Keep It Under Control

Client questions about litigation management are always the same: How likely are we to win? How long will it take? How much will it cost? The answers vary from case to case, but metrics exist to answer the questions and to enhance litigation management.

General Counsel and corporate litigation managers believe that the single most important component for successful management of litigation is faster resolution of cases. It appears obvious that the longer the case duration, the higher the legal fees. General Counsel do not believe that longer duration and additional cost generate a better result. In their view, the result is more than likely to be the same whether the matter is resolved prior to taking depositions or following the conclusion of fact discovery. See, A National Litigation Management Study, Commissioned by: The Council on Litigation Management, Revere Advisory, Inc. (March 2011) (Revere Study), pp. 8-9.

The speed with which a dispute is resolved is directly related to effective litigation management. This article describes a two-step approach for litigation management. The first step is the collection of quantitative information about each case. Over time, this information ' the metrics ' will reveal trends, duration, probabilities and costs. The second step is the preparation of a comprehensive, detailed litigation budget based, in part, on the data collected concerning similar lawsuits. The budget represents the plan for handling the lawsuit. This litigation management process creates a reasoned and logical framework for early case assessment, quicker resolution and more predictable outcomes.

Metrics

General Counsel have the responsibility for reporting the performance of litigation management to the business client. More often than not, the report is based upon minimal quantitative data instead of a qualitative assessment of outside counsel in conjunction with in-house litigation staff recommendations. The Revere Study identified the need for an increased emphasis on metric analysis in litigation:

High-level attention to litigation programs is forcing a renewed or expanded interest in metrics and analytics that allow for clearer measurement of effectiveness and success. Seventy-four percent rated the quality of their litigation metrics as “Fair” or worse, in terms of measuring the overall effectiveness of their programs. In our view, this represents a significant opportunity for the industry and for litigation executives generally.

What metrics are meaningful to the management of litigation? As a starting point, legal metrics is data generated by the litigation process. In its simplest form the data may include the cost to prosecute or defend a case, the cost to resolve, and the case duration. This information is useful, but insufficient to develop trend analysis. It must be broken down into its component parts, which include pleadings, written discovery, document discovery, fact witness depositions, expert depositions, motion practice including summary judgment, and if necessary, trial. Each of these components must be further divided into the underlying activity.

Key Metrics, Key Performance Indicators

We have identified a number of Key Performance Indicators (KPI) which track the components of a lawsuit. We encourage litigation managers to collect this information for every case. If you don't measure it, you cannot improve the process. The following are suggested KPIs: 1) case type ' industry specific; 2) product/service that is the subject of the case ' industry specific; 3) business unit affected by the case; 4) state in which case is filed; 5) firm handling the case; 6) case duration, including the start and stop date for each case component; 7) outside counsel fees per lawyer for each billing cycle and costs by component; 8) cost to resolve ' settlement or judgment; 9) internal costs, including legal department and management time; 10) total cost to resolve ” legal fees, costs to resolve and internal costs; 11) costs of discovery and Daubert motions; 12) the number of depositions; 13) expert costs; 14) trial days; and 15) the steps taken after case resolution to minimize or prevent a future action involving the same product or service.

Many legal departments already have access to this information if they use an electronic billing system or contract for this service. An electronic billing system captures data by timekeeper, date and nature of service that is categorized by code. Typically, an e-billing service uses the American Bar Association Uniform Task-Based Management System set of task codes. This information can be requested from your billing service and imported into a database that you use to analyze the history of your cases.

In the event the legal department does not use an electronic billing system or service, the first step in the data collection process is the identification of the key data points. The focus is on information that is important to the business and the resolution of litigation involving the company's goods or services. The process might start with the legal department developing its list of key metric data points. The business client should be asked to review the list and encouraged to add the information it believes will be most useful in managing its operations. This process promotes collaboration with the business client that results in the collection of customized information that is valuable to both the business and the legal department. This partnership will drive performance improvement by both.

Once the key metrics are identified, the legal department must establish a method for collecting the data. This generally involves communication with outside counsel at the beginning of a case with a request to provide information. The information should be collected over the life of the case. It should be captured by inside counsel in a database that can be sorted and reviewed to analyze for patterns. A simple database may be constructed with an EXCEL spreadsheet. In addition, the company's IT group may also have recommendations concerning the tools that are available for this purpose. The legal department should also keep in mind that the business client may want access to the database reports.

