Vetting and retaining counsel for major litigation matters can be one of the highest-stakes decisions an in-house leader makes. In-house leaders should consider these five critical topics regarding retention of outside counsel for major litigation matters. Though these suggestions focus on high dollar, “one-off” or highly specialized cases, they can apply to any type of case.
1. Match the selection criteria to the objectives. First, look at the organization’s priorities and preferences, both as to disputes generally and as to the commercial issues raised by this litigation. What are the commercial implications of success or failure with this case—and how is “success” and “failure” defined in this matter? Does the company want to settle the case as quickly as possible? If not, does the organization want to “litigate” the case or “try” the case? Sometimes it is difficult to tell at the early stages, and counsel may need to be prepared for both.
Counsel will need to balance a variety of considerations, ranging from lawyers who are familiar with the business, products and executives, to lawyers who regularly practice in the forum in which the case is pending. If key members of the litigation team are in a location other than where the case is pending, keep in mind that travel time can significantly add to a final bill.
Also, look for lawyer with experience with the type of case, but don’t rely exclusively on that criterion. At the end of the day, business litigation is business litigation. Whether the lawyer has experience with cases involving breaches of an officer’s fiduciary duties or experience with cases involving an asset purchase agreement that went bad may be one factor in the counsel retention decision, but it should not be the only—or even primary—factor. A lawyer who has experience with business matters and fully understands the business considerations in the case,or who will take the time to understand them, will generally be able to handle efficiently and effectively both kinds of cases.
2. Remember that litigation counsel involves a team, not a single lawyer. Insist on meeting all of the members of the team. Determine whether the team works well together. Do they have complementary skill sets? Do they have good chemistry? Be proactive in assembling the team. Otherwise, the firm will assemble the team based on who has available time, not what you need.
Also ask how they approach project management for major litigation matters. Do they use project management tools and techniques that make sense for this matter? Who will manage the work effort—the senior trial lawyer, a mid-level litigator, or someone else? Regardless of years of experience or specialized expertise, the lawyer managing the case needs to know how to get the right people on the right seats on the bus. Ask how many cases this team has worked on together. How far did these cases go through the litigation process? What was the outcome of the cases? How well did those outcomes match the clients’ objectives?
Often, in-house counsel become frustrated with bills when they see new names and faces (sometimes with high billing rates) on a major matter. Demand to know who is on the team and expect to be billed only for the efforts of the team. Be clear that you must be consulted in advance if the team roster is going to change.
But the other extreme can be problematic too. Law departments sometimes institute policies that ultimately do a disservice to some cases. For example, no more than one lawyer at a deposition, no more than two lawyers at a trial, and no billing for inner office consultations. Sometimes these limits can get in the way of efficient teamwork. Discuss any billing guidelines with outside counsel in advance so that the guidelines can be customized, if necessary, to reflect the company’s objectives for the outcome and cost of the matter.
3. Consider the cost. In-house counsel must be able to budget their outside counsel expenses, despite the inherent unpredictability of commercial litigation. If a team has relevant experience, they should be able to help with estimates and ranges for various phases of the case. Work with them to develop sensible assumptions regarding tactics and strategy to support the budget and forecasts.
Nonetheless, most firms will insist on an hourly billing arrangement or some variant (blended rates, discounts, etc.). Don’t fear an hourly billing arrangement, just know how to manage it. Insist on a case plan for the matter, and meet with counsel on a regular basis (typically monthly, but at least quarterly) to update the plan and budget.
By figuring out the end game and breaking it down to smaller and smaller tasks, a solid case plan and budget can be developed. Discuss the plan and budget with senior management for their input and concurrence on the chosen objectives and related costs. Then, evaluate what happens in the case against the plan and budget, and update both as needed, in order to ensure there are no surprises in the amount or timing of the outside counsel’s bills.
4. In addition to evaluating the team, understand the other costs of the case. Litigation support—e-discovery, contract lawyers for document reviews, the creation of trial exhibits, and so forth—represents an ever-growing portion of the cost of major litigation matters. Some law firms have vast litigation support resources on staff. Some exclusively use outside litigation support services.
Many larger companies have preferred litigation support vendors with whom they have negotiated service terms and discounts, and they insist that all of their outside counsel use those preferred vendors. While that approach can have benefits for repetitive types of litigation, for one-off commercial cases, it generally makes sense to factor litigation support resources into a choice of a team, but not to insist on changing the resources the best team customarily uses.
5. Insist on references and use them effectively. When the list for candidates has been narrowed to two or three, ask for references. Every litigator will provide references for cases that he won. Ask for some he didn’t win.
When speaking with references, drill down on budgeting and billing. Did the client think the bill was fair? Focus on fairness and value, not lowest cost.
Some lawyers have low hourly rates, and yet the total bill ends up high. These are firms that may have over-lawyered the case, or they may be inefficient. At the other extreme, some lawyers have high rates but are very efficient. And then of course there are the ones that have high rates and are still inefficient. Thus, reference checks should focus on whether the overall bill was fair and achieved the company’s goals, with reasonable visibility and predictability of overall cost based on your objectives for the case. And if it’s truly a “bet the company” case, cost of counsel may be lower down on the list of priorities.
Working through each of these issues will help in-house leaders make outside counsel retention decisions that match their organization’s priorities with the right team of lawyers for major commercial litigation.