Chapter § 1.02 Pressing Issues

• Jurisdiction: United States
• Publication year: 2020

§ 1.02 Pressing Issues

[1] Cost

One of the most pressing issues in-house counsel face is addressing and controlling the spiraling costs of litigation. Given that in-house legal departments are generally a cost center rather than a revenue center, in-house counsel must attempt to achieve beneficial results economically. This is a primary area of concern: “At the end of the year” we “look at what is spent on litigation. We strive to make that number smaller every year, and that is a big challenge.”⁶ In-house counsel are an integral part of corporate business teams, and budgeting is often a major focus for these teams. They cannot afford to tolerate exceeding budgets or missing profit targets.⁷ Outside counsel is a cost that in-house corporate litigation managers carefully consider; these managers seek outside counsel who will mirror corporate management and cost models, and the most valuable outside counsel provide monetary forecasts and stay within the budgets they provide.

[2] Unpredictability of Litigation

The unpredictable nature of litigation and the expense of e-discovery are two major challenges to budgeting for legal expenses. Litigation is inherently unpredictable. At the outset of most major litigation, the parties do not know all of the facts necessary to accurately assess the prospects of a case, its complexity, and its length. Additionally, the course of litigation depends to a large extent on the strategy and tactics chosen by opposing counsel, choices that are somewhat limited by legal ethics and the client’s resources. Judges can also have an unpredictable effect on litigation via their responses to motions and by their decisions on the scope of discovery. Accordingly, it is often quite difficult, at the start of litigation, to ascertain how much the litigation will cost.

Compounding this uncertainty, e-discovery can be very expensive.⁸ One corporate litigator described a lawsuit in which the e-discovery costs exceeded the legal fees,⁹ and this experience doesn’t appear to be unusual. There are many examples of e-discovery horror stories: An appellate court affirmed an order holding the Office of Federal Housing Enterprise Oversight in contempt for not meeting a discovery deadline after the agency spent $6 million (or nine percent of its entire budget) in a futile attempt to comply with the deadline.¹⁰ In another case, a party was said to have spent $3 million on e-discovery in just five months.¹¹

The uncertainty of litigation costs often forces companies to be “reactive” within the very broad outlines of a budget rather than proactive in the sense of planning their expenses well ahead of time. But this attitude can clash with the understandable desire of the corporation’s managers to impose strict budgetary discipline throughout the company and to stick with it. General counsel sometimes complain that they are being asked to quantify that which cannot be precisely quantified. This problem is exacerbated in a changing economic landscape, because, as previously discussed, periods of economic difficulty require cost-cutting or at least more predictability of costs.

Furthermore, as the economic situation changes, litigation concerns likewise change and become more challenging to predict and model. According to one corporate counsel, in just one five-to-six-year period the focus shifted from “antitrust and competition-related litigation”¹² to derivative actions and securities cases, resulting from heightened shareholder activism. Each of these types of litigation carries with it its own risks, its own timetables, and its own costs...