In this guide, experienced litigator Catherine Krow of BigHand explains how to carefully scope matters to obtain realistic litigation budgets.
Litigation is inherently unpredictable. At some point during the case, something unexpected will happen: a judge may make an adverse ruling; opposing counsel may act irrationally; bad facts may come to light that change the course or risk profile of the matter. These “surprises” cause scope changes, such as more motions (in U.S. Law, a motion is a procedural device for decision. It is a request to the judge to make a decision about the case), more depositions (in U.S. Law, a deposition is a witness’ sworn out-of-court testimony. It is used to gather information as part of the discovery process), more interviews, more documents, greater need for partner involvement in tasks, etc. If the anticipated scope of the matter was not clear at the beginning, bills can quickly spiral out of control.
As tension over costs mounts, the relationship between firm and client deteriorates. Having a well- scoped budget solves these problems by setting clear expectations for clients and firms and providing costs-per-task that can anchor the budget when circumstances change. Instead of fighting about why bills exceeded expectations, a well-scoped budget transforms the conversation between lawyers and clients into a simple math problem: e.g., three additional corporate representative depositions @ $25,000 per deposition = $75,000 budget increase.
In this practical Guide, experienced litigator Catherine Krow of Digitory Legal explains how to carefully scope matters to obtain realistic litigation budgets.
Setting a realistic budget and managing to those numbers involves planning the matter’s scope, staffing, and timekeeper supervision before the engagement begins. This Guide will focus on scoping; however, managing litigation spend requires an up-front understanding of all three elements.
Scope: The budget must explain the assumed numbers for tasks that drive costs, such as the number of interviews, discovery motions (in U.S. Law, discovery is a pre-trial procedure in which each party can obtain evidence from the other party by means of discovery devices such as a request for production of documents, etc.) or gigabytes of documents. Defining these variables allows clients to compare apples-to-apples when receiving bids from competing firms. This approach also gives clients unit costs for each task that can serve as the building blocks for fair, flexible alternative fee arrangements. See a checklist of variables at the end of this document.
Staffing: To achieve both quality and efficiency, the budget should provide insight into who is doing what in the matter. Clients can see if the budget provides partner time where they would want it (for strategic tasks such as in key depositions and trial) and uses lower-cost resources where appropriate (such as in document review and drafting of simple discovery requests).
Supervision: The budgetary expectations that were set between relationship partner and client must filter down to the timekeepers doing the work. Thus, the budget should be built from the bottom-up at a task and timekeeper level. This means that the amount of time for each task should be considered and incorporated into the budget.
Most electronic billing and timekeeping solutions are set up to incorporate the Uniform Task-Based Management System (“UTBMS”) codes for litigation adopted by LEDES.org and the American Bar Association.1
UTBMS litigation codes are a useful starting framework, but they do not provide sufficient detail because the litigation L-code “buckets” (L100, L110, L120, etc.) are too big. To compare proposals, clients need more detail. For example, proposals budgeting $20,000 versus $50,000 for L110 (or
Below is a discussion of some of the key cost-driving variables that should be quantified in a well- scoped litigation budget.
L110 Fact investigation and development
Fact investigations typically involve interviews and document review. Budgets should define the number/volume for each and average costs per interview and per gigabyte or document custodian (I recommend using mega/gigabytes because of the high variability in volume per custodian).
Complex cases often involve post-interview memos for some or all witnesses, particularly if the case is an internal investigation. Those costs should be included in the per-interview numbers.
What to scope for:
L120 Analysis and strategy
Analysis and strategy (L120) can become “dumping ground” for improperly-coded attorney time, which distorts billing data and actual vs. budget tracking.2 Thus, it is important to be clear about the budget for this element of the case and what is does and does not include at the outset.
Analysis and strategy occurs from the start of the case through discovery, so the number may be higher than expected; even one meeting a week adds up to 100 total hours over a two-year case. Weekly meetings with the team and periodic updates to the client throughout the course of the case are included in this section, as is research to determine the best course of action. Research and communications relating to specific motions, depositions, expert reports, etc. should be included in the applicable L-code categories for each of those tasks, not L120.
Written Analyses: Formal opinion memoranda lay out the facts gathered in the investigation with evidentiary citations, potential claims/defenses, and offer opinions and recommendations. They are typically expensive. These formal writings are often requested in white-collar internal investigations or Special Litigation Committee investigations. If you request a formal opinion memorandum, break out the estimate separately.
In patent cases, counsel will need to prepare written claim charts in the analysis phase. This is a standard element of patent case preparation.
Board Presentations: Board presentations are often required in securities and white-collar cases. Again, they are expensive. If they are expected, let your counsel know and ask for those costs in the budget.
