TEXAS: An Introduction to Litigation: General Commercial

An Alternative Approach to Escalating Litigation Costs in Commercial Cases

John Zavitsanos; Kelsi Stayart White

Litigation costs have ballooned over the last two decades. These escalating costs hurt both plaintiffs and defendants. For plaintiffs, costs eat into your true recovery and can make litigation economically pointless. For defendants, high costs artificially drive up settlement numbers because plaintiffs can negotiate higher nuisance value settlements when defendants are faced with million-dollar litigation costs to fight even meritless lawsuits.

In our view, litigation costs have risen because modern litigation treats discovery as the endgame and trial as a hypothetical event in the far-off future. We propose a different approach and have had success with it in Texas courts and beyond. It may strike you as counterintuitive, but it works.

Engage in settlement discussions early. The typical pattern of conducting hundreds of thousands of dollars of discovery and then delaying trial and other deadlines in order to mediate drives up costs exponentially. Outside counsel should explore possible settlement at the very beginning of the case before serious dollars have been spent. A competent trial lawyer can gather the relevant documents and email communications from their client, research the law, and assess their chances of success from the outset. In our modern world of email, text messages, and electronic documents, the key evidence in almost every case is already in the client’s hands. Further, in most commercial disputes, companies have exchanged letters and information with one another before outside counsel gets involved. Based on those exchanges, you can assess yours and your opponent’s positions with about 75% accuracy. In a minority of cases, it may be worth the significant cost of discovery to gain greater confidence in your assessment, but for most cases, this level of accuracy will do and is where you would end up even after discovery anyway. If early settlement efforts are successful, you saved money and solved your problem. If not, you did not create months or a year of additional delay after engaging in expensive discovery. On this point, outside counsel and business decision-makers should make an effort to handle early settlement negotiations themselves, rather than always defaulting to paying for mediation.

Minimize depositions. Depositions are overused. In most commercial cases, you only need to depose a handful of witnesses. There is no need to depose every fact witness identified in an initial disclosure, which we see parties regularly wanting to do. Depositions reveal your case strategy, show your opponent your favorite documents, and preview your cross-examination style. Because depositions come at a strategic and financial cost, be selective about them and make sure you have a specific reason you are taking each one. Come up with an aggressive cap on the total number of hours for depositions to propose to the court. Witnesses within subpoena range can be called at trial regardless of whether they have been deposed. So, focus on depositions of witnesses that are either outside of subpoena range or who may become unavailable by trial (i.e., they are ill, may leave the company, or move states). Rather than always relying on a corporate representative deposition, we stress the use of interrogatories to pin down an opponent’s position. The benefit to that approach is that there is a continuing duty to supplement interrogatories. There isn’t a duty to supplement corporate representative testimony, which makes it easier for your opponent to change their story later.

Set and keep trial dates. There is a direct correlation between the length of time a case has been pending and its costs. Nothing drives up costs like delay. A continuance results in one side seeking to re-open discovery, change their theories, add claims, add experts, or otherwise fix weaknesses in their case, all of which requires the opponent to then respond. This process starts the entire discovery machine over again. On top of this, continuances granted within thirty days of trial mean parties must pay for multiple rounds of trial preparation. To avoid this cycle, counsel should have a docket control order or agreed scheduling order in place from the start of the litigation that sets a realistic trial date based on the needs of the case. We’ve found that Texas state courts will follow the parties’ lead here. This trial date should be treated as set in stone, not a constantly moving target. Counsel should reach trial-related deadlines on time. This ensures that you will not have to agree to continuances as a matter of course because your side is just as unprepared for trial as your opponent. To keep outside counsel on target, your fee agreement can provide for a 30% reduction in hourly rates after any agreed continuance other than in truly exceptional situations. The one variable you cannot control here is the court’s schedule. But we’ve found that Texas courts can tell which lawyers are serious about getting to trial on time and are less likely to prioritize cases where they can tell the lawyers will inevitably seek a continuance right before trial. Avoiding agreed continuances increases the chances the court will prioritize your case, keeps your costs down, and maintains pressure on your opponent, all of which may result in a better settlement. Whether it’s via trial or settlement, you will resolve your legal problem more efficiently.

Separate settlement and trial representation. If you want to pursue settlement as trial approaches when leverage can be high, we recommend engaging separate settlement counsel to handle any settlement negotiations that occur 60 days out from trial. Your trial counsel should focus solely on trial preparation by that time. Settlement counsel’s fee arrangement should be structured so that their billable rate goes down the longer it takes them to settle the case. Despite what you might think, this actually reduces, rather than increases, costs. Here’s why: When settlement talks and trial preparation are on dual but separate tracks, settlement talks do not interfere with trial preparation and then end up causing a continuance (which, again, balloons your costs). Instead, trial counsel focuses on trial preparation and is ready to go on the set trial date, while the settlement counsel focuses on settlement. These dual tracks mean you have two alternatives to resolve your lawsuit by the trial date (trial or settlement) and increases the likelihood the case will be resolved faster. Splitting up settlement and trial representation also can position you for a better negotiated resolution because your opponent will recognize that your trial team will be prepared for trial no matter how much time settlement negotiations take up. Settlement and trial are two different but equally powerful tools in the litigation toolbox, and one should not be sacrificed for the other.

Clients want us to deliver results while managing costs, and we get it. High litigation costs hurt us too. How? We are a firm of trial lawyers. We do not just manage litigation; we try cases. This is core to who we are as a firm. Trials are how we keep our skills sharp and train our young lawyers. And the biggest impediment to trials today is litigation costs. For this reason, we are just as invested as our clients in managing litigation costs so that trials remain an effective tool for the resolution of commercial disputes in Texas.