The collection of data is a process that takes time, and a sufficient number of cases before the analysis will yield useful results. Consequently, one must be patient with the process, knowing that it will take time to populate the database with sufficient information.

Analysis of the Key Performance Indicators

The data collected from an individual case may be used to compare actual results against pre-defined expectations or goals, or compared with averages from similar cases or averages for segments of prior cases. This information will also assist with the identification of the outliers. The analysis is also helpful to develop an understanding of what causes the differences between the expected outcome and the case that is off-the-charts.

It is important to establish an analytical framework for utilizing the KPI from your metrics database. The analysis should, at a minimum, consider the resolution costs, the dispute duration and the detail concerning outside counsel fees. With respect to resolution costs, you should calculate the average cost/case by: 1) legal fees and costs; 2) judgment or settlement amount; 3) internal costs necessary to support the case; and 4) the total of all of these cost components. You should also calculate and review the average duration of your cases by case type and by case component. Finally, I recommend a detailed review of outside counsel fees including by lawyer, staffing mix and time spent on each major case component.

Strategic Case Analysis: Litigation Plan and Budget

One does not typically build a house without a plan and budget for the project. The preparation of a litigation plan and budget should be conceived of in the same manner as a construction project. The process starts with a strategic plan that is converted into economic terms in the form of the litigation budget. The budget is the blueprint for the litigation strategy and monetization of that plan.

The objective of the budget process is to identify each of the litigation components that the client and counsel believe may be necessary to resolve the case. It is intended to educate the client and to minimize surprises during the pendency of the case. In addition, a budget is a tool for managing expectations. The process of developing the plan and budget serves to align litigation objectives and the means of achieving those objectives between the client and outside counsel.

The plan should be created by lead counsel in conjunction with the client. The starting point is the use of a budget form that breaks the case down into it component parts. These components should track the KPI that is collected for each case. There are typically six primary components in litigation: 1) pleadings and motions to dismiss; 2) written and document discovery; 3) witness depositions; 4) dispositive motions; 5) alternative dispute resolution; and 6) trials. These components can be subdivided to include pre-suit investigation, initial pleadings, written discovery, document production, discovery motions, fact witness depositions, expert witness depositions, dispositive motions, pretrial preparation, trial and appeal. Each of these main topic areas contain detailed analysis. For example, each deposition requires planning and preparation, the travel related to the deposition, the cost of the transcript or digital video recording, the time taking the deposition and reporting back to the client. Each one of these activities should be a line item on the budget.

The data in your metric system may be used to compare the budget prepared for an individual case with the average cost components from similar cases. The budget may be reviewed for material differences between the historical trends and the proposed budget. This analysis should give rise to a discussion concerning these variances. In addition, this process may assist in the identification of a case which is potentially an outlier.

Once the plan is created, it should be revised to reflect actual activity in the case. A best practice might be to revise and include the budget with each invoice. The budget can be revised to take out the completed tasks that are included on the invoice. In addition, revisions can be made to reflect changes necessitated by actions of opposing counsel.

Conclusion

Data collection and metric analysis are critical elements to comprehensive litigation management. Dedicating time and resources to a program that captures information for analysis is a worthwhile endeavor to ensure control of costs and resolutions. The process takes time on the front end to establish the system. The legal department must be patient during the initial data collection stage. It takes a number of cases before sufficient data is collected to conduct meaningful trend analysis and to realize a return on the investment. The Revere Study found that survey participants reported that for every $1.00 invested in a litigation management process, the return on investment over time was equal to $10.35. Therefore, be diligent in collection and patient with the process. The proper use of metrics can be an extremely powerful way to evaluate and manage performance. Legal departments which use quantifiable performance management tools can yield great long-term results.

Patrick W. Michael is a partner in the Louisville, KY ALFA International firm of Dinsmore & Shohl. He is a business advisor and trial lawyer whose practice is concentrated in the area of commercial litigation and business consulting. He has recently conducted a number of seminars concerning litigation management and metric analysis, business ethics, e-discovery, and document retention programs. Michael can be reached at [email protected].

