You’re Damned if You Don’t Consider the Costs of Litigation

Posted: March 15, 2011 in Choosing a Lawyer

Businesses that can afford them must decide whether to use the Big Boston Law Firms (“Biglaws” for short) for their legal work. This is an easy choice for large businesses. For the most part, the Biglaws do excellent legal work. They have excellent reputations and customer relations and a wide range of resources and expertise. The in-house counsel or manager that chooses the Biglaws for legal work insulates himself or herself from internal criticism. Even if the result is not satisfactory, no one can blame the in-house counsel or manager who hired a top firm.

A recently reported case from the Business Litigation Session, Brooks Automation, Inc. v. Blueshift Technologies, Inc. 2006 WL 1537520, *1 (Mass.Super.) illustrates both the excellent work that large firms do, and the staggering amount of legal fees and costs that a client can incur. We know this because the prevailing party filed an application with the Court for an award of fees and costs (the prevailing party won on a c. 93A claim, which allows for the recovery of fees and costs). It sought $873,830.50 in attorneys’ fees and $88,222.25 in costs, for a total of $962,052.75. The Court awarded the fees and costs. It reasoned that the attorneys were well qualified and did an excellent job on an important legal matter for their client.

The judge had some other interesting observations:

“To be sure, there are certainly able, smaller, purely local law firms that could have represented Blueshift in this action, perhaps at a lower price. Yet, it would have been difficult for a small law firm to devote the quantity of resources needed to be devoted in a short time frame to obtain the result that [the Biglaw] was able to produce for Blueshift.”

I agree with the judge that there are able, smaller law firms that could have represented Blueshift well. But this litigation, compressed into a short time period, apparently required a massive amount of lawyer and paralegal time. The judge is right that it would have been difficult for a small firm devote the sheer quantity of resources. Thus, in the Blueshift case, the client was well served to retain a Biglaw (especially since the opponent had to pay the legal fees). However, the vast majority of business and employment law cases do not need such a massive amount of resources in such a short time.

The judge had some other interesting observations:

“Certainly, in some cases, the number of attorneys and staff who billed time in this case on behalf of Blueshift-ten attorneys, a senior litigation technology specialist, a paralegal, and a case assistant-would be excessive or inefficient, but this Court does not find that it was here. To be sure, the billing rates charged by all the attorneys and paralegals are large, but they are roughly the median charged among comparable large firms with Boston offices, and therefore reflect approximately the “going-rate” in the large firm attorney market. To characterize these attorneys’ fees as “unreasonable” simply because they are expensive would be a moral judgment, not a market judgment. By analogy, it may seem crazy that a utility infielder in major league baseball earns $1.5 million per year while a Superior Court judge earns $112,000, but that does not mean it would be unreasonable for a baseball team to pay that amount. Indeed, an arbitrator may justly find that the ballplayer is “entitled” to that amount if his salary is determined by arbitration. The $600 per hour billed by [the senior attorney] is certainly a great deal of money, but it is comparable to that billed by other lawyers in Boston of his ability and experience.”

There you have it. $600 an hour is the going rate for an experienced Biglaw lawyer. Some charge more, some less.

By contrast, you can find very good business litigators for $200-$300 an hour in smaller firms, especially outside of Boston, and for $300 – $350 inside Boston. Hiring a less expensive lawyer can work to your advantage if your opponent hires a Biglaw. If you know that for every $1,000 in legal fees that you spend, your opponent is spending $2,000 or $3,000, you have an advantage. For example, there may be much more pressure on your opponent to settle the case rather than incur more legal fees.

In any event, small and medium size businesses should recognize that litigation can be very expensive and choices of which counsel to hire should be considered carefully. Some clients think that if they hire a Biglaw, it will immediately bring their opponent to its knees (the “my lawyer can beat up your lawyer” approach). This rarely happens in reality. And if it doesn’t, get ready to open your checkbook. Or, find a less expensive lawyer who can handle the matter more cost effectively.

By Adam P. Whitney, 617.338.7000.

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