How To Resolve Claims While Saving Millions Of Dollars
Becoming embroiled in litigation is a choice and in today's business world that choice results in the significant expenditure of funds and time. Simply because a claim is made against your company does not mean that you have to play the litigation game. Companies now have a cost saving alternative to traditional claims handling and resolution - Pre-Litigation ADR, aggressive initial investigation, and the use of legal counsel who is on board with the process.
All parties walk away from litigation as losers. In the case of someone who has truly been wronged and seeks compensation, monetary awards are diminished if not completely eaten up by contingency legal fees, costs, and liens/subrogated interests. As for defendants who seek vindication by aggressively defending themselves, victory is never assured, even in matters that should end with a favorable result. A win can provide a measure of satisfaction but more often than not it comes at a steep price - costs, attorney's fees, expenses, time, and aggravation significantly detract from victory.
Then there are those occasions when you end up on the wrong side of a verdict after spending hundreds of thousands of dollars in defense. The bitterest pill of all is having to swallow these losses when the verdicts are not based on the facts or the law but simply on the irrational whims or misplaced sympathy of jurors.
No one can predict the outcome of a given matter with any reasonable certainty, especially when the persons charged with the responsibility of deciding the outcome (jurors) are not even known until the day of trial. But staggering adverse verdicts based upon the emotions or sympathy of juries have become much too common and neither the facts or the law seem to matter.
Of little comfort to litigants, litigation does create a group of folks who always come out as winners - the lawyers, the experts, the court reporters and anyone else who receives payment regardless of the outcome.
DIRECT v. INDIRECT COSTS
The costs of litigation cannot be measured solely by the direct expenditure of funds as there are many indirect costs that are just as significant. Direct costs can be easily quantified by adding up the attorney's fees and expenses incurred. Quite often the direct costs exceed the monetary value of a case, yet many companies are compelled to fight because, "...it's the principle of the thing."
Indirect costs, i.e. the time and effort which your in-house staff must devote to document production(s), answering interrogatories, responding to other paper discovery, preparing for depositions, testifying at deposition/trial, and otherwise assisting in the defense of a claim, only add to the total. You may not be able to quantify the indirect costs but they clearly exist.
LAW FIRM DYNAMICS
Law firms billing their clients on an hourly basis have an inherent, secondary gain motivation that makes it difficult for them to render litigation advice that is solely in the best interests of the client. A law firm is a business and all good businesses strive to make a profit. Legal practitioners who bill their clients on an hourly basis realize a profit only after generating a threshold number of billable hours.
Most firms require that their members generate a minimum number of billable hours per year creating pressure on practitioners to maximize billing on matters for which they are responsible. All of the above presents an inherent financial disincentive for legal practitioners to bring a matter to conclusion quickly.
It is not suggested that litigators live to churn files or render disingenuous advice to clients for the sake of extra billable hours. However, fees are increased by the lifespan of assigned matters ad thus it stands to reason that expedited resolution of matters affects the profitability of attorneys
The good news is that there is an alternative to playing Litigation Roulette, and that alternative is described in the next section.