Lawsuits and Root Canals: Business and the Courtroom
Just as a root canal is unpleasant but sometimes necessary for good health, so too is litigation unpleasant but sometimes necessary for the continued good health of your business. If you are on top of your business you will get your lawyer involved as soon as you sense trouble. However, your typical business lawyer’s retainer agreement will be hourly based. It will likely establish the hourly rate for the senior partners, the junior partners, the associates and the paralegal assigned to your case.
Chances are, burdened by the mind numbing prospect of a lawsuit, the interruption of your business, the lost opportunity cost and the distraction of it all, you will marvel at these hourly rates. You will be dimly aware that the more hours your lawyer works, the more money it will cost you. You may comprehend that the sooner the case is over, the less money your lawyer will make. You will sign the retainer agreement anyway,believing you have no choice.
At the end of the month you will receive a bill from your lawyer which will charge you by the quarter hour.You will see that the senior partner at $600 an hour made some five minute telephone calls at $150 each, the junior partner at $225 an hour spent three hours preparing to interview witnesses at a cost of $675 and the associate at $175 an hour spent eighteen hours drafting motions for $3,150 and the paralegal did a lot of case management, editing and miscellaneous stuff at $125 an hour for twenty hours or $2,500. The senior partner will likely pen a cheery note to the bill saying that you are off to a good start, that the legal issues are being sorted out and she may even tell you of the many expensive motions already filed and to be filed over the next many months.
She hopes to have someone actually talk to witnesses soon. This is what you get when you indulge in the dated, inefficient and unimaginative practice of paying a lawyer by the hour to “quickly” solve your legal problem. Plaintiff’s trial lawyers do not charge by the hour. They charge on a contingency fee basis. This is results based billing. Contingency fee billing requires the lawyer to carefully examine the merits of the case before accepting it and encourages both the lawyer and the client to clearly assess the “value” of the legal service to be provided before spending a penny.
The contingency fee encourages efficiency and results. The hourly fee encourages a focus on the process of the case rather than on the successful and speedy conclusion of the case. The hourly fee rewards the “work”of the case. The contingency fee rewards only the results obtained.A contingency fee will not always work for business litigation. However, a good business person and a good lawyer ought to be able to craft an alternative to the tired old, same old of hourly billing. Some other retainer agreements may include combinations of a more affordable reduced hourly rate plus a contingency, whereby the lawyer receives some cash flow during the pendency
of the case but ultimately only profits based on the result achieved. A combination of flat rate and contingency may be appropriate to a particular case. Sadly, clients and hourly lawyers often enter into an hourly fee arrangement when they only have a general notion of what the case will involve, how long it will take to conclude, what resources will be required and what result can be reasonably anticipated.By contrast, before a trial lawyer accepts a contingency or combination fee, she must judge the merit of the case, predict the scope of the effort, determine a plan which achieves real value for the client and work as efficiently as possible.
Business litigation is sometimes necessary. Paying a litigator by the hour only encourages the prolongation of the misery by rewarding inefficiency of thought and action. There is nothing creative about hourly billing. When your business is faced with the prospect of bringing or defending a lawsuit, get creative about the process and expect no less from your lawyer.A good business keeps up with change, creates change, or dies.When faced with a matter that may go to court, change the old way of thinking and take control by consulting a contingency fee trial lawyer.
Duncan Garnett is a senior partner atPatten, Wornom, Hatten & Diamonstein, L.C. and a former president of the Virginia Trial Lawyers Association. While he concentrates his practice on life-altering personal injury and wrongful death, he also handles a wide variety of civil trials.
First published in The Oyster Pointer.
