At the beginning of litigation and selection of the law firm that will handle the case, the in-house lawyer must assess the case—the strengths, weaknesses, costs, etc., involved. Case evaluation is very important. Evaluation can be made through an early evaluation by outside counsel, knowledge of potential costs, use of employee interviews, and formulation of a plan/budget. When a company has a good idea of the chances of winning, as well as the potential costs, it is in a better position to determine whether to proceed to trial. Therefore, at the beginning of litigation, the company or organization should obtain a thorough evaluation of the case and use internal risk management tools to assess the cost of a trial. Is the cost of litigation worth it?
Risk analysis of litigation can be a useful tool in evaluating a case. One such tool that is often utilized is the decision tree. A decision tree analysis can be used to evaluate the probability of outcome of certain events during trial. Each event can then be analyzed in the context of the probability of the entire outcome. A decision tree risk analysis provides a systematic method of analyzing cases from the beginning
Besides the use of a decision tree, a properly formatted litigation budget should address the fees and costs of going to trial. Using a budget helps to establish a realistic framework for litigation as it should cover expected fees and costs. Remember however, a law firm’s fees at trial could skyrocket for a number of reasons, including:
-The number of lawyers involved.
-Time: Most trial lawyers will work long hours during a trial, so fees will add up.
This especially true if the trial is a complex one involving patent disputes or
Competition/ Anti-trust claims.
-The cost of expert witnesses.
To properly manage civil litigation, especially in the United States, companies need to implement LRM strategies and processes by use of an in-house Law Department that is capable of overseeing or managing outside litigation. Depending on the legal exposure of a company, it can be a full-time job. This management function will be key in properly coordinating litigation to avoid excessive costs, duplication of effort, and minimization of disruptions to a company’s business, as well as setting an effective trial strategy.
What many foreign companies doing business in the United States fail to appreciate is that an outside litigation lawyer does not necessarily have the company’s best interests in mind during litigation. Litigators want to win. Sometimes the desire to win is not in the best interests of the company. Many companies have paid a great deal of money to litigate a case when a resolution to the dispute was available had the parties tried to actively settle the matter. Remember, a trial lawyer’s business and primary goal is to win- not to settle.
An in-house legal manager, representing the company’s best interests, can help facilitate settlement once a legal risk assessment as to the validity, cost, and expense of litigation is made. In fact, during trial, a settlement is still possible and can be facilitated by in-house counsel. Therefore, the Law Department should maintain control and oversight of any litigation. A LRM program can be very helpful in managing the legal risk process as well as providing litigation oversight. Remember, litigation can result in a variety of negative issues such as:
• Loss of time.
• Potential interruption of business.
• The cost and expense of business interruption.
• Potential bad or negative publicity.
• Negative impact on the company’s brand image
• Potential loss of reputation.
As companies facing U.S. litigation are often exposed to excessive fees and costs, massive business disruption, lengthy litigation, and the unpredictability of the jury system, efficient management of the litigation process is necessary. Though, obviously, outside litigation counsel is necessary in most cases, an in-house Law Department can save the company great sums of money by managing the litigation process. Such management involves the assessment, management, and potential transfer of risk through various LRM strategies, including:
-Effective coordination of legal defense efforts in order for the company to avoid duplication of costs and effort from case to case
-Coordination of witnesses, answers and interrogatory responses, documents, and depositions
-Acting as the central site for all facts, positions, decisions on legal issues, and motions
-Development, implementation, and coordination of a defense plan
As part of an overall LRM program, a company’s Law Department must implement processes to control, reduce, and manage outside legal fees and costs. By utilizing legal risk management tools, a Law Department can proactively reduce legal fees and costs.
Management of litigation, like management of most business processes, begins with a business plan and a budget. In this case, prior to trial, when a company seeks an appropriate law firm to represent it, it needs an acceptable litigation plan and budget. Law firms many times will try to push back on the request of a budget, claiming legal costs are hard to predict. This, of course, is not the case. Experienced lawyers, whether in the United States, Europe, or Asia, are very familiar with the legal costs in their own geographic region as well as costs and expenses associated with the particular issue, such as patent litigation or class actions. Certain costs may be hard to quantify, such as defense litigation costs (which may depend on how aggressive a plaintiff is in trial), but for the most part, law firms can provide a litigation plan and budget using approximate or ballpark figures.
Effective management of litigation and therefore outside legal spend will depend on a well-prepared litigation plan and budget. This, in turn, depends on the proper identification of potential litigation issues and a plan for potentially adversarial proceedings. Questions that should be asked when discussing the plan and budget with outside counsel include:
Is this matter an actual or potentially adversarial proceeding?
Will this matter result in potential commercial litigation?
Will this matter result in potential regulatory litigation?
Will this matter lead to governmental litigation?
Kinds of Actions
An accurate litigation plan and budget will depend on the nature of the proceeding or legal matter at hand. Such matters can be classified as follows:
• Antitrust and trade disputes
• Bankruptcy and creditor actions
• Class actions (product liability, etc.)
• Labor and employment
• Governmental inquiry/informal visit
• Government enforcement proceedings
• Administrative tribunals
• Internal corporate investigations
Certain costs will be associated with the nature of the dispute. For instance, commercial litigation costs will be dictated by the cost of discovery, including: depositions, interrogatories, production of documents and things, and physical examinations, etc. Costs involved with regulatory proceedings will involve governmental investigations and internal corporate investigations and perhaps parallel proceedings, criminal as well as civil litigation.
Litigation Management Tools
Litigation management depends upon the in-house legal team or risk manager actively assessing and managing litigation by using an effective litigation management process. The litigation management process should utilize management processes as well as LRM tools.
For a corporation to effectively manage litigation, management needs to understand its role as litigation manager. If it hands over the entire litigation management process to the outside firm representing it, the costs will, of course, substantially increase! The law firm must be managed! The risk manager, corporate manager, or in-house lawyer (General Counsel, etc.) must understand his or her role as a litigation manager. That includes use of management functions and LRM tools.
• Effective coordination of legal defense efforts to avoid duplication of costs
• Coordination of use of witness and discovery
• Serve as the central site for all facts, positions, and decisions in legal issues
• Development and implementation of a defense plan
• Internal assessment of facts
• Point of contact for regulators
• Litigation budget
• Coordination of documents
• Use of employee interviews
• Use of defense plan
• Early case assessment
• Alternative fees
• Outside billing guidelines
Only through the regular use of legal risk management tools can a company or organization effectively control its outside legal spend, especially when dealing with litigation.