Legal costs in civil litigation have been rising for years, placing more and more financial pressure on companies and individuals. According to a recent litigation cost survey, the average hourly rates for law firms continue to climb, with partners now charging an average of $598 per hour. Total discovery costs per case average a whopping $3.8 million for big cases and $290,000 for mid-size litigation matters. 

With legal spend rising every year, companies and individuals need smart strategies to control costs and avoid runaway legal bills. Unchecked legal spending can negatively impact budgets, profitability, and access to legal services. The good news is that clients have more options than ever before to actively manage legal costs.

This article will explore pragmatic strategies clients can use to rein in outside counsel costs and get better value from their legal budget. With the right oversight, planning, and fee structures, it’s possible to obtain quality legal representation without breaking the bank.

The Rising Costs of Civil Litigation 

To understand how to control legal costs, it helps to recognize why civil litigation is becoming so expensive. Several trends in recent years have conspired to drive up the cost of resolving legal disputes through the court system:

Hourly Billing Rates at Law Firms Keep Increasing – Partner billing rates at large law firms now average nearly $600 per hour, with some lawyers charging over $1,000. Associates and paralegals also command high rates for their time. As law firm salaries and overhead costs rise, so do hourly rates.

More Complex Regulations and Technology Drive Up Discovery Costs – The amount of information and data involved in litigation has exploded in the digital age. Massive email archives, texts, social media, and other electronic records all get sucked into discovery, requiring teams of lawyers and paralegals to sort through. Predictive coding and other technologies add costs.

Decline of Trials Means More Dispositive Motions – As the number of civil trials has dropped, cases today are more likely to be resolved through procedural motions, which can involve extensive briefing and argument. More motion practice adds legal hours.

Law Firm Leverage Models Encourage Overstaffing – To maximize leverage and profits, law firms have incentive to assign as many lawyers to a case as possible. Too many cooks in the kitchen can needlessly drive up legal bills.

Unnecessary Litigation Steps – Some lawyers still bill by the hour, creating incentive to drag cases out. Even with good intentions, lawyers sometimes take unnecessary steps that pad bills like over-discovery, excessive motions, and duplication of work.

With all these dynamics, it’s no wonder legal spending is skyrocketing. Fortunately, clients can counter these trends with the right strategies.

Key Strategies to Control Legal Costs

Clients have more ability to control costs than they often realize. By managing outside counsel with a disciplined approach, legal spend can be reined in substantially. Here are impactful tactics to reduce legal fees without sacrificing case quality:

Choose the Right Law Firm and Fee Arrangement 

Retaining the right law firm under the optimal fee structure provides a strong foundation for controlling costs. Key considerations:

– Seek out firms with specific expertise in your type of case. A lack of direct experience will force lawyers to learn on the job and drive up billable hours.

– Align interests through fee structures. Consider alternative fee arrangements over standard hourly billing. Outcome-based and flat fees incentivize efficiency.

– Only partner with reputable firms with a track record of reasonable billing practices. Some firms are known for excess and abuse.

– Establish billing guidelines upfront. Set guidelines on rates, hour expectations, and expenses.

Invest in Early Case Assessment and Planning

Thorough case evaluation and planning on the front-end helps streamline the process on the back-end. Smart law firms will:

– Assess the facts, law, jurisdiction, likely defenses, and risks early. This allows for better targeting of strategies.

– Develop litigation plans that focus on required elements while avoiding fishing expeditions. Some lawyers pursue every tangential angle without a strategic plan.

– Provide options and risk analysis for settlement versus continued litigation. Cases sometimes drag out when reasonable settlement is optimal.

Limit Discovery and Motion Practice

Keep document requests and interrogatories narrowly tailored. Responding to overly broad discovery creates huge expense. Where possible, stipulate with opposing counsel on mutual limits to scope. For depositions, avoid overuse and coordinate scheduling efficiently. 

On motions, be very selective in filing. Focus only on those that clearly advance the goals of the case. Resist the temptation to file purely out of gamesmanship. Before filing or responding, determine if a motion is truly necessary and likely to succeed. Decluttering motions trims costs substantially. 

