Jottings By An Employer's Lawyer

Friday, July 11, 2008

The (Not Very Well) Hidden Cost of Litigation

There is nothing so confirming as seeing someone else quoted in print making a point that you yourself have made. Even better when that person is well known. So I was pleased to find this quote from Stanley Chesley in a Law Practice Management article, Ohio Law Firm Switches to Success-Fee Billing. Chesley formerly a plaintiffs' lawyer has been actively involved in some of the largest mass tort claims and settlements, including both breast implants, tobacco and phen-phen (the latter has resulted in some controversy and litigation against him). According to the article, Chesley is now representing corporations in antitrust and securities litigation.

His point, which I have also made over the years, is set out his comments on how he thinks cases should be handled:

"I think many cases should be settled before summary judgment because the cost of discovery is not only the lawyer fees, it’s also the corporate executives and all the department heads” who have to spend valuable time giving depositions and assisting in discovery, he says.

My only addition would be to not limit the time consumed to "corporate executives and department heads" as much of the time spent (and arguably "lost") is not done by employees at that level, but whose time is still quite valuable.

Still not included in his equation, which focuses on actual hard dollar costs, is the psychic drain that litigation places on company employees. That is particularly true in employment cases, where it is a conscious decision of the company (and thus of some individual or group of individuals) that is being defended.

I have often wondered if any enterprising academic has tried to put hard numbers to these costs. If so, I haven't been able to find it. If anyone else has, I would love to hear from you.

Michael, great point - especially about the "psychic drain". Your point about "hidden costs" applies to plaintiffs too, not just defendants. People think it's easy to sue or defend lawsuits in this country, but as anyone who has actually gone through the process knows, it is not. Litigation is often a grueling, painful, stressful experience. It has to rank up there with divorce and losing your house to a fire.
I've never done it, and for obvious privilege reasons I can't explain it, but I once had a client do it for me, and they based their settlement on that.

It was more than the attorneys' fees by a significant amount.
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