QUESTIONS CLIENTS SHOULD ASK COMMERCIAL LITIGATORS (#2): What is this going to cost?
You are meeting with a lawyer over a business dispute. You have asked him what your case is worth and he has given you his best estimate. Here is what you should ask him next: what is this going to cost?
Clients rarely ask this question
Which doesn’t seem logical, given that we live in a set price society. Whether it's a box-fan at Walmart or an oil change at Jiffy Lube, we expect and get a set price BEFORE we agree to buy the thing. This is the way markets for goods and services work in our country, except (apparently) for legal services. Not only do the providers of legal services not put a price tag on them, but the consumers generally buy them without any idea as to what they might ultimately cost.
There are three reasons for this
First, clients are afraid it will be a big number and don’t want to know the answer.
Second, they assume that there is no price competition between lawyers, so there is no point in asking.
Third, they don’t know how to ask because legal services are not something most people buy very often.
Assuming these are the three reasons (or at least three of the reasons) that clients don’t ask what litigation will cost, here is why I believe they should.
While the cost is likely to be “big”, the client needs to know so that he can decide whether to proceed with the case
Once the lawyer has answered the first question (what is my case worth), the client is going to need to decide what he or his company would be willing to pay to see it through. Only the client can make this decision. If the case is worth $100,000, would he be willing to pay $10,000 to litigate it? Probably. $50,000? Maybe. $80,000? Heck no. How can he make that decision unless he knows what the cost is?
There is in fact price competition between lawyers
Try as we might, lawyers have not yet managed to transcend the law of supply and demand, so there is price competition between lawyers. What there is not, is an efficient market for legal services that facilitates rapid price comparison. So, clients have no other recourse but to ask Lawyer Johnson what he will charge, and then ask Lawyer Smith, and so on until they get the best possible price. Nobody would buy a box-fan at Walmart if it cost half as much at Target. It should work the same way with lawyers.
There is a simple way to ask what a case will cost
"What is your best estimate of fees and costs by phase of litigation?”
Since business disputes rarely get tried to a jury (the great majority are settled somewhere along the way), the total cost is not that informative. It would be like knowing the cost of a bus ride to California when you are most likely getting off in Memphis. What is informative is the cost of each phase of litigation.
At RJL, we divide the litigation process into four phases: Pleadings (investigation, research and filing the complaint or answer); Discovery (getting documents, information and taking depositions; Pre-trial Resolution (mediation and dispositive motions); and Trial.
An experienced commercial litigator should be able to give his client a fairly accurate estimate of the fees and costs that are likely to be incurred in each phase of litigation. To do that, we use a Fee Forecast spreadsheet that we have developed over the years. While not perfect, we usually get pretty close.
If a lawyer can't (or won't) provide an estimate of his fees, the client should keep searching until he finds a lawyer who will. Only then will he be able determine what this is going to cost.