At the conclusion of a particularly acrimonious yet victorious trial, a client gave me a framed quote from Voltaire: “I was never ruined but twice: once when I lost a lawsuit, and once when I won.” I keep that picture in a prominent location in my office for all my new clients.
Voltaire knew that the cost of a lawsuit is high. It is not unusual to see a client spend over $100,000 to obtain a resolution of a modest-sized business dispute. Many people that have not gone through the process are surprised at this expense.
Let me walk you through some basic math. The attorney rate per hour in Minnesota typically ranges from $200-$700 per hour. Based on my experience, the norm in business litigation seems to be in the range of $300-$600 per hour. One case recently involving the Viking stadium included an attorney rate of $1,000 per hour. The larger the law firm, the higher the overhead and consequently the higher the hourly rate. Now, have a look at the number of hours it will take to get the case to resolution.
There are essentially four stages to litigation, each requiring hours of attorney time. First, the initial pleadings must be prepared and served. These papers help identify the nature of the dispute and the claims that are made. Filing fees are incurred (currently $350 for initial filing and $100 for each court hearing).
The second stage involves the exchange of information. Unlike the TV show, Perry Mason, under the modern-day rules, the parties are required to exchange information through document requests, written questions, and depositions. The court reporter will charge for transcribing the deposition; that means more money. This is the most expensive stage and not surprisingly, this is when “litigation fatigue” sets in for many litigants.
The third stage is the actual trial/hearing or settlement conference. Since the early 1990s, parties are required to participate in a settlement conference, except under limited circumstances such as a probate proceeding. For each hour spent in a trial, for example, the rule of thumb is the attorney will be required to spend at least 3 to 4 hours in preparation. In all, a three-day trial would typically involve somewhere around 100 hours of attorney time.
And, we have not even started calculating the cost of outside vendors, such as the computer forensic expert that is needed to gather electronic data, and other expert witnesses. Now, include additional attorney staff, such as associates to help prepare, and paralegal time, and you will see how one stage of the litigation proceeding could easily cost $50,000.
The fourth and final stage is documenting the resolution of the dispute by way of a jury verdict, a court award, an arbitration award, or the settlement documents.
This cost of litigation also does not include the intangible loss of the client’s time. The client is taken away from being productive at work. The client must dedicate their own staff to assisting the lawsuit. Time must be spent in gathering documents and identifying witnesses.
I have tried many cases to a verdict or arbitration award during my career. I seem to be the only one that leaves the room enjoying the experience. It’s not just because I am paid handsomely; it is my chosen profession to be a trial attorney and I enjoy the courtroom. Clients, however, have not chosen to be in the courtroom and the stress level is extraordinarily high. A lawsuit can be ruinous even when the client wins.
After nearly three decades of trial work, I provide as part of my practice mediation services to help others realize the meaning that Voltaire was trying to make. Even when a party has victory in a verdict, there is a real cost to a lawsuit.