Business Litigation Reporter August 23, 2017

Partnering with Outside Counsel to Find Value

Though law firms have been handling litigation on behalf of corporate clients for decades, industrywide surveys continue to suggest that, in a significant portion of cases, these clients feel they are not receiving very good “value” for their outside litigation spend. For most clients, value is typically based on two key factors: first, that outside counsel put the client’s best case forward, and second, that the client paid a fair price for those efforts. A client may not feel that it has received good value if outside counsel failed to present the client’s best case, or if a favorable result came at a cost that exceeded the client’s expectations.

Open communication between client and outside counsel, from the start of a case through its conclusion, remains the best way to ensure the client obtains – and believes it has obtained – good value from its counsel. Recent improvements in both technology and resources at leading law firms provide tools that can also assist both in presenting the client’s best case as efficiently as possible and in maximizing the accuracy of a litigation budget.

Increasingly, helpful information is available on maximizing client value. Here are some of the ways clients and counsel can make sure the client will be satisfied with the value received for its litigation spend:

  1. Review the Litigation. Instead of just assigning a piece of litigation to counsel, discuss with prospective outside counsel the importance of the litigation to the company. Make sure counsel understands the business and reputational impact of the litigation for the company. Discuss and agree upon the litigation strategy at the outset (understanding that strategies may evolve), check that the key legal and business people at the company are on board with that approach, and make sure outside counsel is prepared to implement the agreed-upon strategy.
  2. Scope. Agree on foreseeable issues as to how the litigation will proceed. How many witnesses will there be and who are they? How many documents will need to be reviewed and produced? How many experts are anticipated? Will there be motion practice? Will opposing counsel or jurisdictional complexities create complications? Can some work be done in-house or by contract attorneys? These important considerations help to ensure that in-house and outside counsel have a baseline understanding about what the litigation will entail and what the client expects from the representation.
  3. Use Knowledge Management and Artificial Intelligence to Predict Cost. Outside counsel should assess, based on the likely scope of the matter, the projected total cost using standard hourly rates. Both the client and outside counsel should understand this cost and the assumptions on which the assessment was made. Consider leveraging the firm’s and the client’s historical data on matters similar to the case at hand to better understand the potential costs. Using internal firm resources, outside counsel should be able to identify comparable matters by matter type, jurisdiction and outcome in order to identify the range of costs required for the most likely potential results. Advanced data analytics and artificial intelligence can also yield substantial benefits here. New tools such as IBM Watson’s Outside Counsel Insights, while requiring significant up-front investment, can ultimately help clients leverage documents, time entries, work patterns and other matter information to identify inefficiencies and deviations from billing guidelines, providing greater transparency to all parties concerning work efficiency. Other vendors and applications will likely be moving into this space as the capacity and accessibility of data analytics spread. 
  4. Align Interests. Once the likely scope and estimated cost of the representation are understood, outside counsel can make a customized proposal that highlights how value can be achieved through strategically aligned interests. There is no one-size-fits-all when it comes to charging for legal services. In some circumstances it may be in both sides’ interests to use a traditional hourly rate payment structure. Or an alternative fee arrangement may be appropriate. A client may want an arrangement that entails a lower hourly rate with a success fee to counsel if a successful outcome is achieved. Or the client may want more cost certainty at the outset, and prefer a fixed-fee payment structure. This topic should be discussed at the outset to align the interests of the client and outside counsel for the particular representation.
  5. Use Knowledge Management For Streamlined Matter Execution. Knowledge management can assist outside counsel in executing matters, connecting practitioners to the substantive work product samples, exemplars, forms and know-how they need to do the work more efficiently. Companies should expect their outside counsel to leverage these resources to improve efficiencies and gain insights into the judge, forum, opposing party, opposing counsel, etc., and to use these resources and insights to manage the case to the agreed-upon budget.
  6. Communicate and Reassess. Client and outside counsel must communicate regularly to evaluate shifting factors and make appropriate adjustments. The scope of litigation often changes, for better or for worse. A matter that was anticipated to involve months of discovery and a lengthy trial may be limited by agreement of the parties or court orders. Conversely, a matter for which limited discovery was anticipated could greatly expand based on the actions of opposing counsel or the court. These kinds of changes must be assessed against initial estimates of the scope and cost of the litigation to ensure client expectations remain aligned with outside counsel.
  7. Follow-up. When the engagement has ended, schedule time for key representatives to discuss the matter and whether good value – in work product and in cost – was achieved. Examine how the value to the client changed over the life of the matter and have a concrete discussion about how to use this engagement to deepen a mutually beneficial relationship between the client and counsel in future matters.

A successful, value-driven litigation proposal makes an investment in a client in a way that is both quantifiable and meaningful to counsel and client. Execution of a value-driven proposal at the outset drives the key components of a successful lawyer/client relationship: efficiency, trust, predictability and sound legal judgment. Client and counsel should choose an approach that best aligns their interests for the particular representation at hand. They must also be able to adapt to changing goals and priorities inherent in a legal representation, and communicate regularly about these changes to foster a successful, long-term relationship.