Section Review

Thoughts on effective litigation management: An in-house counsel's perspective

"In law, nothing is certain but the expense."

- Samuel Butler


Business people hate litigation. It is at best a distraction; at worst it represents a threat to the bottom line. Litigators want nothing better than to bring home a victory for the client. They are genuinely, and understandably, proud when they prevail on a dispositive motion or at trial, or obtain a favorable settlement. While much fanfare or hand-wringing surrounds the outcome of any lawsuit, more often than not, insufficient scrutiny is given to the cost of achieving that outcome. This article offers a few thoughts from the perspective of an in-house counsel on this issue and others that impact the effective management of litigation.

To handle a lawsuit effectively takes planning and ongoing communication, much as with any other business endeavor. If the corporation is a respondent, the required planning must be done in a concentrated period of time. When the summons and complaint lands on in-house counsel's desk, the answer date can be but a few days away. Nevertheless, it is essential that in-house counsel expeditiously perform a preliminary assessment of the case in order to estimate the total potential cost of damages, outside counsel fees and other litigation costs and expenses. This assessment - including, at the very least, obtaining as much of the factual background about the matter as possible - is key to determining the most cost-effective litigation strategy for the case. The more homework that in-house counsel does in advance, the better he or she will be able to manage the direction of the case as it proceeds.

The most effective litigation management strategy requires a truly collaborative effort among the business people, in-house counsel and the outside counsel. Sometimes, the first challenge for in-house counsel is to identify the internal "client" who will take ownership of the matter. The internal client should be someone in a sufficiently senior position to make business decisions with regard to the ultimate resolution of the case. In-house counsel must provide the internal client with an initial assessment early on so that necessary financial and other resources can be allocated in a timely fashion, and must provide regular updates on a periodic basis or when significant developments occur in order to permit the internal client to make timely and accurate decisions or to secure input from others in the corporation. As the individual in the middle between the business person or people and the local counsel, in-house counsel is in the best position to ensure proper coordination, communication and effective expenditure of the corporation's funds. This is where in-house counsel adds value to the process.

The next part of the planning process for each piece of litigation involves the selection of local outside counsel. Much of the ultimate total cost of a piece of litigation depends on the selection of local counsel, a decision which most often rests with in-house counsel. As an initial matter, it must be determined if local counsel is needed at all. The answer may be "no," depending upon factors such as the complexity of the case and the level of sophistication of in-house counsel. In-house counsel may be well-equipped to handle many arbitration matters because of their detailed knowledge of the issues and the law or familiarity with the business people and processes. Also, since local court rules and customs do not come into play in arbitration, the benefit of outside counsel may be foregone, a savings to the bottom line. By contrast, a small in-house legal staff simply may not have the horsepower to deal with a single, large-scale arbitration without the assistance of outside counsel.

If the preliminary review of the relevant documents and the facts indicate that outside counsel is necessary, steps should be taken promptly to retain the most appropriate counsel. Corporations with a nationwide business footprint often have a network of preferred firms that handle its litigation, and possibly, other legal work across the country. While retaining the same firm in a particular geographical area provides a number of benefits (such as discounts from stated hourly rates or greater knowledge of the corporation's business and personnel), there may be reason to look elsewhere in certain cases. For example, if the firm does not have an office in the city where the case is pending and would want to hire counsel in that city to assist in any court appearances, it should be considered up front whether having multiple outside firms makes sense, and if so, how to avoid unnecessary overlap. In some cases it may be appropriate, but it should be discussed at the outset of the case. Even if outside counsel thinks he or she can handle the matter in another locale, in some parts of the country it is almost essential to have counsel from that immediate area.

Once the outside firm has been retained, the issue of staffing must be addressed. Only the rare case requires more than one partner and one associate, especially if significant assistance is afforded by in-house counsel, who often can provide drafts of pleadings, research memos from similar cases and significant assistance with regard to discovery. In-house counsel also should communicate clearly that transferring a case from one partner or associate to another will be approved only in extraordinary circumstances. In such an event, it should be made clear from the outset that the company will not pay for getting the new outside counsel up to speed. Also, if a matter is routine or one with limited potential liability, it may be most appropriate to have an experienced associate, rather than a more costly partner, handle the matter.

In-house counsel should discuss staffing issues, along with all facts and legal issues, as best can be determined at that time, in the transmittal letter or in a separate contemporaneous document. A comprehensive transmittal letter serves many purposes. Not only should that letter explain the case and the business entity's rules regarding litigation to the outside counsel (e.g. limitations on allowable expenses), it also must serve as an introduction to the case for anyone who picks up the file at a later date. After outside counsel has had a chance to review the file, a discussion with him or her about the efficient handling of the case is then worthwhile. Appropriate issues would include what discovery will be necessary, who will be drafting which documents, and how the case will progress from a scheduling perspective. This type of discussion will help to eliminate surprises on both sides. This is also the time to discuss with outside counsel how the case should be handled in light of the potential degree of exposure, the experience of in-house counsel and the level of involvement of in-house counsel. In-house counsel must carefully memorialize the results of any discussion on the handling of the case and circulate this to outside counsel and the business people.

Once the planning phase is over, a successful resolution of any litigation matter depends on hard work and communication among outside counsel, in-house counsel and the business people. Of course, all bills should be reviewed carefully to make sure the attorneys working on the case are billing at the agreed upon rates and that expenses are charged in accordance with the terms of any up front agreement. Bills provide a lot of information to in-house counsel on the handling of the matter at the outside firm, information that often does not come up in correspondence or telephone calls. Monthly bills will show where time is being spent and can help bring to light any unnecessary expenses - such as redundant or excessive research. The business people may or may not see the bills from outside counsel depending upon the internal financial structure of the business, but the cost of funding any litigation should always be communicated to the business people to take into consideration in determining if and when settlement is appropriate. If matters of principle are involved, or if one side or the other is emotionally attached to its position, it may be difficult to resolve the matter short of trial or an arbitration hearing. In that circumstance, it falls to in-house counsel to advocate carefully for the outcome that is in the best interest of the company as a whole. All of the expense of any lawsuit, no matter whether the expense comes from a settlement or damages award on the one hand, or from fees paid to outside counsel on the other, ultimately flows to the bottom line.

Once the particular case is over, a telephone conversation between outside counsel and in-house counsel can help address any issues that may have arisen which for one reason or another could not be dealt with sooner. This assessment tool can be effective in reviewing what went well (and less well) on both sides. Face-to-face meetings with outside counsel when they are in from out of town on another matter are also effective in maintaining a close relationship with outside counsel. In-house counsel can provide some insight into how the client's business operates; and outside counsel can often share helpful information on the industry as a whole or legal developments in general.

Achieving the optimum outcome in any litigation matter requires a cooperative effort between and among the outside counsel, in-house counsel and the business people. In-house counsel serves a vital role as the linchpin in that effort. Planning and communication coordinated through in-house counsel are the keys to reaching that goal in an effective and efficient way.

©2017 Massachusetts Bar Association