The costs of litigation

by Ted Frank on June 21, 2007

Sun General Counsel Mike Dillon, writing about litigation, repeats something I’ve long said:

Litigation is costly. Incredibly costly. But it is not the expense that is the real issue, it’s the diversion of resources. Time employees spend reviewing e-mails and documents, educating lawyers and preparing for depositions is time away from the business. That’s the real cost of litigation.

Note that these costs are not included even in PRI’s $865-billion/year estimate of the expense of jackpot justice, much less the trial-lawyer critiques of the PRI study, which is why that number, even with its problems, may well be an underestimate of the true expense.

While Sun’s strategy of keeping quiet while litigation was pending may have made sense in this particular competitor-to-competitor litigation, I think it is a very large mistake in the context of trial lawyers and activists targeting companies.

{ 3 comments }

1 Elliott Hurwitt 06.22.07 at 10:29 am

Not to mention the question of what all those billable hours are actually FOR. Nobody is comfortable about discussing this, but a lot of the costly attorney hours are for something less sublime than, shall we say the full attention of a partner. Work gets passed down to junior associates and from them to paralegals and from them to the proofreaders. And that’s assuming the firm hasn’t outsourced all the lower-level work, which is by no means a safe assumption.

By the time you get to the guy in Mumbai who’s actually fixing up the document, competent though he may well be, the cost differential is really getting up there. A million here, a million there — pretty soon you’re talking about real money!

Good thing the client will never get wind of this …

2 Stewart Peterson 06.22.07 at 10:49 am

>>While Sun’s strategy of keeping quiet while litigation was pending may have made sense in this particular competitor-to-competitor litigation, I think it is a very large mistake in the context of trial lawyers and activists targeting companies.

Absolutely. In those cases, it’s less of a dispute than a PR exercise. Oh, and a way to wear out a target company until they go bankrupt or stop doing whatever the opponents don’t want them to do.
This happened all the time in nuclear power plant projects in the 1970s-80s and I suspect it occurs in many other ventures as well.

3 TheMasonic 06.22.07 at 7:20 pm

Dillon’s comments remind me of the litigation going on right now in the scramble to collect from Anna Nicole’s estate and her late husband, J. Howard Marshall. Larry Birkhead, in particular, is already in a dispute with his fired attorney for $600k and probably spending at least that much trying to win the pending dispute before the Ninth Circuit. Unfortunately, in the end, it’s possible he could “win,” only to leave Dannielynn saddled with an imaginary fortune and huge attorneys’ fees.

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