Litigation Management—Proactive or Reactive Budgeting?
Michael Boutot | November 1, 2004
In an era where so much focus is on cost-containment and consolidating legal services, the questions begs to be asked as to whether or not we are being proactive or reactive. Let me briefly explain the difference and then see if we can establish some check points to clarify the subject.
Generally speaking, proactive approaches first and foremost identify and focus on where you want to go. Reactive approaches focus primarily on where you have been. Put another way, proactive determines what you want to accomplish whereas reactive focuses on what you want to correct.
Before I am misunderstood, I am not suggesting we do not learn from past mistakes. In fact, to really know where we want to go, we often must draw on past failures. However, we must be cautious not to presume and make decisions solely on those past mistakes. We typically refer to reactive responses as being "knee-jerk reactions"—spur of the moment decisions based on something drastic that has occurred. Now, let's try to apply that to the concept of litigation management.
Lawsuits and litigation costs are on the rise, a statistic that really cannot be challenged no matter how you try to dice up the numbers. Thus, we sit back and evaluate what has caused all the increase and attempt to establish plans and programs to try and control these costs. In essence, we become reactive. The one area that has been heavily affected is the area of cost control and requiring attorneys now to submit budgets so costs can more accurately be projected.
Now a budget can be considered proactive, and it also can be considered reactive. Let me explain. If we are requiring budgets because we feel that we have been taken advantage of by prior panel counsel, then that is reactive budgeting. If, however, we are requiring budgets because we want to establish a true picture of where our costs are to better and more efficiently manage a litigated case file, then that is proactive.
Over-Lawyering
Getting your lawyers to stay within your budget is only part of the solution. In many instances, the real culprit in runaway litigation costs is over-lawyering—overstaffing a case with too many lawyers and allowing high-priced senior lawyers doing what junior lawyers or paralegals could do far more cheaply. You can keep this from happening in your cases—but only by taking an active role in managing your litigation just as you would any other major project your company undertakes.
However, the exact opposite can also be true. For instances, you may decide to hire a less expensive lawyer at $150 per hour as opposed to a more senior lawyer at $350 per hour and yet it takes the less-seasoned attorney three-times longer to do the work required. How you determine which attorney you use often determines whether you are of a proactive mindset or a reactive mindset. Ideally, each case should be handled on its own merits. In other words, on the less serious matters you should consider utilizing a less experienced attorney, whereas on the more serious cases a more experienced attorney. That is more proactive.
Teamwork and Budgeting
In addition, the proactive strategy involves teamwork. That is, constant communications and joining of efforts between the legal staff and the claims staff. Historically, we in the legal profession have convinced our clients that litigation strategy decisions should be made only by lawyers. Don't believe it. If there is one key fact you have to understand in order to begin to get a handle on runaway litigation costs it's this: Every litigation strategy decision—from what motions to file, to what discovery to conduct, to whether to press a novel legal theory—are critical buying decisions for your company. Sure, you need to have advice from your lawyer on how each strategy decision will affect the progress of your case, but you need to make the final decision at each juncture, on a cost-benefit basis, just like you do for every other purchasing decision your company makes.
Here's how you do it. Every month you and your lawyers need to map out in detail exactly what needs to be done in the next 60 to 90 days. Some things you will have no choice about; most things you will. For example, the other side has noticed the deposition of a key witness. You probably don't have any choice about whether he goes. You do however, have a decision to make about how much time you want your lawyers to spend preparing him. You could decide not to have your lawyers spend any time at all preparing him. You could simply hand him one of the videotapes made to prepare witnesses for business depositions and have him show up at the appointed time. Depending on the nature of the case and the experience of the witness, that could be risky—but it would be cheap. On the other hand, if you're especially cautious, you could have him meet several times with your lawyers to prepare. That would reduce the risk of having his deposition testimony hurt your case, but it will probably cost a couple thousand dollars.
For most clients, the best approach lies somewhere in the middle, but the key point here is that to really begin to control your litigation costs, you need to be involved in making these kinds of decisions. With respect to depositions, many corporate litigators overprepare their witnesses for depositions. After you've decided what needs to be done in the next 60 to 90 days, you and your lawyers need to determine the most economical way to get that work done. Your job here is to make sure your work is assigned to the right person on the law firm food chain or outsourced to a more cost-effective subcontractor. Partners shouldn't be allowed to do work associates can do just as well, associates shouldn't be doing work paralegals can do, and paralegals shouldn't be doing work secretaries or messengers can do (a common occurrence at big firms). Be careful here however. Where a job can be done by either a partner or an associate, it can sometimes be more economical to have a partner, who may complete the work more quickly, do the job.
The decisions here aren't always black and white. For example, if you've decided that your witness should have a single, 90-minute meeting with your lawyers to prepare for his deposition, you next need to decide whether he should meet with a partner or an associate, and whether a partner or an associate should attend the deposition on behalf of your company. Again, if you really want to control your litigation costs, you need to be involved in these decisions too.
Once you have determined what work needs to be done and who should do it, it should be a straightforward matter to work out a detailed 60- to 90-day budget. With this budget in hand, you'll be able to avoid at the outset much of the over-lawyering that comes from being charged for extra lawyers sitting in on hearings or depositions or from having a high priced partner do work that a less expensive associate could do.
Conclusion
The bottom line is this: budgeting can be a very valuable tool if it is done in a proactive mindset. However, if you are just creating a budget because "everyone else is doing it" and its purpose is only to create a "checks and balance," you are fooling yourself and your client(s) as to its effectiveness.
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