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Litigation Budgets

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For some of our clients, flat fees or litigation budgets are a better billing structure than the hourly fee.  We offer detailed litigation budgets to clients to show how our time is spent while working on your case.

Preparing a Litigation Plan and Accompanying Budget

Management of costs and presentation of project status are significantly improved when a litigation plan and accompanying budget are developed.   A litigation budget is not a "cap," nor is it a guarantee that fees will never exceed a certain amount.   However, the ability to give a straightforward presentation of a case in the form of an estimate will assist all parties and enable better control of the costs associated with litigation.  For this reason, litigation budgets are a helpful way to manage litigation costs while preparing for any unexpected developments.   Below are the advantages to preparing and maintaining a litigation plan and budget and a brief summary of how a budget is prepared.

 

Advantages to Preparing a Litigation Budget

There are several advantages to preparing a litigation budget.  Some advantages include:

  1. Accountability. A litigation plan and accompanying budget allow for straightforward reporting to management. When a budget is in place, both parties can function with greater confidence as to the prospects of the case at varying stages of litigation.
  2. Control. Especially in a cost-concerned market, litigation plans and budgets help monitor the resources used in a specific matter. Monitoring resources used is closely connected to the ability to monitor costs associated with those resources.
  3. Reporting. Because litigation budgets help monitor and control costs, status updates are more easily reported to corporate management at virtually any stage of the litigation.
  4. Foreseeability. Litigation budgets help those involved to anticipate and adapt to unforeseen developments in a case and prepare for the impacts of those developments at any stage in the litigation.
  5. Communication. Litigation budgets allow for more precise and timely communication between the parties. At any stage of the litigation the parties will have access to information related to the fees already incurred, the budgeted amount remaining, and any necessary updates to the plan due to unexpected events or delays.

 

Managing Litigation

Before a litigation plan and budget is created, counsel must establish and develop a working understanding of the goals of the client. Keeping these goals in mind, a litigation plan and accompanying budget are prepared. Below are the steps involved in planning, preparing, and presenting a litigation budget:

  1. Planning. What are the client's goals? All too often, attorneys forget that the end goal should always be directly connected to the client's objectives. At the outset of the representation, the client's goals should be clearly stated and understood by all parties as early as possible and well before litigation plan is prepared. Civil litigation can easily be divided into several major "phases" including (1) Opening Phase (Pleading), (2) Middle Phase (Pre-Trial Discovery), (3) Pre-Trial Motions, (4) Trial Preparation, and (5)Trial.
  2. How a Litigation Plan is Developed: With the client's goals in mind, a litigation plan is prepared. This step is necessary to ensure that the goals of the client and the steps required to achieve those goals are clearly laid out. The litigation plan should always take into account the following:
    • Goals of the client
    • Reasonableness of the client's goals
    • Method by which the client's goals are to be achieved
    • Costs associated with those goals
    • Anticipated sequence of events - providing a "timeline" of events
    • Assumptions made (i.e. if one of the objectives requires that the court grant a motion, this assumption needs to be made clearly and the alternatives should be given)
  3. How are Costs Estimated? At the end of the day, the very reason litigation budgets are prepared is to give all parties involved an idea of the costs involved in a particular matter. Evaluating the resources needed to achieve the client's goals is essential to creating a comprehensive litigation budget. Preparing a litigation budget can be difficult, but an attorney with enough prior experience litigating cases should be able to accurately predict what will happen in another case based on a quick review of the facts and issues presented.
  4. Preparing the Litigation Budget: After the litigation plan is developed and verified with the client, a litigation budget is generated that includes a reasonable estimate of the total cost of litigation and a breakdown of where those costs are incurred at each stage. The budget should always take into account the following:
    • Legal issues involved
    • Number of hours (estimated) that will be spent working on the matter
    • Experience required to work through legal issues presented
    • Technical Issues - who will be preparing documents? What technology is needed?
    • Resources - keeping in mind anticipated travel, mailing, and administrative expenses.

A method called "task-based billing" allows outside counsel to stick to the litigation plan and budget. This type of billing allows management to understand the amount of time and effort involved in relation to the type of task performed. Most electronic billing systems allow for this type of budgeting and invoices.

 

Tracking Process using Litigation Budgets

One of the advantages to preparing a litigation plan and budget as listed above is the ability to provide progress updates at any stage of the litigation upon request. At each stage, the amount of hours spent on the matter as well as the budgeted cost remaining should always be available. Because of the availability of this information, status updates and reports to law departments by outside counsel are more informative and may be quickly forwarded to management. This process saves time and resources because all parties are timely informed of the case status. Additionally, any necessary approval for changes to the budget may be timely given.

 

Potential Issues: Budgeting and Billing

There are several potential issues that may arise when litigation plans and budgets are used. Some of them include:

Unforeseen circumstances or actions by opposing counsel that affect the time spent in a particular area of litigation.
Actions taken that are not within outside counsel's control, including discovery methods and unanticipated motions by opposing counsel.
How much (or how little) work the judge requires the parties to a lawsuit to perform in a particular case.
Each matter requires a case plan that is specific to the facts and legal issues presented. Because issues may arise that were not apparent at the early stages of litigation, litigation plans and budgets occasionally need to be adjusted to reflect new information.
Matters may be sufficiently related to one another, which may require centralized discovery and research to be conducted. This will generally affect the litigation plan and budget in a positive way.


In Summary

A well-prepared litigation budget serves two major purposes. First, litigation budgets help the client anticipate costs as accurately as possible, which gives both client and attorney a broad understanding of how the case will progress and the costs involved at each stage of litigation and, more importantly, at the end of the process. Second, litigation budgets help manage the case by providing a detailed plan of counsel's expectations at all phases of litigation.  Using a litigation budget, one may easily compare case expectations and goals to the progress made in the case and can effectively manage the tasks that have yet to be completed.

In addition, litigation budgets keep counsel on track and accountable for all work performed. Using the methods above, an experienced attorney can effectively provide a "best estimate" of the cost of litigation and provide the client with a comprehensive look at the matter. If an attorney is willing to take the time and plan out a case from start to finish, chances are the end result of the litigation will be less expensive for the client and more efficient for the attorney. This process helps counsel and clients to make meaningful, well informed choices at every stage of the litigation.