By Laurence M. Johnson
While at all stages of litigation a corporate client has ultimate decision making authority and controls case management, inside counsel and outside litigation counsel must see each other as partners in order to conduct the litigation efficiently and effectively.
As partners, each has responsibilities they must meet for the partnership to be effective. The inside lawyer must stay abreast of how the case is being staffed, budgeted, organized, conducted and billed. He or she must be available to litigation counsel when required.
In turn, litigation counsel is obliged to provide cost-effective, first-rate representation and include inside counsel in all decision making. The following guidelines may help corporate counsel to meet their responsibilities and obtain the best results possible.
Selecting Outside Counsel
What should you look for and expect? Trial lawyers provide a service and you are entitled to lawyers who realize this and act upon it. Your company is the client and is entitled to counsel who:
(1) promptly responds to emails and telephone calls;
(2) quickly masters the facts and applicable law and clearly evaluates both;
(3) formulates a realistic litigation strategy with insight and resourcefulness;
(4) effectively manages document discovery and motion practice;
(5) provides candid information as to the costs and benefits of particular projects, so that you can participate in planning decisions;
(6) prepares your witnesses for their depositions carefully and conducts incisive and thorough depositions of opposing witnesses;
(7) thoroughly understands your company's goals in prosecuting or defending the litigation and acts consistently with that understanding in every aspect of the case;
(8) conducts settlement negotiations effectively;
(9) prepares for trial thoroughly, but efficiently, and conducts the trial, if necessary, effectively, and;
(10) uses time efficiently and provides detailed and informative bills.
That is a pretty tall order, so how do you find counsel who can and will meet these expectations?
You interview candidate firms and discuss your needs and expectations thoroughly and candidly. If you are looking for counsel in a "big" case, look for counsel who already have experience in handling major similar cases. Talk to other inside counsel who worked with them.
Ask them to prepare a budget keyed to the important phases of the litigation (preparation of pleadings, proceedings for an injunction or for pre-judgment security, discovery, preparation of expert testimony, summary judgment, trial, appeal) that they anticipate and the tasks within those phases that will need to be accomplished. If this is foreign to them, or if the budget leaves out or underestimates steps that you think should be included, maybe they do not have the experience in managing a major case that you need.
The initial meetings should be used to discuss the management and strategy of the case. You should expect the lawyers to be candid and to resist giving you optimistic predictions and encouragement, merely because they think that that is what you want to hear.
At the same time, they should be prepared to explain and justify their evaluation of the risks and necessary tasks and their estimate of the probable cost of what will need to be done. For example, what are the opportunities for obtaining injunctive relief or security? Summary judgment? What are the considerations upon which counsel's views are based?
How much discovery will be both necessary and appropriate, given the factual situation and the amount at issue in the case? Counsel should be asked to justify their plan for managing the case at the outset and this process should be reexamined as the case progresses.
Working With Outside Counsel
Capable counsel will give you the "biggest bang for your buck" if you insist upon being an active and informed participant. "Absentee ownership" of a lawsuit just doesn't work.
Candid discussion at the beginning will inform counsel what you expect of them and require them to explain how they will deliver. Communication should continue through every stage of the litigation from the initial conference through preparation of pleadings, discovery and preparation for trial. This communication should be planned at the outset.
It is equally important to stay well informed on all significant developments (both favorable and unfavorable) and all decisions in the case. You should hear about problems when they first arise and not on the eve of a decision or, worse yet, afterwards.
For example, if outside counsel believes that a witness of yours, who is about to be deposed, does not seem willing to devote enough time and effort to preparation, or is not listening to your advice, now is the time for inside and outside counsel to work together to correct the situation before the witness hurts your case at his deposition.
You will want to be proactive in exploring strategic options and choosing cost-effective ones whose potential benefits justify the expense. You should encourage your own management to maintain a business-oriented approach to the dispute, as emotional or ego-driven management decisions are usually unwise and sometimes disastrous.
Finally, communication and responsiveness with counsel is a two way street. Outside counsel need your cooperation in providing the contacts to obtain and martial information required to respond to discovery requests, to articulate the kinds of documents you will want to obtain from your adversaries and the officers and employees of the opposing party whom you will need to depose and to access all needed documentary and testimonial evidence throughout the case. This is likely to be achieved naturally if you consult with counsel frequently to evaluate progress and developments in the case.
Fight Or Settle?
In order to participate intelligently as a partner you need to know the case and use the available tools to evaluate it. It is not enough to have trial counsel's recommendation. You should require their reasoning in sufficient detail so that you can independently evaluate it and make the ultimate decision.
