3/31/2014

What’s It Going to Cost? A Look at Major Drivers of Legal Expense

Even when liability and verdict estimates are similar among different claims, there are many factors that affect the cost of defending a case.

By Jim Pattillo

In Alabama, we recently had a record low temperature of nine degrees. That’s nothing to my friends in Chicago, but here in the South, life came to a screeching halt. Of course, Murphy’s Law dictated that my furnace went out at the same time. My first thought: How much is this going to cost me?

I promptly called Danny Morgan at FAST Appliance Service. He came out to my home and analyzed the situation only to tell me—four hours later—that I needed a new fan motor. As I wrote him a check for the new motor and five hours of labor, I asked why it took so long to figure out the problem. Truthfully, what I really wanted was to pay one pre-set price to solve the problem. Of course, I wasn’t paying for the solution. I was paying for the work and expertise of Danny Morgan, and the amount of time to diagnose and correct the problem depended heavily on the cause and appropriate solution. A new fan motor costs much more in parts and labor than it does to simply dust off the sensors that turn the heat on, but that is the hand I was dealt.

The cost of litigation is very similar. There is a never a one-cost-fits-all solution for a particular case. Even when liability and verdict estimates are similar among different claims, there are many factors that affect the cost of defending a case. Let’s examine some of those factors.

Number of Witnesses. This can be a big driver of legal expense. Decisions must be made about whom to depose and why. Some witnesses need to be deposed to eliminate surprise and to find out what they will say in support of an opposing party at trial. Others need to be deposed to provide summary judgment testimony, and some need to be interviewed only. Two similar cases in terms of potential verdict size can have vastly different costs based on the number of witnesses and how each is handled.

Volume of Documents. In personal injury cases, a plaintiff with a complicated medical history can present issues of comorbidity and preexisting medical problems. This can mean a large volume of records to review. On the other hand, a simple broken arm presents very little in terms of medical documentation to review. In commercial litigation, financial documents may require detailed review and can be voluminous. Electronic discovery can be very expensive, as well.

Frequency of Court-Mandated Appearances. In many venues, the court will hold mandatory status conferences or docket reviews as often as once a quarter. Other courts will set the most perfunctory and unopposed motions for hearing. Counsel must attend these hearings or else risk drawing the ire of the judge.

Complexity of Novel Legal Issues. Routine cases with common fact patterns usually do not require significant legal research. Others may present legal issues during the course of discovery that were not anticipated at the outset. One way to hedge against these expenses is to hire counsel with legal subject matter expertise.

Number of Parties. In addition to creating scheduling and other logistical issues, cases with numerous defendants mean multiple sets of discovery, more parties to depose, lengthier depositions, and more expert discovery. Joint defense agreements can help thin these expenses. Looking for opportunities to consolidate defenses through indemnity agreements also can help. However, the bottom line is that multiparty cases are more expensive than single-plaintiff, single-defendant cases.

Opposing Counsel. This is perhaps the most widely variable driver of expense. Effective and experienced opposing counsel actually means lower defense costs in many instances. Inexperienced counsel with nonspecific discovery can drive expenses up. Occasionally, it may be the situation that opposing counsel works up his case in a way that can intentionally drive up costs to increase settlement pressure. Many jurisdictions have rules allowing the court to award costs as sanctions for discovery abuses or frivolous claims. If you suspect that the opposing party is driving up costs unnecessarily, a review of the jurisdiction’s laws on fee recovery is in order.

Many alternative billing arrangements make an effort to control these costs in some version of a flat-rate structure or by asking defense counsel to be monetarily invested in the outcome. This can be effective for routine high-volume claims. However, the above drivers of legal expenses can be highly varied even between two otherwise similar and routine cases. As is a constant theme in handling claims litigation, continual communication about budgets and strategy is the very best way to avoid surprises.  



Jim Pattillo is a partner at Christian & Small LLP. He can be reached at jlpattillo@csattorneys.com.

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