Client questions about litigation management are always the same: How likely are we to win? How long will it take? How much will it cost? The answers vary from case to case, but metrics exist to answer the questions and to enhance litigation management.

General Counsel and corporate litigation managers believe that the single most important component for successful management of litigation is faster resolution of cases. It appears obvious that the longer the case duration, the higher the legal fees. General Counsel do not believe that longer duration and additional cost generate a better result. In their view, the result is more than likely to be the same whether the matter is resolved prior to taking depositions or following the conclusion of fact discovery. See, A National Litigation Management Study, Commissioned by: The Council on Litigation Management, Revere Advisory, Inc. (March 2011) (Revere Study), pp. 8-9.

The speed with which a dispute is resolved is directly related to effective litigation management. This article describes a two-step approach for litigation management. The first step is the collection of quantitative information about each case. Over time, this information ' the metrics ' will reveal trends, duration, probabilities and costs. The second step is the preparation of a comprehensive, detailed litigation budget based, in part, on the data collected concerning similar lawsuits. The budget represents the plan for handling the lawsuit. This litigation management process creates a reasoned and logical framework for early case assessment, quicker resolution and more predictable outcomes.

Metrics

General Counsel have the responsibility for reporting the performance of litigation management to the business client. More often than not, the report is based upon minimal quantitative data instead of a qualitative assessment of outside counsel in conjunction with in-house litigation staff recommendations. The Revere Study identified the need for an increased emphasis on metric analysis in litigation:

High-level attention to litigation programs is forcing a renewed or expanded interest in metrics and analytics that allow for clearer measurement of effectiveness and success. Seventy-four percent rated the quality of their litigation metrics as “Fair” or worse, in terms of measuring the overall effectiveness of their programs. In our view, this represents a significant opportunity for the industry and for litigation executives generally.

What metrics are meaningful to the management of litigation? As a starting point, legal metrics is data generated by the litigation process. In its simplest form the data may include the cost to prosecute or defend a case, the cost to resolve, and the case duration. This information is useful, but insufficient to develop trend analysis. It must be broken down into its component parts, which include pleadings, written discovery, document discovery, fact witness depositions, expert depositions, motion practice including summary judgment, and if necessary, trial. Each of these components must be further divided into the underlying activity.

Key Metrics, Key Performance Indicators

We have identified a number of Key Performance Indicators (KPI) which track the components of a lawsuit. We encourage litigation managers to collect this information for every case. If you don't measure it, you cannot improve the process. The following are suggested KPIs: 1) case type ' industry specific; 2) product/service that is the subject of the case ' industry specific; 3) business unit affected by the case; 4) state in which case is filed; 5) firm handling the case; 6) case duration, including the start and stop date for each case component; 7) outside counsel fees per lawyer for each billing cycle and costs by component; 8) cost to resolve ' settlement or judgment; 9) internal costs, including legal department and management time; 10) total cost to resolve ” legal fees, costs to resolve and internal costs; 11) costs of discovery and Daubert motions; 12) the number of depositions; 13) expert costs; 14) trial days; and 15) the steps taken after case resolution to minimize or prevent a future action involving the same product or service.

Many legal departments already have access to this information if they use an electronic billing system or contract for this service. An electronic billing system captures data by timekeeper, date and nature of service that is categorized by code. Typically, an e-billing service uses the American Bar Association Uniform Task-Based Management System set of task codes. This information can be requested from your billing service and imported into a database that you use to analyze the history of your cases.

In the event the legal department does not use an electronic billing system or service, the first step in the data collection process is the identification of the key data points. The focus is on information that is important to the business and the resolution of litigation involving the company's goods or services. The process might start with the legal department developing its list of key metric data points. The business client should be asked to review the list and encouraged to add the information it believes will be most useful in managing its operations. This process promotes collaboration with the business client that results in the collection of customized information that is valuable to both the business and the legal department. This partnership will drive performance improvement by both.

Once the key metrics are identified, the legal department must establish a method for collecting the data. This generally involves communication with outside counsel at the beginning of a case with a request to provide information. The information should be collected over the life of the case. It should be captured by inside counsel in a database that can be sorted and reviewed to analyze for patterns. A simple database may be constructed with an EXCEL spreadsheet. In addition, the company's IT group may also have recommendations concerning the tools that are available for this purpose. The legal department should also keep in mind that the business client may want access to the database reports.