L130 Experts
L130 includes the costs associated with identifying and vetting experts and reviewing/revising their reports. Time spent preparing for, taking and defending expert depositions should be included in L340.
The budget should indicate the number of expected experts by issue, including consulting experts. For example, for employment cases, you may need a vocational expert, an economist, and a psychology expert to evaluation “emotional distress” claims.
L160 Settlement/ Non-binding Alternative Dispute Resolution (ADR)
The settlement budget should include any mediations or ADR and the related briefing; time spent attending mandatory settlement conferences; and drafting/negotiating settlement documents. Expect the cost of settlement work for class action suits to be higher than most other cases because of the briefing and other court processes related to approval of class action settlements.
What to scope for:
L210 Pleadings
The L210 section includes any motions to dismiss claims that are assumed in the complaint. You will want to know whether the L210 number in your budget includes such a motion. The strategic value and likelihood of success of a motion to dismiss is highly variable and an issue you should discuss with your outside counsel.
L230 Court mandated conferences
Most courts will set periodic status conferences to discuss the case. The anticipated number and cost of each should be included in the budget. This number should not include mandatory settlement conferences, however, as they fall under L160 (Settlement/ Non-binding ADR).
L240 Dispositive motions
This section is for motions for summary judgment or summary adjudication. These motions may dispose of claims before trial, but they can be quite expensive. Discuss with your outside counsel at the beginning whether such a motion should or should not be included in the budget.
L250 Other Written Motions and Submissions
Any motions included in this section should be appropriately labeled so you can understand what they are and what each will cost. Examples of possible “other” motions include: Markman/Claim Construction motions (in patent cases), motion for change of venue, motion to remove case to Federal court, and motion to consolidate.
L320 Document Production
The volume of documents to be reviewed for document production can be extremely difficult to predict, so it is very important to understand the assumed volume and unit costs for this element of the budget. Also, carefully assess who is doing the document review. If full-rate attorneys instead of lower-cost resources review a large volume of documents, it may not be an efficient work flow.
L330 Depositions
Budgets should separate the depositions your counsel will ask for and take, from the depositions of your witnesses/employees that opposing counsel asks for and your counsel will defend. The tasks associated with taking a deposition are very different from defending one. As the client, you can control the number of depositions your counsel asks for and takes, but the number of depositions your counsel must defend is depends on opposing counsel’s requests and the Court’s rulings.
In addition, the cost of taking or defending various types of depositions can be very different. The budget should therefore identify the number of each type or rank of deposition (e.g., 2 patent inventors, 3 damages witnesses, 1 corporate representative on liability issues, etc.).
What to scope for:
L340 Expert Depositions
Include the number of expert depositions that will be taken and defended by issue.
What to scope for:
L350 Discovery Motions
Unexpected discovery battles are the cause of many exploding litigation budgets, so it is important to understand how many times your counsel expects that one of the parties will file a motion seeking the Court’s intervention on discovery issues and what each one of these motions will cost.
L390 Other Discovery
Other discovery includes, independent medical examinations (commonly used when physical or psychological injuries are alleged), site inspections, or physical testing. If a budget includes other discovery, ask your counsel to define what that “other discovery” is.
There are four key questions that should be considered when budgeting for a trial: (1) who is on the trial team; (2) which team members will be in Court; (3) how many days of trial are expected, including trial-related hearings; and (4) how long is the trial preparation period.
Trials take an enormous amount of preparation. It is not unusual for every member of the trial team to work at least 1.5 times their normal pace during trial preparation and trial, so understanding the number of people and length of time involved in trial and preparation phases is critical to budgeting for trial. The work needed to prepare for trial often expands to fill the trial preparation time, particularly in complex or high-risk cases. Thus, extensions granted at or near trial can increase costs for this phase significantly.
What to scope for:
Following these steps will make you a significantly better prepared client and helps you better communicate with your firm. Careful scoping at the beginning of a matter helps control cost more effectively throughout the engagement. Every piece of litigation is unique. The twists and turns once you enter the court domain, can create explosive cost. Pre-planning allows you to set a range and expectations with your lawyer.
About the Author: Catherine Krow founded Digitory Legal to help lawyers and in-house legal departments respond to an evolving legal market and to solve cost-management problems in ways that promote trust and collaboration. Catherine practiced law at top-tier firms for 17 years, most recently as a Litigation Partner at Orrick, Herrington and Sutcliffe.
L100 Case Assessment, Development and Administration
L200 Pre-Trial Pleadings and Motions
L300 Discovery
L400 Trial
Please note: L500 Appeal is not included in this checklist. Appellate matters are often budgeted separately after trial concludes and client knows if it will be the Appellant (more expensive role because counsel must submit two briefs, and opening brief and a reply) or the Appellee.
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