Watch Out for Litigation Costs

litigation costs

Some attorneys (and their clients) do not consider litigation costs when performing their cost/benefit analysis. Likely, if they consider them at all, it is only from the perspective of what they will need to spend to prosecute the action. But as our recent case illustrates, how much the opposition is going to spend must be considered.

Here are the facts.

Our client (we’ll call them Acme) is a small business, that has customers all over the world. Acme hired someone to work overseas, but fired him after a few months based on poor work performance. The employee was very well paid for his time, and Acme even allowed him to vacation in Greece for a couple of weeks on the company dime after the termination, just to show there were no bad feelings.

But the employee did not go quietly into the night. He found an attorney who was willing to file an action containing ridiculous claims, ranging from Labor Code violations to false imprisonment.

The attorney’s background was in personal injury, and I think he thought that by making the claims so outrageous, Acme would enter into a quick settlement to make the action go away. Instead, Acme became driven to defeat the action to leave no doubt that the claims were all false.

As ridiculous as the claims were, Acme had to take them seriously because the lawsuit sought millions in damages. And since the employee had worked in various countries, that meant traveling to those countries and spending significant sums to take the depositions of witnesses.

Victory.

In the end, the claims were all disposed of with a motion for summary judgment. As the prevailing party, Acme was then entitled to recover its litigation costs.

Let’s talk about costs.

Costs are subject to California Code of Civil Procedure section 1033.5. That statute lists in very specific detail which costs can, and cannot, be recovered.

Relevant to this case, one recoverable cost is “travel expenses to attend depositions.” And then there is my favorite allowable cost, section (c) (4), which provides:  “Items not mentioned in this section and items assessed upon application may be allowed or denied in the court’s discretion.” In other words, the court can award any cost it deems to be reasonable and necessary for the litigation.

Travel expenses to attend depositions are specifically recoverable, but what does that include? Airfare seems obvious, as does any transfers. But what about a hotel? One can’t fly to Romania, take a deposition, and return the same day, so a hotel stay is necessary for the deposition. But what level of hotel? Are the client and I permitted to stay in the sort of hotel we would normally stay in when traveling, or must we stay in the equivalent of a Motel 6 in order to keep down the costs for the opposing party?

And what do we do about food? A judge could reason that we’d need to eat whether or not we were in Romania, so that should not be put on the opposing party. But the cost of eating at a restaurant will be much higher than eating at home. We are only there because Plaintiff filed this frivolous action, so why should we bear that cost?

As you can see, there are many decisions for the court to make, and no way to know what the judge will conclude.

My cost strategy.

I have seen attorneys who follow the strategy of throwing every conceivable cost against the wall to see what will stick. They fly first class, stay at high end hotels, and even include the drinks they had with dinner on the cost application. But I think that destroys their credibility, and causes the judge to question other items.

I am reasonable when incurring the costs, and equally so when submitting them. I make sure to set forth the expenses I am not seeking, so the judge knows I am already making cuts.

In this case, the bulk of the expenses had been incurred before I was retained. Thankfully, prior counsel and the client had followed a philosophy similar to mine, and had not gone first class on everything. I submitted the cost memorandum, and the judge awarded the full amount — over $150,000 in costs.

Conclusion.

Costs need to be part of the cost/benefit analysis used to determine whether to pursue a case, including the costs that will be incurred by the other side.

Opposing counsel no doubt hoped for a quick settlement, even though his case was too weak to even withstand a motion for summary judgment. Did it not occur to him, when Acme’s counsel was incurring significant expenses, that those expenses could someday fall to his client?

His client is now liable for over $150,000 in costs; an amount that is life-altering to most.

Leave a Reply

Your email address will not be published.

Aaron Morris
Morris & Stone, LLP
Orchard Technology Park
11 Orchard Road, Suite 106
Lake Forest, CA 92630
(714) 954-0700

Email Aaron Morris
DISCLAIMERS

NOTICE PURSUANT TO BUSINESS & PROFESSIONS CODE SECTION 6158.3: The outcome of any case will depend on the facts specific to that case. Nothing contained in any portion of this web site should be taken as a representation of how your particular case would be concluded, or even that a case with similar facts will have a similar result. The result of any case discussed herein was dependent on the facts of that case, and the results will differ if based on different facts.

This site seeks to present legal issues in a hopefully entertaining manner. Hyperbolic language should not be taken literally. For example, if I refer to myself as the “Sultan of SLAPP” or the “Pharaoh of Free Speech,” it should not be assumed that I am actually a Sultan or a Pharaoh.

Factual summaries are entirely accurate in the sense of establishing the legal scenario, but are changed as necessary to protect the privacy of the clients.