Chapter 8 A Cost Effective Approach to Defending Products Liability Litigation
| Jurisdiction | New York |
I. INTRODUCTION
In today’s marketplace, clients justifiably have shown a tendency to microscopically examine their costs of doing business, including, of course, the costs of defending lawsuits regarding their products. Law firms and, in particular, their products liability practices, face tremendous market pressures. Almost across the board, clients are reeling from the tremendous costs associated with products liability litigation while simultaneously facing an increasingly competitive global market
A. Market Factors
As law firms are subjected to increased scrutiny by their clients, the legal marketplace itself is changing. Since the late 1990s, the legal profession has shown amazing growth. In 2010 alone, according the American Bar Association, there were 44,288 law school graduates. In short, there is, and in all likelihood will continue to be, an overabundance of attorneys, at least insofar as the term “overabundance” can be equated with an “overcapacity” of lawyers
From an economic standpoint, the traditional concepts of supply and demand dictate that an overcapacity of attorneys should result in decreasing prices for legal services because of the increasing supply of such services. Nevertheless, the costs of practicing law continue to rise, and more and more products liability clients are rightfully demanding that law firms assist them in controlling costs. It is very likely that, in the future, clients will be increasingly hesitant to permit law firms to pass on the ever-rising costs of running a law practice
Accordingly, the days when law firms could afford to practice without an eye on the bottom line are over. In the “good old days,” for many firms the “bottom line” merely meant the outcome. Today, however, law firms are evaluated by their clients not only in terms of the results achieved, but also in terms of the costs of achieving those results. While counsel may view the “war” in the context of a particular litigated matter, sophisticated clients today see the “war” as the larger struggle of continuing to do business, in spite of the growing costs of litigation. The law firms that will succeed in the 21st century are those that are best able to see the “war” from the client’s perspective and, therefore, become proactive
Litigation clients, including corporations and insurers defending and indemnifying companies and individuals, have justifiably come to expect high quality legal representation that is cost-effective. The successful law firms will be those that respond to this demand for more cost-effective litigation management.
B. Legal Auditing
Various studies have shown that a significant percentage of business executives believe that their attorneys perform unnecessary work designed solely to generate revenue. In order to address and, to whatever extent possible, remedy this perception, self-insured companies and insurance carriers have employed “legal auditing” with increasing frequency to review their counsel’s commitment to reducing litigation costs and streamlining the litigation process. 1569
The auditing process can take many different forms, but typically, the team of auditors arrives at the firm, sets up camp in one of the conference rooms and requests from 20 to 30 files for detailed review. Each file, and the bills generated with respect to that file, are examined in detail, and every entry on the bill is compared to every piece of correspondence, every legal research memorandum, every pleading, every deposition summary and so forth, to determine whether the client received “fair value” for the service the law firm rendered. In addition to determining whether each particular activity was indeed performed, the auditing team may attempt to make value judgments concerning whether the activity was necessary to achieve the desired result in the case.
For those products liability defense groups that practice in an efficient manner, these auditing teams bear no malice. However, there are no holds barred when it comes to carrying out the job for which they were hired. Thus, being required to return substantial fees as a consequence of an audit is a real possibility.
While legal auditing may be one way of ensuring that the law firm is effectively managing the client’s litigation, it is essential to recognize that simply reducing the cost of defense counsel’s bill is not the answer. Because bad litigation results are extremely expensive, the client and its auditing team should know that any effort to limit fees, without assessing the true impact on liability management and case results, can actually lead to an increase in litigation costs.
C. Litigation Management
Effective litigation management seeks to minimize the total cost of litigation. While total litigation costs do, of course, include attorney fees, they also include significant costs for “disbursements” such as deposition transcripts, document production and reproduction, computerization of records, travel expenses, trial exhibits, accident reconstructions, exemplar products, independent medical evaluations, surveillance activities and so on. Also classified as “disbursements” are the various costs and expenses associated with the increasing use of highly specialized “expert” witnesses and other “independent contractors” retained by defense counsel at the client’s expense.
There are a number of ways a creative defense counsel can begin to contain costs in products liability litigation and engage in effective litigation management. These steps include the following:
1. Formulate a workable and realistic litigation budget at the earliest possible stage in the defense of the case.
2. Conduct cost-effective investigation, discovery and depositions.
3. Apply cost-reduction techniques in the immediate pretrial preparation and actual trial of the case.
4. Implement a policy of “staffing” individual cases on a cost-effective basis and select a defense team (including, without limitation, defense counsel, in-house representatives, deposition and trial witnesses, outside experts and other “independent contractors”) to be responsible for an individual litigated matter from start to finish.
In addition to the foregoing suggestions, defense counsel can implement a host of other relatively common-sense, cost-cutting measures in the effort to win the war from the client’s perspective. Before discussing these suggestions, however, it is important to remember that a cost-effective approach to defending products liability cases presupposes that the defense firm is fundamentally committed to a good-faith effort at cost containment.
II. ESTABLISHING A LITIGATION BUDGET
A. Cost-Benefit Analysis
The client’s increasing expectations of and requests for accurate cost estimates and reasonable litigation budgets are in part a reflection of the client’s frustration with the spiraling costs of, and the uncertainty regarding the financial aspects of, defending products liability cases. When counsel makes a good-faith attempt to formulate a realistic budget in response to a client’s or carrier’s request for a formal litigation budget or plan, it has the positive effect of moving defense counsel away from a “mechanical” defense approach. Instead, counsel is forced to consider each component of the litigation process,...
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