When managing your business, one of the last things you want to deal with is large, unexpected litigation costs. Beyond expensive legal fees, litigation also requires you to spend time and energy managing your litigation strategy, working with employees to help reduce the strain that litigation places on their time, and protecting your company’s reputation. To help plan for unexpected costs that arise during litigation, follow these five tips:
1. Engage Experienced Attorneys as Soon as Potential Litigation Arises
Before any formal legal complaints have been filed, many businesses attempt to resolve potential litigation without engaging outside counsel. While this might prove reasonable for minor customer or employee complaints, attempts to manage potentially significant legal issues without the early help of outside counsel often increase costs in a number of ways. For example, companies that attempt to resolve disputes themselves often produce documents and communications that may later harm them in court, which could have otherwise been protected by attorney-client privilege. Also, companies that wait until the last possible moment to engage outside counsel often lack the time to negotiate cost reduction strategies with outside counsel in the same manner that they could have when dealing with a problem at its earliest stages. When you see a problem that will most likely result in litigation, seek counsel right away.
2. Establish Electronic Communication Protocols and Use E-Discovery Tools
Discovery represents one of the most expensive and time-consuming aspects of litigation. You can reduce discovery costs before litigation arises by establishing clear electronic communication protocols. For example, you may consider limiting the number of corporate email accounts used in communications with customers. If all customer communications go through a select number of email accounts (e.g., email@example.com; firstname.lastname@example.org) then you may be able to reduce the amount of time it takes for employees or outside parties to collect and preserve relevant data. Similarly, you should consider electronic discovery, or “e-discovery,” tools to minimize the costs of discovery. Whether you choose to bring electronic discovery software in-house or to engage with an outside electronic discovery provider depends on your needs, though both options can reduce costs as compared to relying solely on outside counsel for discovery support.
3. Discuss Pretrial Motion and Deposition Expectations with Outside Counsel
For strategic reasons, some companies may ask outside counsel to file as many motions or depose as many witnesses as possible. However, in many cases, runaway motion practice and depositions change little about the substantive outcome of the dispute while significantly increasing costs. You should always ask outside counsel to get clearance from you and your in-house counsel before filing potentially unnecessary motions. Similarly, you may want to limit depositions to only those who will likely serve as material witnesses given the significant travel and preparation costs associated with depositions.
4. Consider Arbitration, Mediation, and Settlement Alternatives
At several points during the litigation, you may be presented (or may want to present) alternative dispute resolution mechanisms, such as binding arbitration or a settlement. These options should always be measured against the expected value of ongoing litigation. If you believe that a settlement will significantly reduce your ongoing legal costs without unnecessarily harming your company’s reputation, you should strongly consider the option. Under most state rules of professional responsibility, outside counsel have an ethical obligation to abide by your decision to settle a matter. Overall, beware the pyrrhic victory that often occurs where a successful litigation outcome costs more in counsel fees than the early settlement offer proposed.
5. Require Periodic Reports on Expected Costs and How to Close the Matter
Although outside counsel will sometimes protest the utility of setting a budget without knowing how the litigation will unfold, you should require outside counsel to periodically update you and your company on expected litigation costs. For example, if you see on the report that your outside counsel plans to bring (and bill time for) multiple attorneys for meetings, negotiations, or court dates, you can and should ask whether you can reduce costs by bringing fewer attorneys. Similarly, this report should include updates on what avenues exist to close or settle the matter based on your specific end goals.
The unexpected costs of litigation divert time, money, and energy away from your business. These tips can help you reduce the costs of litigation and get back to managing your company.