Client: If I’m going to continue prosecuting my lawsuit, I want to make sure that I don’t end up spending more in legal fees than I can collect in damages at trial. You said you’d tell me how I should evaluate that as a client, so I make the right business decision.
Attorney: I can start by telling you about an actual case that I heard about once. A client had a property line dispute with her neighbor, who sued her. The neighbor was seeking only about $20,000 in money damages from the client. The client’s attorney ended up charging her about $350,000 in legal fees to litigate a $20,000 dispute. It became a publicized court decision.
C: How did the client let that happen?
A: I don’t know all the details. But I have personally seen other cases myself where a client ended up paying far more in legal fees than her case was “worth” at trial.
C: You use the word “worth.” What do you mean by that?
A: Every lawsuit has a price tag in terms of money damages. For a plaintiff, the value, or “worth,” of their case is the maximum amount of money damages that they can realistically expect to recover if they win at trial. Think of that like hitting a home run in court. The plaintiff has to be able to prove those damages with sufficient evidence, however.
C: How do you determine what the maximum potential damages might be?
A: I use a mix of different factors. First, I rely upon my past experience litigating cases like yours. Second, I talk to other attorneys in town about their cases. Third, sometimes local legal newspapers carry information about jury verdicts in other similar lawsuits. Fourth, I evaluate the witnesses, documents, and other evidence that we have in hand on the damages issue to see if they will support the maximum potential recovery by us. It’s not science, more like an art.
C: What have you been able to determine about my case?
A: Using all those factors I just mentioned, I feel we have a strong chance of proving money damages of between $500,000 - $1 million in your case.
C: How do you define “strong chance?” Can you give me a percentage?
A: Not until we complete some pre-trial discovery and depositions in the case, so I can see more of the ultimate evidence. Right now, I’d say we have a “better than 50% chance” of proving those damages. Remember, we’ll have to prove liability first, but I believe we have the evidence to do that.
C: So you’re saying that, as of right now, you think I’m more likely than not to win that amount of damages?
A: Yes, as of right now. Keep in mind that as we take more witness depositions and obtain more documents from your opponent, that might strengthen or weaken our case. The value, or “worth,” of a case is always in flux, never static. That’s because it’s directly tied to the quality and quantity of the evidence in the case, which can always change from day to day.
C: So there will always be some level of risk for me, as the client, that I might end up spending a lot of money on legal fees to go to trial and still come away with less money in damages?
A: Yes, you can never eliminate that risk. You never know what juries will do at trial. That’s one reason why the vast majority of civil lawsuits settle before reaching trial. Both parties decide they really don’t want to take that risk anymore.
C: Is there anything I can do as a client to reduce or manage that risk?
A: Yes. First, I tried to give you the most realistic initial estimate that I could of the legal fees through trial, which can be difficult to project so far in advance. You’ll recall that I said the total legal fees were likely to be roughly $50,000 - $100,000 the first time we talked on the phone. I based that on my past experience with cases like yours, although it’s not a guarantee.
C: So you didn’t “lowball” me on the initial fee estimate?
A: No, I deliberately avoided doing that. That’s why I put it in writing for you, with the usual caveats. When attorneys lowball the initial estimate just to get the case in the door, and it turns out like that property line dispute that I told you about, clients end up suing their attorneys for overbilling.
C: Can you give me any further fee estimates as we go along?
A: Yes, I will give you forwarding-looking, periodic litigation budgets for the case in writing. I’ll talk about those with you in more detail the next time. Suffice to say, with a case budget, you’ll have some advance idea of how much each portion of the lawsuit is likely to cost as we head toward trial. Remember, a case budget is a best estimate, not a cap on the legal fees.
C: Do you revise the case budgets as we go along?
A: Yes, you have to, otherwise the case budgets won’t be useful tools for anyone. They will just be “funny” numbers.
C: Does every attorney do what you do?
A: No, some attorneys avoid giving initial fee estimates at all, and if they do, they won’t put them in writing. Even more attorneys don’t give their clients periodic case budgets, because those attorneys are afraid of committing themselves to anything in writing. They don’t want their clients to use the case budgets against them if the legal fees get too large later on for whatever reason.
C: They why do you do it?
A: Because I’m comfortable giving my clients periodic case budgets. It’s a habit I’ve developed. My law firm bills efficiently. I like to plan ahead, too, which is necessary for case budgeting. If my clients are going to assume significant financial risk by litigating a case toward trial, I’m willing to share some risk with them by committing to case budgets in writing, again, with some caveats. Also, I’d want a case budget if I were the client.
C: So between your initial fee estimate, plus case budgets, I’ll have some tools to project how much the case will cost in legal fees. Once I know that, I can keep comparing the cost of litigating to the projected damages at trial at any point in time.
A: Yes. Just keep in mind that both the cost of litigation and the projected damages at trial will keep changing. It’s like having two moving parts side by side. The goal is to manage the two numbers, so they don’t get too out of whack with one another. If they do, it will be time to re-evaluate whether it makes sense to keep litigating.
[TO BE CONTINUED]
© 2008 Ken Moscaret. All rights reserved.