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The case for separate settlement counsel in the ADR process

Have the recent domestic and global economic upheavals led to structural changes in the practice of law? Whether there is a “new normal” for the legal profession may be debatable, but one thing is certain: clients, particularly business clients, have sharpened their focus on how to reduce legal spending, and have singled out litigation as a primary target.

BTI Consulting Group’s recent Litigation Outlook report, based on interviews with inside counsel, noted that corporate counsel’s top goals for the coming year were to control legal costs and bring more value. The single largest increase in concern was to reduce the cost of litigation.

Another report, Northwestern Law School’s “Litigation Cost Survey of Major Companies,” recently submitted to the Judicial Conference of the United States, produced the conclusion that litigation costs, both on average and as a percentage of business revenue, have been rising in the past decade.

Like Mark Twain’s death, reports on the demise of the billable hour may be greatly exaggerated. But clients and outside counsel continue to look for solutions to rising litigation costs, including alternative fee arrangements, strict budget monitoring, and the fixed-fee buffet concept. These remain works in progress.

The heart of the matter is that litigation is a continuum of wide-ranging uncertainties that lead to two virtual certainties: 95 percent of all civil cases will settle by the time of trial, and the journey will be expensive.

Therein is the potential for a creative alternative: earlier case intervention and negotiation of settlements. If settlement can be accomplished before exorbitant costs are incurred, value can be captured for clients by avoiding high discovery and trial-preparation expenses.

Take a moment to consider those expenses. Discovery has become a proverbial bottomless sinkhole driving litigation costs upward. The survey noted above reported the following:

  • For “major cases closed,” corporate per-case spending averages between $622,000 to $3 million.
  • In medium-size cases involving e-discovery, the estimated costs of attorney time and vendor bills average $3.5 million.
  • The ratio of document pages discovered to use at trial was often 1,000 to 1.
  • The survey concluded, “Ineffective and expensive discovery does not aid the fact finding. Whatever marginal utility may exist in undertaking such broad discovery pales in light of the costs.”

Even in routine cases, document management and e-discovery costs quickly mount and can overshadow the underlying case value. After trying enough cases, you also realize that, at the end of the day, the effective fruit of all that effort and expense is often of marginal importance to the trial.

Separating the roles of trial counsel and settlement counsel can provide clear benefits, and is not unprecedented. Several corporations have engaged separate settlement counsel whenever a significant litigation matter is being handled, or appoint someone other than outside trial counsel to focus exclusively on early settlement opportunities. In fact, some trial counsel prefer not to be involved in settlement negotiations.

Why have separate settlement counsel?

  • Separate settlement counsel bring an independent assessment — a fresh pair of eyes — in looking at the litigation, not in terms of the myriad, microscopic legal issues often involved in trial preparation, but in terms of the more strategic considerations affecting decision making on both sides.
  • Getting ready for trial is a demanding process, and the essence of the task is to be prepared to address and win every contingency. That’s very expensive. The demands of complex evidentiary and pretrial procedural requirements often create time-consuming burdens, essential if the case proceeds all the way through trial. Separate settlement counsel can potentially avoid or short-circuit those costs or, at a minimum, allow trial counsel to more efficiently focus on trial preparation and avoid the distraction of having to deal with settlement negotiations.
  • When done on a fixed-fee basis, settlement counsel’s interests and incentives are directly in alignment with the client — saving litigation costs. This is not to say that trial counsel doesn’t share the desire to save costs where possible. But the reality is that trial counsel appropriately focuses on doing everything necessary to win at trial, and avoid any surprises. That focus can produce different incentive and time outcomes than those that are the goal of settlement counsel.
  • The advocacy skills for successful negotiation and mediation are different than the advocacy skills of a trial lawyer. Some trial lawyers recognize that fact and can shift accordingly; some cannot. If you are unable to “leave your game in the locker room” when it’s time to negotiate settlement, you create barriers to effective negotiations. Moreover, asking trial counsel to perform in both a “warrior” and “peace maker” role can sometimes send less-effective, mixed messages to the other side that separating the roles can avoid.
  • Having separate settlement counsel lets the client send the message to opposing counsel regarding the seriousness of its preparations to win at trial, while at the same time remaining open to settlement.
  • The tensions that often develop between competing trial counsel can sometimes create a barrier to the element of trust necessary to facilitate settlement negotiations.

I’ve been trial counsel when separate counsel was appointed for settlement purposes, and I found it to be a positive experience. It let me focus on what I needed to do to get ready for trial, without being distracted with the hours of negotiation that ultimately produced a settlement just before the jury returned. I’ve also served as settlement counsel and thought it helped both the client and trial counsel achieve better results. The age-old verities still apply: the best way to settle a case is to be prepared to try it, and some cases can’t be settled, but must be tried. That said, there is value in a separate role for settlement counsel, and it deserves more consideration.

By Alan Rudlin. Rudlin is a partner in Richmond office of Hunton & Williams LLP. He has extensive knowledge in the various types of alternative dispute resolution and has served as the chair of the VSB-VBA Joint Committee on Alternative Dispute Resolution.

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