Whether you are suing or being sued, litigation is typically a daunting proposition. Aside from the obvious business risks and reputation management concerns, the cost of litigating is a serious consideration for your bottom line. In order to manage your litigation costs effectively, you need to have a clear understanding of your risk tolerance and your ultimate budget. Consider the following steps in managing litigation finances so that you are not caught off guard by unexpected bills.
1. Invest serious time in analyzing the value of your claim.
If you are the plaintiff, this means that you will need to understand the likelihood of prevailing on the merits of your claim along with the enforcement of any judgment you receive. That is, you should be sure that the party you are suing has actual assets that you can collect or attach to be able to collect the amount of any potential judgment. If the opposing party does not have attachable assets or appears to be close to bankruptcy, even winning a lawsuit could be a losing battle because of the expense it will take you to get there. On the other hand, if you are being sued, you should immediately evaluate your likelihood of having the claim dismissed. If that is a likely result, then you should be prepared to invest more heavily at the outset of litigation so that the case does not drag on needlessly.
2. Think carefully about the timing of settlement.
If you would prefer to have your case stay as far away from a trial as possible, then an early settlement is likely the best option for you. The best way to force an early settlement is to invest your resources in mounting your best case from the very beginning. This means you should front load the work and fees. Even if you end up having to pursue the claim past settlement negotiations, this early effort will pay off dividends in keeping you on schedule.
3. Communicate often and early about the cost of outside vendors and expert witness fees.
If your case will require extensive discovery, it is best to have a discovery budget in place before that phase of the case begins. You will want to consider using a fixed fee arrangement for outside vendors if you are dealing with e-discovery. Also, if your case involves expert witnesses, be sure to ask for fee schedules early on in the vetting process. This will prevent any surprises in hourly rates. You should also use a set budget for expert witness preparation, deposition and testimony. Having set parameters in place with experts and vendors can help manage expectations and keep bills from suddenly getting out of control.