Litigation Budgets Should Reflect Reality
Law firms should base their case budgeting processes on real numbers that better enable clients to manage litigation costs and set reserves. Undoubtedly, litigation budgets can change during the course of litigation, but attorneys need to notify their clients as soon as practicable of expected upticks in case expenses and necessary budget increases.
Too often, when preparing litigation budgets for clients, lawyers copy-and-paste a set of numbers from one report to the next without stopping to consider the fees and expenses that may be associated with individual cases. Like many things, budgets require some experience to do well, but they also require attention. Clients need a budget that reflects the reality of a case. When a lawyer flings numbers at a page because he can’t be bothered to evaluate what he expects a case to cost, he does his client (and ultimately himself) a disservice.
How Do Realistic Litigation Budgets Help Your Client?
The Association of Corporate Counsel advises companies that litigation budgets will enable them to:
- More closely monitor how the company’s financial resources are being utilized;
- Effectively control the costs associated with litigation;
- Adapt to unexpected developments in litigation;
- Report up the ladder with greater confidence about the status of litigation and expectations for cases;
- Establish litigation reserves with greater assurance; and
- Anticipate the effects (whether positive or negative) the litigation and its resolution will have on business operations.
What Does an Effective Litigation Budget Include?
In short, everything. Different clients will have different formats in which they want their budgets submitted. But they are largely seeking the same information. Litigation budgets should capture all the billable hours and litigation expenses that you foresee, usually broken down by tasks. Task-based budgeting structures can be valuable for communicating to your clients what hurdles you expect to encounter in particular cases. Some cases are going to be more discovery-intensive or motion-heavy that others. By providing your clients litigation budgets that reflect the reality of your cases, you can clue them in to these expectations early on.
Below is an example of the type of litigation budget you could use for a personal injury case. It includes most of the tasks I usually expect to encounter through the discovery phase of a case. Note: This graph is for demonstrative purposes and does not reflect time spent on any actual cases or billable rates for my firm or me.
Does Your Litigation Budget Reflect Your Client’s Goals?
I’ve written before that you should handle litigation in a way that reflects your client’s goals and objectives; otherwise, even if you achieve positive results, your client is going to have the impression that he isn’t being heard. In the same way, your litigation budgets should reflect how your client likes to handle cases. If they want you to be aggressive with discovery and motion practice, you are likely going to have a higher budget. If the client wants associates and paralegals to do as much work on files as is practical, the budget should reflect that. Litigation budges are an opportunity to communicate to your client that you are on the same page.
Litigation budgets can serve to reinforce the attorney-client relationship when they are done well. But when a budget does not reflect the realities of a case, it can lead to surprise expenses for the client which he is not prepared to undertake. Clients can prepare to deal with higher budgets, but they find it much more difficult to deal with an unexpectedly high legal bill that requires funds to be pulled from other sources. Your client too is operating on a budget. When you provide a trustworthy litigation budget, you enable his business to operate more effectively.