Risk Management Articles

How To Control Today's Costs for Yesterday's Projects
By Michael J. Baker, Esq. and Robert R. Brina, Esq.

Too often after a project is completed and profits have been calculated, the ugliness of a legal battle begins, sapping profits, draining resources and leading to years of litigation. While some litigation may be required to settle disputes arising from construction projects, there are means to keep costs to a minimum and still achieve a fair resolution to all parties. The key is controlling the adversaries on both sides, and the way to do that is to know a little more about how costs tend to escalate out of control as litigants move toward resolving disputes.

The costs surrounding construction litigation are of a fundamentally different character from the costs in other forms of litigation. And the greatest waste of money often comes from the failure of the attorneys involved to take control of the experts on his or her team and effectively direct all work that must be done on the case. The attorney must establish a structured plan of attack, and that plan must include a tight time-line approach to control costs for attorneys, paralegals, experts and consultants costs. Unfortunately, the old adage, that the time to do the task expands to the time available, often prevails over a structured approach.

Most importantly, the attitude of your attorney must not simply be to "settle in for the long haul." The primary difficulty with this approach is that it inevitably proves to be a self-fulfilling prophecy in terms of both tactics and expenses. Certainly your counsel needs to let opposing counsel know that there is a willingness to spend what is necessary to successfully resolve the case. However, a victory is not a victory if you spent too much on the laurel wreath. You must demand that your attorney have a plan to control costs and the will to exercise that control throughout the process of litigation.

Mediation Alternative

Mediation and other forms of Alternative Dispute Resolution should definitely be considered in any dispute before unleashing the forces of litigation. Certainly the benefits are obvious: reduction of expenses; a shorter overall time-frame to resolve the matter; and the certainty of a resolution by an agreed upon date certain. With sophisticated parties and a sense of economic good will, these goals can be achieved through the mediation mechanism. However, if contact between parties has been acrimonious and there are great distances over key issues, then the hope that this process would suddenly lead toward a settlement to preclude litigation is not very realistic. For the sake of this writing, the assumption is made that litigation is the only solution to the issues at hand.

Staffing the Case

The most immediate response from many law firms beginning a construction litigation case is to mobilize a large team, variously composed of partners, associates, paralegals and administrative personnel. And you and your own general counsel may fall victim to the perception that "bigger is better," and since it's a large law firm, you'll have a better chance of ultimate victory. The problem with assembling a large team is control over time, which is mostly what the client pays for. The solution is relatively simple, and that is to suggest that you and your law firm each appoint an "ombudsman" for the case, someone who can work his or her way through all layers of personnel, both in your organization, at the firm, and the retained experts, to determine if the work being done is actually required for the case. These individuals should be able to do two things on a regular basis: (1) report to you on the progress of all aspects of the case in clear, non-legalistic language; and (2) keep tabs on all expenditures.

Experts and Consultants

Many law firms commit their clients to expend extraordinary sums of money on expert analysis. This practice is particularly noteworthy in engineering and construction litigation which often become a battle of the experts and end up being a major portion of the overall litigation costs. These experts should and must be kept on short tethers. Their assigned tasks must be tailored strictly to their prospective testimony in the case. There are three basic rules that your attorneys should follow to control costs related to consultants:

The Paper Chase

Construction litigation is probably the most document intensive litigation that exists in any form of commercial dispute. Thousands upon thousands of dollars are routinely expended for imaging or copying, storing, and retrieving and reviewing of documents. There are ways to control these costs, however, and clients should exercise their supervision over their attorneys to see that at least some of these measures are employed to provide efficiencies in the entire process.

First, your counsel should have the expertise to very early in the case review and determine the major areas in which documents will need to be housed, copied and retrieved. It is critical that the experienced attorneys make the selections, not the junior or inexperienced staff. It is a waste of money to delegate such an important task to people who do not have the "big picture" experience. This is true because even the most dollar-laden lawsuits are ultimately resolved based upon very few actual documents. It is the "experience" that recognizes and selects these documents; therefore, it is vital that your attorney make some judgments initially as to which documents are more likely to be potential evidence, and which are not.

Second, you should inquire as to the document storage plans for your particular case, especially if a high volume of documents is involved. Even though the trend is to electronically image documents, ultimately hard copies will be produced. Such hard copy costs can be reduced by storing documents off site, rather than taking up expensive space in a law firm. Consider making arrangements for your own document repository. It is surprisingly more cost effective than an outside service and much more efficient because it is tailored to your use.

Third, you need to evaluate the necessities of "copying everything," which some firms automatically do in a lawsuit particularly with the advent of more advanced electronic scanning. Such an approach simply compounds the inherent complexity of the case by burying potentially useful documents in a pile of those that are only vaguely important. Also, imaging and photocopying costs can be very expensive. It is essential to know what actually needs to be copied and what kind of costs have been negotiated with copying companies for this service.

Finally, you need to be made aware of the kind of personnel that are to be assigned to searching documents for relevant information as the case progresses. It's going to be much more expensive to have legions of inexperienced people searching through documents than to employ a much smaller number of people with expertise about the issues at hand. The ombudsman approach mentioned earlier can help you keep tabs on this cost.

Also, you should know about the electronic or other "issue recognition" systems that may be utilized to make information retrieval more efficient, and less costly.

Tasks and Time-Lines

Large lawsuits inevitably invite a leisurely pace towards resolution, either by settlement or in a court of law. The solution to the problem of costs mounting over a long period of time is to realize that efficiencies of both time and money are obtainable only when each attorney, consultant and para-professional on the litigation team has been given specific tasks, and more importantly, given specific time-lines attached to those tasks.

A long-term case requires that it be broken into its component and even sub-component tasks, and ideally, with each task to be broken down and completed within a two-week time frame. If the task is not completed within the short-term deadline, the attorney supervisor needs to find out why and make a further assignment if required. This kind of management of tasks is for efficiency as well as completeness. Such management will prevent the duplication or overlapping of tasks, which ultimately leads to increased costs and an actual slowing of the process toward resolving the case.

Experience Doesn't Cost More, It Saves Money

The informed, experienced team of lawyers will actually save clients money, especially in the highly complex area of construction and engineering litigation. Knowing what actually needs to be done in a case and following through with legal management become vital with all of the specialized knowledge that is utilized, either from the legal team itself, or the outside experts.

Finally, the experienced team is more likely to be the kind of team that can bring closure to the lawsuit, sooner rather than later. This team will know when to press forward, what consultants are really necessary for either a plaintiff or a defendant, which documents are important and which are not, and with this knowledge can save a client thousands of dollars of litigation costs.

The bottom line? The project is over. Let it be finally over as quickly as possible by resolving legal issues in a cost-efficient manner. Then the financial "bottom line" will benefit.

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