The collection of data is a process that takes time, and a sufficient number of cases before the analysis will yield useful results. Consequently, one must be patient with the process, knowing that it will take time to populate the database with sufficient information.

Analysis of the Key Performance Indicators

The data collected from an individual case may be used to compare actual results against pre-defined expectations or goals, or compared with averages from similar cases or averages for segments of prior cases. This information will also assist with the identification of the outliers. The analysis is also helpful to develop an understanding of what causes the differences between the expected outcome and the case that is off-the-charts.

It is important to establish an analytical framework for utilizing the KPI from your metrics database. The analysis should, at a minimum, consider the resolution costs, the dispute duration and the detail concerning outside counsel fees. With respect to resolution costs, you should calculate the average cost/case by: 1) legal fees and costs; 2) judgment or settlement amount; 3) internal costs necessary to support the case; and 4) the total of all of these cost components. You should also calculate and review the average duration of your cases by case type and by case component. Finally, I recommend a detailed review of outside counsel fees including by lawyer, staffing mix and time spent on each major case component.

Strategic Case Analysis: Litigation Plan and Budget

One does not typically build a house without a plan and budget for the project. The preparation of a litigation plan and budget should be conceived of in the same manner as a construction project. The process starts with a strategic plan that is converted into economic terms in the form of the litigation budget. The budget is the blueprint for the litigation strategy and monetization of that plan.

The objective of the budget process is to identify each of the litigation components that the client and counsel believe may be necessary to resolve the case. It is intended to educate the client and to minimize surprises during the pendency of the case. In addition, a budget is a tool for managing expectations. The process of developing the plan and budget serves to align litigation objectives and the means of achieving those objectives between the client and outside counsel.

The plan should be created by lead counsel in conjunction with the client. The starting point is the use of a budget form that breaks the case down into it component parts. These components should track the KPI that is collected for each case. There are typically six primary components in litigation: 1) pleadings and motions to dismiss; 2) written and document discovery; 3) witness depositions; 4) dispositive motions; 5) alternative dispute resolution; and 6) trials. These components can be subdivided to include pre-suit investigation, initial pleadings, written discovery, document production, discovery motions, fact witness depositions, expert witness depositions, dispositive motions, pretrial preparation, trial and appeal. Each of these main topic areas contain detailed analysis. For example, each deposition requires planning and preparation, the travel related to the deposition, the cost of the transcript or digital video recording, the time taking the deposition and reporting back to the client. Each one of these activities should be a line item on the budget.

The data in your metric system may be used to compare the budget prepared for an individual case with the average cost components from similar cases. The budget may be reviewed for material differences between the historical trends and the proposed budget. This analysis should give rise to a discussion concerning these variances. In addition, this process may assist in the identification of a case which is potentially an outlier.

Once the plan is created, it should be revised to reflect actual activity in the case. A best practice might be to revise and include the budget with each invoice. The budget can be revised to take out the completed tasks that are included on the invoice. In addition, revisions can be made to reflect changes necessitated by actions of opposing counsel.

Conclusion

Data collection and metric analysis are critical elements to comprehensive litigation management. Dedicating time and resources to a program that captures information for analysis is a worthwhile endeavor to ensure control of costs and resolutions. The process takes time on the front end to establish the system. The legal department must be patient during the initial data collection stage. It takes a number of cases before sufficient data is collected to conduct meaningful trend analysis and to realize a return on the investment. The Revere Study found that survey participants reported that for every $1.00 invested in a litigation management process, the return on investment over time was equal to $10.35. Therefore, be diligent in collection and patient with the process. The proper use of metrics can be an extremely powerful way to evaluate and manage performance. Legal departments which use quantifiable performance management tools can yield great long-term results.

Patrick W. Michael is a partner in the Louisville, KY ALFA International firm of Dinsmore & Shohl. He is a business advisor and trial lawyer whose practice is concentrated in the area of commercial litigation and business consulting. He has recently conducted a number of seminars concerning litigation management and metric analysis, business ethics, e-discovery, and document retention programs. Michael can be reached at [email protected].