July 10, 2009

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Before the Trial

Involvement in Legal Processes Minimizes Expenses

By Daniel Wadley and Derek Kearl

July 10, 2009

Legal expenses can be difficult for any company to absorb, especially in times of economic turmoil when companies are forced to give added scrutiny to their bottom line. Nevertheless, legal expenses are an almost unavoidable cost of doing business and often increase during periods of economic distress, particularly those associated with litigation. It is essential that companies take simple but important steps to manage their legal expenses and ensure they are getting the most they can from them. Become Educated on the Process Especially if your company does not have an in-house attorney, it is important that decision makers take the time to learn the basic ins and outs of the legal work being done. This can be daunting when it comes to litigation with its complex and highly specialized set of rules and procedures. Nevertheless, legal work is not rocket science and with a modest investment of time, a basic understanding of the work being done can be obtained through communicating with outside counsel. Be Actively Involved in Planning and Monitoring the Legal Work It is tempting for overworked decision makers to turn legal matters over to their outside counsel and hope the matters are resolved efficiently and with positive results. However, this approach invites a scenario where the legal work being done takes on a life of its own or diverges from the path the decision maker would have chosen. By remaining actively involved in the process and taking the time to map out and direct the work being done, the decision maker can better ensure that the work is consistent with the goals and needs of the company. Choose Your Battles This is especially important in litigation. At any given stage of litigation there are numerous courses that can be pursued and projects that can be done, many of which may or may not be necessary. Not all motions have to be filed, and not all depositions need to be taken. Ask your attorney the hard questions, particularly inquiring into the practical outcome of any proposed project. If there is not a significant and measurable advantage to be gained by undertaking the work, perhaps the project should be rejected. All work should be directed at obtaining the best result for the least expense to the company. Have Realistic Expectations Litigation can be expensive and notoriously difficult to predict. Whether to proceed in litigation and what level of risk is acceptable is ultimately a business decision. No company wants to forfeit its legitimate claims or capitulate to the unreasonable demands of an opportunistic plaintiff. Nevertheless, sometimes it may be advantageous to investigate other ways of resolving the dispute so that the company can redirect its resources to other business areas. Negotiate Any Anticipated Price Reductions Upfront Your outside counsel is aware that as the country experiences unprecedented economic turmoil, companies are struggling to meet their demands while dealing with the reality of shrinking revenue. If you anticipate difficulty in covering your legal costs, consider addressing these concerns with your legal provider before the legal work begins. More often than not your legal provider would prefer negotiating any limited price reductions upfront rather than be placed in the awkward position of discounting bills after the work has been completed. Legal work can and should be a valuable resource to aid the company in its growth and development. Mismanaged or undermanaged, however, and it can also be a significant tax on a company’s valuable resources. Following these five basic suggestions minimizes legal expenses and better ensures legal work stays consistent with the goals and interests of the company. Daniel Wadley and Derek Kearl are attorneys practicing in Holland & Hart LLP’s Salt Lake City office. Their practice primarily entails commercial litigation, securities fraud, accountant liability and lender liability.
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