginning, you can clearly define your goals for discovery and motion practice.
Just as jury instructions offer a game plan for your case, they also give you your opponent’s game plan. The jury instructions essentially tip your opponent’s hand as to the information he or she needs to get from depositions and other discovery vehicles. By preparing, you can effectively place roadblocks to your opponent’s case—not because you are withholding information but because you have anticipated and can counter the use of that information.
Sometimes, despite your best efforts to build a strong case for your client, you will be on the wrong end of the case. Even if you don’t believe you have a real chance to win, you can maximize results for your client through settlement. The sooner you can get to that point, the better for your client. Aside from the obvious cost-saving effects of ending the case early, you can strengthen your negotiation position by preventing the discovery of damaging evidence.
Defense counsel can also benefit from understanding the plaintiff’s motivation for settlement. If the plaintiff’s counsel is working on a contingent-fee basis, the longer the case drags on, the more time opposing counsel has put into the case without compensation. As a result, from the perspective of the plaintiff’s attorney, the final price of an acceptable settlement rises with every passing day. Early settlement can help a defendant keep the final settlement number comparatively low.
Develop a Cooperative Relationship with Your Opposing Counsel
But so many of us think: “I didn’t go to law school just to negotiate settlements. I suffered through that evidence class so I could make it to the courtroom. I want to be Perry Mason and Atticus Finch, tearing down my opponent’s case in a grand stroke of brilliance!” Unfortunately, that drive to beat your opponent can cost your client a lot of money.
Rather than eyeing your opponent’s jugular from the outset, strive to develop a cordial, cooperative relationship with opposing counsel early on and maintain it. A strained or outright contentious relationship between opposing counsel nearly always causes litigation costs to skyrocket. In a discovery dispute, for example, the most cost-effective way to resolve the issue begins with picking up the phone and calling opposing counsel, staying reasonable and cordial.
Of course, it is not always possible to develop a cooperative, amicable relationship with opposing counsel. At times, you face opposing counsel who simply will not play nice. At other times, you might feel so certain about the rightness of your position that you feel no need to budge. Even when this happens, try to take every opportunity to build a positive relationship between you and your counterpart whenever possible. Every bit of goodwill earned becomes capital you can spend later in the litigation.
Recent changes in the Federal Rules of Civil Procedure were enacted, in part, to encourage cost savings in litigation. For example, upcoming changes to the federal rules regarding expert discovery may have a dramatic effect on litigation costs. Although the change will be mandatory in the federal courts, agreement between counsel can have the same effect in state courts.
The change to Federal Rule of Civil Procedure 26 that went into effect in December 2010 makes preliminary drafts of expert reports and communications with other experts exempt from discovery as work product. As it stood, complex litigation often required each side to hire a testifying expert whose work was fully discoverable, as well as a consulting expert whose work was protected from discovery. The changes to the federal rules will alleviate much of the inefficient behavior that the old rule inspired.
Additional cost considerations come into play with expert witnesses. Like your attorney team, your expert team should have a good blend of experience (and credibility) and low cost. This can often be accomplished by hiring an expert with a competent staff. The staff handles the grunt work of preparing drafts of the report under the expert’s supervision, while the expert adopts the report and conveys the message during depositions and at trial.
As noted earlier in this article, your client may be the best source of experts. If you are representing a manufacturer, the world’s leading expert may be the person on the shop floor or the person who designed the product, and that in-house expert is often much more affordable than a hired expert. Keep in mind, though, that whatever benefit is gained in cost may be lost in perceived (or actual) bias if the in-house expert is appointed as a testifying expert.
A final consideration for cost savings is your choice of court. Although you might have grounds to bring the case in federal court, you may be more successful at keeping costs down if the case proceeds in state court.
The jurisprudence of the federal court system makes a summary judgment motion nearly mandatory. Virtually every case brought in federal court faces at least one dispositive motion. If you intend to take your case to trial and you have a strong case, count on spending time and money responding to summary judgment motions if you file the case in federal court. State court actions, though not immune to the increase in summary judgment practice, are less likely to face costly summary judgment motions as part of the litigation.
Similarly, the application of Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), to your federal case increases the likelihood that you will face a motion to disqualify an expert or a motion to dismiss the complaint. As outlined above, these are just the types of motions that you would like to avoid if you are looking to save costs. Proceeding in state court reduces the chance that you will spend a significant amount of your client’s resources on these motions.
Clients looking to cut costs in every corner of their budget place high value on outside lawyers and firms that offer streamlined, cost-effective litigation services without compromising strategy. Demonstrate to your clients a willingness and ability to minimize the cost of litigation by leveraging your client’s own assets, focusing your case strategy to highlight the key winning issues, and developing a cooperative relationship with opposing counsel. Your efforts will be rewarded with repeat business and enthusiastic referrals.