You should not hesitate to critically test counsel's evaluation and call upon them to explain or defend each opinion. Critical examination of the factual and legal strengths and weaknesses of the case will sharpen everyone's evaluation and lead to a realistic settlement posture.
In this connection, it is often helpful to understand and use the tool of "decision tree analysis" -which assesses the steps necessary to obtain a favorable result, estimates the likelihood of success at each step, and calculates a quantitative estimate of the likelihood of ultimate success and thus the present fair settlement value of the case.
By way of much simplified example, suppose you are defending a claim for $10 million in damages that are plainly recoverable if there is liability. Counsel estimates that you have no significant chance of disposing of the case by judgment on the pleadings, but a 30 percent chance of obtaining a favorable summary judgment against the plaintiff, and, even if you do not obtain summary disposition, a 40 percent likelihood of prevailing at trial. There are two points in the case at which you have a chance of winning and the plaintiff has risk that the case will be lost.
Even though the odds of prevailing are against you at each stage, the overall outlook is far more favorable. The claim, discounted by the 30 percent chance that you will obtain summary judgment, is thus only worth $7 million before summary judgment and if that stage were going to decide the case finally one way or the other.
But it is not. Even if the plaintiff gets by summary judgment, he still has to go to trial, where he has a 40 percent chance of losing. Thus, the claim's ultimate value, discounted by the further 40 percent likelihood that it can be successfully defended at trial, is only $4.2 million ($7 million x .6). Thus, the fair value of the claim, before either summary judgment or trial, is well less than half of the total $10 million.
If, however, you do not settle the claim before losing summary judgment, that risk is gone for the plaintiff, and the fair value of the claim increases to $6 million. This is because the original 30 percent risk to plaintiff of losing at summary judgment is only valid before that stage has been accomplished and disappears for both parties once that stage has passed.
Decision tree analysis can thus be used on a continuing basis to update the evaluation of the case and to guide decisions both as to whether to settle it, and how much to invest in the litigation.
This tool is useful principally because of the analytical discipline that it requires, but it is well to remember that the expression of probabilities at each step expresses, in terms of quantitative probabilities, what is really a non-quantitative judgment about some aspect of the merits.
The end result, while expressed in terms of probabilities, is really no more than an opinion that synthesizes and presents in quantitative terms, the necessarily imprecise predicate opinions. But so long as its limitations are recognized, decision tree analysis is immensely useful as an evaluative tool.
It is obviously imperative to involve your management in the ongoing evaluation of the case, and development of settlement positions than to present them with a decision as to whether to approve or disapprove the end result of settlement efforts. Failure to do so is likely to lead to dissatisfaction with the result (and with your, and outside counsel's, roles in obtaining it) even if the proposed settlement is approved.
Evaluating Outside Counsel
Here, "knowledge is power." Determining whether your lawyers' efforts are cost efficient is much easier if you insist, from the beginning, upon detailed bills that specify, for each attorney and day of the billing period, what work has been done and the time charged for it. You can then evaluate the cost of representation by comparing it with your own experience and/or the time charged by other firms for comparable tasks and thus eventually establishing ranges for the reasonably efficient performance of similar tasks.
For example, bills that contain no specific detail, or uninformative descriptions like "conference" or "legal research" can mask inefficiently expended or, worse yet, imaginary time. You are entitled to know who the conference was with, and what it was about, what the topic of the research was, what it consisted of, and what end product (brief, memorandum of law, collection of cases, etc), if any, it produced.
Making your expectations in this regard clear from the beginning will inform counsel of what you expect and will encourage responsible billing practices. Of course, in order for informative bills to be useful to you, you have to be prepared to read them carefully, apply some common sense, and inquire about any questions that the bills present.
These practices are greatly preferable to establishing arbitrary "knee jerk" policies like "we only pay for the time of one attorney participating in a conference" or "we don't pay for associates who attend a hearing or deposition with a partner (regardless of whether the associate is actually performing some appropriate support task)" which are unreasonable, unrealistic and likely to lead your lawyers to feel that they are being unfairly treated.
It is better to talk with outside lawyers beforehand, and encourage them to draw reasonable distinctions between what is actually useful in the representation and what is being done primarily to further the training and education of the associate. Most responsible outside counsel are more than willing to do so and many firms have internal policies that encourage or require such distinctions.
Finally, if questions or issues about the legal bills arise, you should not hesitate to discuss them promptly and candidly with the lawyers, who should always be prepared to discuss and respond to any concerns that you have.
Laurence M. Johnson is a litigator and corporate attorney with the Boston-based firm of Davis, Malm & D’Agostine, P.C. He can be reached at (617) 367-2500 or ljohnson@davismalm.com.
January 2005 / NEIH