Consider Alternative Fee Arrangements

Alternative fee structures create shared incentives, in contrast to hourly billing which can incentivize excess. Common alternatives include:

– Flat fees – A preset fee for all or defined portions of a case. The law firm bears risk of going over the set amount.

– Capped fees – Fees cannot exceed a set amount without client approval. Firm is responsible for overages.

– Contingency fees – Law firm only collects fee if case meets with success. Creates aligned incentive.

– Collared contingencies – Contingency fee with upper and lower limits to mitigate risk.

– Value-billing – Fee based on mutually agreed upon value delivered by firm.

Alternative arrangements make spending more predictable. Explore options to shift risk and align incentives with counsel.

Use Technology to Increase Efficiency

New legal technologies enable significant time savings while also reducing unnecessary work. AI document review can speed up e-discovery. Analytics help quickly sort case facts and strategy. Automation can streamline routine legal tasks. Choose firms open to new tech.

Control Who Works on Your Case  

Ensure staffing models align with complexity and needs of a case. Partners should not perform tasks associates can handle. Associates should not perform tasks paralegals can handle. The highest rate resource should only be deployed when essential. Avoid overstaffing a case as that creates excess coordination costs.

Maintain Realistic Expectations on Costs

Clients sometimes enter litigation with unrealistic expectations on legal spend, only to eventually experience sticker shock from mounting bills. Ask law firms upfront for case cost estimates and possible ranges. Make sure you enter litigation with eyes wide open on likely expenses. This allows for better budgeting and avoids frustration down the road.

Consider Settlement or Alternative Dispute Resolution

Litigation is slow, expensive, and risky. Where reasonable, explore settlement openings earlier in cases before costs escalate. Mediation and arbitration also offer faster and cheaper resolution than seeing a trial through. Be open to alternatives to a full trial if it makes commercial sense. Sometimes the economics support an earlier exit.

Managing Outside Counsel Effectively

Once counsel is selected, effective management is essential to control costs. Here are best practices for keeping outside firms in line with budget goals:  

Establish a Budget and Billing Guidelines

At the start of an engagement, outside firms should present a litigation budget or estimated range. Require them to discuss major assumptions behind it. Also set billing guidelines on rates, task expectations, and expense policies. Requiring upfront budgets sets the tone for discipline.

Review Bills Closely and Regularly 

Do not simply accept without question the invoices law firms submit. Require detailed time entries that break down each activity and the time spent. Scrutinize entries to flag waste, duplication, and inefficiency. Get outliers explained. Monthly or quarterly bill reviews enable early identification of mounting costs.

Enforce Budgetary Limits  

If counsel exceeds the agreed upon budget or billing guidelines, enforce contractual rights. Require a discount or waiver of fees for overages. Do not simply accept breaches, as that sets bad precedent. You must train outside firms to take budgets seriously. 

Don’t be Afraid to Challenge or Negotiate Bills

Many clients shy away from directly challenging legal bills, but this is often necessary. Lawyers sometimes make errors or include questionable charges. Flagunsupported expenses. Challenge entries that reflect duplication or inefficiency. Most firms will offer concessions or discounts if given proof. Avoiding confrontation can lead to abuses.

Conclusion

Rising legal costs should not become an inevitable fact of life for companies and individuals engaged in civil disputes. With the right oversight, expectations, and structures, it’s possible to obtain top-level legal representation without excessive spending. Aligning incentives and enforcing discipline is key.

By investing in strong case management, alternative billing models and leveraging legal technology, legal costs can be controlled. Work collaboratively with outside counsel to identify unnecessary expenses. Maintain clear communication around budgets and guidelines. Challenge unreasonable charges when warranted.

Controlling legal costs requires knowledge, skill, and active participation in overseeing outside counsel. It’s not always easy, but the savings and value delivered can make a vital difference in handling civil litigation effectively and efficiently. With a smart approach, companies and individuals alike can thrive through the legal process rather than become victims of it.