Litigation Management—Proactive or Reactive Budgeting?
November 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.
by Michael
R. Boutot
International
Litigation Management Association
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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