Times Demand Due Diligence on Potential Lawsuits
by Tom Bender
With all that could be at risk, you need to be involved in management of litigation.
A lawsuit can have a dramatic effect on the bottom line of many businesses, whether you are suing or being sued. At a time when many businesses have cinched their belts to get through the prolonged economic flat-lining, there’s considerably less margin for error. How you manage that litigation can often make a big economic difference. Some things to keep in mind:
First, make sure you have the right counsel for your type of case. Just like every ball player can’t play every position, not every attorney has the same skill sets, even within the same practice areas. Ask around. Your own counsel might be helpful, but recognize that sometimes their personal and economic interests may be involved, including keeping the case within their firm when it might better be handled elsewhere, or fear that the referral might lead to a loss of business. Internet research can be helpful, but be wary of lawyers advertising divorce and litigation in the same ad. If the stakes are high, you want a specialist.
Once you get to the right potential players, ask some pointed questions about their experience and even a list of referrals. Experience counts—ask how many cases like yours they have handled; how many in the court you are going to, and the like. Avoid inexperienced lawyers, but don’t equate age with trial experience, or criminal trial experience in state court with business law experience in federal court. Get someone who has enough experience to handle your case without the need for a costly learning curve.
Make sure the personalities fit. Litigation is a long-term relationship; it helps to have personalities that mesh. Dealing with a lawsuit is hard enough without having a disagreeable counsel.
When you’ve done all that, it’s time to consider the cost/benefit analysis and get it under control:
• If you are considering filing a lawsuit, think long and hard: What do you want to accomplish? What economic benefit can be quantified from that suit, and what are the likely costs? Some attorneys may salivate over phrases like “I don’t care what it costs” or “I would rather pay you than let them get away with it,” but ongoing bills often dampen such early enthusiasm. You are in a business after all, and unless you can identify an economic benefit that will be derived from the suit, it might be better to write it all off as a bad experience and move on.
• Find out about fees; contingency arrangements are often good because they cap fees. If your case is not handled on a contingency basis, get an estimate of fees likely to be incurred.
• Ask how expenses and advances will be handled for things like copies and long-distance phone charges or payments to third parties, such as court reporters or experts’ fees. If you are ultimately responsible for paying those expenses, you want to know what they might be. No attorney likes a budget because of the uncertainties of litigation, but to make a cost/benefit decision, you need guidance on expenses, and those lawyers are in a better position to know than are you.
Now … does it still make sense to go forward? Lawsuits involve lots of variables, many of which may work against you. Do a hard business analysis first, but if you go forward, keep up to date on the budget for the case. The best way to control litigation costs is to avoid them—so if you can do so, settle early.
And if you’re being sued?
Immediately, see if your insurance provides coverage. Even if it doesn’t, there may be an obligation to provide a defense, which helps control costs. Again, choose the best counsel for your case, then consider what can be done to resolve the case before litigation. The cost of a mediator is usually split, so it is not significant when compared to the cost of even one deposition. You need to decide what it will take to defend the case and a budget for that.
Some other considerations:
• Know who will do the work on your case. Partners often shift work to associates, who have lower billing rates. That has some merit, but with most cases resolved before trial, make sure that the attorney you hire is actively involved, not just a figurehead.
• Remember: Bickering is expensive—don’t do it, and don’t allow your counsel to. The goal of litigation is to obtain information to present to a finder of fact, whether judge or jury. Cooperation among counsel doesn’t mean a lack of advocacy on your behalf, and can actually save you money by avoiding needless motions and disputes.
• Arbitration can work, but in gen-eral, it hasn’t proven to be a panacea for controlling litigation costs. Discovery can be as broad as traditional litigation, and the loss of the right to appeal is a risk. Plus, larger cases might require three arbitrators. Result? You pay for three judges when you could otherwise get one for free. They have their place—but be careful.
Tom Bender is a ahareholder with the Kansas City law firm of Walters, Bender, Strohbehn and Vaughan.
P | 816.421.6620
E | tbender@wbsvlaw.com