Page 7 - Litigation

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Litigation | MONDAY, APRIL 13, 2015 | S7
a template. Standardizing how data about engagements is kept at your firm will make access easier and allow comparison of like to like. Qualitative (or keyword) data about a case (e.g., court, judge, nature of claim, etc.) will later supplement memory and make locat- ing a precedent more efficient. It also helps if your firm designates a point person, since facility with using the process you have devel- oped and institutional knowledge will make the system more user friendly—and used. We find that busy attorneys most commonly object to using a budgeting tool over the (often unfounded) concern that the process will be difficult and time-consuming, and that the “lim- ited benefits” do not justify the added bur- dens. This is an individual and organizational bias that must be overcome, and it is not easy.
Litigation has the benefit of many guide- posts in creating a budget template: the Fed- eral Rules of Civil Procedure and local court rules, Uniform Task-Based Management Sys- tem (UTBMS) codes, case scheduling orders, docket files of past similar cases and the ele- ments of the causes of action at issue. Each of these provides information about tasks to be undertaken, the likely duration of those tasks and the appropriate level of legal service provider to undertake them.
“Budget” in some sense is a misnomer; “monetized work plan” might be a better way of thinking about what the effort entails. A well-designed budget has several compo- nents; implicit in estimating cost, the budget sets out a plan for the work. A well-designed budget identifies the work to be accomplished (and by negative implication the work that will not be done), the people who will do the work, deadlines by which the work will be done and an estimate of the effort’s monetary cost. A budget should be distinguished from a fee arrangement; the former informs the latter but is not coextensive with it.
There is no magic to any particular format or tool for the budget. A budget can be cre- ated with a pencil and paper or with sophis- ticated software. Important elements include a format consistent across types of matters, the ability to modify quickly and the ability to reflect incurred costs in addition to budgeted amounts. At a minimum, settle on a tool that is comfortable to use and easily understood. Obviously, a budgeting tool that is available electronically across the enterprise allows greater access to multiple users and can enable better access to historical informa- tion. Choose a tool that is right for your firm.
Once the format and general structure of a budget template is created, the starting point for creating any budget is defining the project’s scope. It is critical to agree at the very beginning in reasonably granular terms as to what work is within the budget and what work falls outside the budget (and is thus an “add-on” or “scope change” if it occurs).
Experience teaches that lawyers and cli- ents have differing mindsets about the level of detail for the described work (or perhaps more properly the excluded work). A “kitchen sink” or “just in case” approach is unsatisfy- ing. A budget should take into account both the likelihood and the impact of a potential event. To avoid “sticker shock,” lawyers may develop a budget that sets out the minimum work—the “best case” scenario. This is sometimes done with an eye to the client’s
perceived tolerance for fees. However, just as providing no budget does a disservice, providing too rosy a picture prevents the cli- ent from making an informed choice and is a very common source of later problems over unexpectedly high bills.
What clients are looking for is the “most likely” scenario. This involves exercising judg- ment about what is most likely to transpire in a case and recognizing that the budget cannot sustain planning for every eventual- ity. It also involves clearly explaining how judgment has been exercised so the basis for those conclusions about likelihood and impact of contingencies can be discussed and agreed upon in advance. The careful client will test that basis, and lawyers are best served to have a well-reasoned basis to point to in support of their conclusions rather than a “gut feeling.” There are often a number of contingencies that are very close calls as to likely probability. Here, discussing with the client whether or not to include such possi- bilities in the budget is important. The deci- sion will be made jointly (and, importantly, remembered and documented) and the client will appreciate the attorney’s sophistication, transparency and concern.
A well-designed budget will reflect—and tee up for discussion—strategy choices, such as deciding whether to file a motion to dismiss the complaint (if it is feasible at the time). It also will identify who will provide services and estimate the time needed to provide them. In addition, a well-designed budget incorporates input from the rest of the engagement team, which improves accuracy and ensures the team’s buy-in and ownership—each a valu- able asset in managing to the budget. These decisions highlight for discussion whether the work can be disaggregated or how much of the work will be done by the client. Thomp- son Hine lawyers have designed a budgeting tool that lets them create “what if” scenarios in real time to test the financial impact of strategy decisions and staffing options.
Experience has shown that there are com- mon elements that “bust” budgets. Planning for and having frank discussions with clients at the outset of matters about some of these potential budget busters results in better set- ting of expectations:
Poor communication among the engage- ment team. Lawyers entirely control the extent of this budget buster. A budget or work plan is only one of the tools needed to manage litigation effectively. A common understand- ing about timing and methods of communica- tion, expectations on how to give or receive assignments, the client’s billing guidelines, the scope of work and excluded work all mini- mize the risk for write-downs and re-work.
Client conferences. Sidestepping this budget buster is entirely within the client’s control. Clients should get the frequency and detail they want in communications. But once the budget is built based on these preferenc- es, the 30-minute, once-a-week email report cannot evolve into a two-hour-a-day telephone conference without busting the budget. If events require a change in frequency or detail, the budget needs to be re-worked.
Unpredictable third parties. These range from uncontrollable local counsel to obstreper- ous opposing counsel to judges who delay rul- ings. Here the lawyer can show » Page S9