CONTROLLING THE COST OF LEGAL SERVICES
By: Daniel P. Simpson
It is never too late to reduce spending on legal services. If you agree, we would recommend that you carefully consider the following suggestions on how to lower your legal bills.
Spend your dollars avoiding litigation, not defending it.
We spend a great deal of money on insurance. Premium costs anticipate risk (i.e., defense costs and claims payments) plus a generous allowance for insurance company administrative overhead and profit. Given the plethora of potentially uncovered claims (for example, claims for breach of contract, non-payment, unfair competition, wrongful discharge, regulatory charges, etc.) it is not difficult to make a compelling case for legal “audits” of everything from purchase order forms to employee manuals. Since we already “know” your business, we can help you prioritize and budget reasonable expenditures on significant measures to protect your business against expensive claims and losses. Consider the following questions:
(a) Are your customers contractually obligated to pay reasonable service charges, attorneys’ fees and costs if you are forced to hire an attorney to collect amounts due?
(b) Have your employees executed confidentiality and non-disclosure agreements covering your marketing strategies, customer and supplier relationships, and intellectual property?
(c) Is your established “core” business sufficiently insulated from risks associated with future expansion plans?
(d) Given the almost unlimited grounds for employment lawsuits, have your employees agreed to forego jury trials in favor of mandatory arbitration of all employment claims?
These and many more “what if?” scenarios merely suggest the same principle that underlies the concept of preventative maintenance—an ounce of prevention…
Hourly fee billing and disbursements.
It is probably not possible to look at any invoice for legal services and rationalize the expense on an item-by-item basis. How can one justify a ten-minute phone call between lawyer and client where nothing is resolved, very little productive information is exchanged, yet a $50 charge appears on the bill? The best response is this: In many situations it is an idea conceived in an instant or a few minutes’ skillful closure of weeks of settlement discussions that produces the greatest portion of the final result. It is simply not possible to bill $50 for “unproductive” conversations and $1000 for five minutes of creative legal work that saves the day. We believe that thorough and efficient legal services performed at competitive billing rates by experienced, competent counsel will get our clients from Point A to Point B at the lowest total cost.
The fact that billing is predicated on the amount of time expended should never preclude the use of project budgets or fee “caps” for many routine legal services. We can often bill at fixed or capped fees for segments of transactional work and other common projects. Initial drafts of many agreements, business governance documents, trusts and wills can be generated quickly and cost effectively. While differing circumstances to complete a particular project will dictate a wide range of costs, it is not unusual for a law firm to stay within budget in terms of anticipated total fees.
Understanding available options and their impact on fees is critical to controlling costs. For instance, we will often discuss due diligence requirements with the client and help prioritize and delegate back that function to others, including the client’s own management. However, there can be circumstances where confidentiality or work force limitations require a considerable effort on the part of the law firm to complete much of the due diligence. Similarly, we are often asked to handle all negotiations in a particular transaction, while in others we are merely scriveners of the “handshake” deal.
Only litigation defies budgeting (the other side is largely responsible, although the courts are nearly as unpredictable). How to manage litigation is the subject covered in a separate article.
Law firms are in the service business. However, as with any service, it’s not how much you spend that ultimately determines the quality of the product. Through advance planning and well reasoned, businesslike decision making, you can control expenditures and acquire the quality legal services you need to protect and increase your assets.
This publication is intended for general information purposes only and does not constitute legal advice. The reader should consult legal counsel to determine how the law may apply to specific situations.