One of the frequent claims I hear at mediation is,
“I’d rather pay my attorney [tens/hundreds of thousands of dollars] in legal fees trying the case than pay it to [insert name of opposing party].”
The most common way to test a party’s resolve is to ask their attorney for their litigation budget. It happens far too often that lawyers haven’t thoroughly evaluated the costs of litigation with their clients and how it impacts their settlement strategy. Off-the-cuff estimates of fees are consistently too low. It’s not until you’ve estimated the time it will take to complete every task you can reasonably anticipate that you realize just how expensive your case can be.
I highly encourage lawyers to prepare a detailed budget estimate for clients at the outset of every case and to revisit it regularly. If done properly, collaborating on a litigation budget with your client provides the ultimate opportunity to establish expectations and get on the same page about risk, strategy, cost-benefit analysis and potential outcomes. The litigation budget should include deciding when you want to engage in serious settlement discussions and/or mediation, and the amount of fees and costs you intend to incur before engaging in meaningful settlement efforts.
Also, don’t lowball the fees and costs to the mediator. While there are situations when you may want to overemphasize the strengths of your case to the mediator, providing a bogus litigation estimate is not one of them. Mediators who spent a career trying cases know an excessively low estimate the minute they hear it, and that takes away from an attorney’s credibility. When it comes to the cost of litigation, keep it real.
There are plenty of useful tools out there for litigation budgeting. You can use this sample budget sheet to help paint the picture for your client.
Finally, it is important to revisit your budgets after the conclusion of a case. It will help you budget more accurately in the future, evaluate where you can provide more cost-effective representation to your clients, identify budget-busting red flags and build in buffers in future budgets.