In-House Counsel: Litigation Costs? Forum

[Anonymous User]

Just wondering, for you in-house folks, how sensitive are you to litigation costs? Like, for employment cases that you can settle at the outset for like 30k, would you fight anyway for a while, spend 70k more, and still settle for 30k?

I know there are a lot of in-house folks on this board. And this is something that's been on my mind. Do big companies just have unlimited budgets? Or is there scrutiny to keep costs low on a day-to-day?

If I wanted to manage litigation in-house, can I just pick and choose which litigations I want to fight? Or is it more nuanced than that?

[The Lsat Airbender]

how sensitive are you to litigation costs?

It should be obvious that this varies wildly depending on the company (its size, culture, profitability, the size and sophistication of the legal department), the dispute in question (maximum total liability, probability of winning at trial, PR implications of public litigation, whether mediation is an option, the extent to which settlement would foreclose further liability stemming from the same issue), and a lot of other contingent factors besides (jurisdiction, what kind of court would adjudicate, negotiating posture of the plaintiff, perceived quality of the plaintiff's legal representation).

Broadly-applicable answers:

The general counsel of a company, almost by definition, has fairly wide latitude to decide litigation strategy, but they are subject to oversight from the CEO and board, often have salary/bonus incentives to keep overall costs down, and have their professional reputation at stake if they make sufficiently-bad moves.

In principle, the goal is always to resolve a dispute at the lowest possible cost to the company (discounting the costs of litigation against the probability and results of winning/losing a trial as well as subjective concerns like PR). Litigating for $70k and then settling for $30k might well be the most cost-effective strategy if it deters other potential plaintiffs. Or it might just result from a game-theoretically sensible negotiation posture at the outset. Or maybe you've got a dozen lawyers on the payroll and they're going to get paid anyway so the fight cost $70k from an accounting perspective but much less from an economic/marginal point of view.

[Anonymous User]

how sensitive are you to litigation costs?

It should be obvious that this varies wildly depending on the company (its size, culture, profitability, the size and sophistication of the legal department), the dispute in question (maximum total liability, probability of winning at trial, PR implications of public litigation, whether mediation is an option, the extent to which settlement would foreclose further liability stemming from the same issue), and a lot of other contingent factors besides (jurisdiction, what kind of court would adjudicate, negotiating posture of the plaintiff, perceived quality of the plaintiff's legal representation).

Broadly-applicable answers:

The general counsel of a company, almost by definition, has fairly wide latitude to decide litigation strategy, but they are subject to oversight from the CEO and board, often have salary/bonus incentives to keep overall costs down, and have their professional reputation at stake if they make sufficiently-bad moves.

In principle, the goal is always to resolve a dispute at the lowest possible cost to the company (discounting the costs of litigation against the probability and results of winning/losing a trial as well as subjective concerns like PR). Litigating for $70k and then settling for $30k might well be the most cost-effective strategy if it deters other potential plaintiffs. Or it might just result from a game-theoretically sensible negotiation posture at the outset. Or maybe you've got a dozen lawyers on the payroll and they're going to get paid anyway so the fight cost $70k from an accounting perspective but much less from an economic/marginal point of view.

Nothing to add to OP's question -- as someone who has done a bit of in-house litigation (and is considering doing more), just wanted to thank Airbender for such a thoughtful response. Lots of wisdom there for me to ponder over.