Two cases have hit the headlines last week due to the hugely disproportionate fees racked up during the course of litigation.
Lord Neuberger, president of the Supreme Court, raised concerns about the colossal legal bills (totaling more than £1m) run up by a couple who complained about noise from a speedway stadium situated less than a mile away from their home. They argue that they were not aware of the stadium when they bought the property, which the judge noted is valued at less than £300,000. The defendants, stadium operators David Coventry and MotoLand UK Limited, who will have to pay their own costs as well as those of the claimants, claim that being landed with a bill of this size would breach their human rights.
Meanwhile the FT reported that a high-court judge has heavily reprimanded Goldman Sachs’ legal team for running-up “ludicrous” fees of £1m over a nine-month period in a lawsuit worth just £8.8m. Lawyers for the investment bank accumulated the fees over the course of the disclosure exercise, which involved a very high volume of documents. Judge David Mackie was particularly perplexed that these fees were estimated and did not include an itemised breakdown of expenses. He did not allow Goldman’s application for payment of its legal costs, but said a future application could be made as long as appropriate supporting evidence was provided. The judge’s rebukes, and the high fees generated by the legal team, make great headlines at Goldman’s expense.
Since the financial crisis, litigation revenues within law firms have remained strong. But are fees becoming excessive? And will the reputation of those companies involved in high-fees litigation be adversely affected as a result? As more and more individuals and businesses might be put off taking their disputes to the courts, what are the alternatives?
Charles Gordon, panellist and mediator at JAMS International, which offers arbitration, mediation, and other alternative dispute resolution (ADR) services, says that costs associated with the disclosure process in litigation are becoming increasingly high. This is mostly due to the volume of electronically stored documents which must be reviewed. This is immensely time-consuming work, which many firms now out-source.
He argues that ADR can help firms avoid racking up these excessive costs. If parties embark on a dispute resolution strategy involving mediation, for example, they can make huge savings.
“The problem can be that parties feel they need a full disclosure exercise so that they can discover the ‘smoking gun’ document in the other side’s records. In practice this rarely happens.”
“It is open to parties to agree to a limited disclosure exercise pre-mediation, for example. This should enable both sides to better understand each other’s argument but not build up the huge level of fees demonstrated in this case.”
In times of dispute, it is crucial for businesses to protect their reputations. Keeping out of court altogether or at least keeping costs to an acceptable level is usually advisable. There are many ways to resolve disputes outside of the courtroom, but sometimes litigation cannot be avoided. In our experience providing litigation PR services, we strongly believe that the communications strategy should be an integral part of the overall legal strategy in times of dispute. In the Goldman case the media chose to focus on a part of the litigation process, in this case the high fees, rather than the key facts and issues involved in the case. This shows how much of a spotlight the press can shine on cases going through the courts, and therefore how important it is that all the reputational risks are considered and addressed through a thorough communications strategy. To learn more about how we help law firms and their clients throughout the dispute process, please take a look at some of our case studies.