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Do you know what you’re paying for?

How in-house departments can cut the fat on costly litigation files
|Written By Jennifer Brown
Do you know what you’re paying for?
‘Using a regional office of a national firm can yield savings between 25 and 45 per cent,’ says one in-house counsel. Photo: Shutterstock

On his first day as director of litigation and information in the legal department of Manitoba Public Insurance, Dean Scaletta asked to see the retainer agreement the Crown corporation had with its external legal providers.

“I got a blank stare,” says Scaletta. “The retainer agreement was basically, ‘Do the work. Send us your bills.’”

That was three years ago and from that moment on, Scaletta was determined to change the way the organization dealt with law firms on litigation matters.

Scaletta and Dean Novak, assistant general counsel of litigation at Siemens Canada Ltd., presented recently at the Canadian Corporate Counsel Association annual spring conference in Montreal. They spoke about how they avoid the traditional and typically costly approach to litigation management, which in their opinion inflates costs unnecessarily.

“I’m still surprised how many companies are still willing to pay rack rates for lawyers,” Novak says.

Among the tips Novak and Scaletta provided for managing litigation files and cutting costs was to look at using regional lawyers or the regional offices of national firms.

“Using a regional office of a national firm can yield savings between 25 and 45 per cent,” says Novak. “Regional lawyers may be willing to waive travel and other related expenses to further compound savings.”

At Manitoba Public Insurance, Scaletta also uses local and more regional firms for its litigation files.

The Crown corporation provides universal compulsory automobile insurance to Manitobans. Scaletta says it had a lengthy list of “approved” defence counsel in each of the more than 60 jurisdictions it did work in across North America. At any given time the department had 1,000 active out-of-province litigation files.

In addition to taking a careful look at what firms were providing services, he decided to look at specific expenses he wanted to get a handle on in terms of what was being billed from the firms.

He made a list of headings that included the following parameters:

• company and firm contacts;

• staffing: one senior counsel, one junior counsel unless otherwise approved;

• matter management: case plan — one lawyer per court appearance/meeting; prior approval for significant expenses such as research, concise status reports after each significant step;

• non-billable hours include: opening files, preparing budgets or invoices, repetitive file reviews, purely clerical/administrative tasks, supervising or instructing associates, students, or paralegals, travel to out-of-office meetings or proceedings;

• non-billable disbursements: (without prior approval) telephone charges, computer-based legal research, parking, conference room time, overtime for staff such as secretarial/bookkeeping etc. All of these items are to be treated as overhead expenses in the hourly rates.

“We were once billed by a firm for use of their own internal conference rooms,” says Scaletta. “Things like that should be treated as overhead expenses and included in the hourly rate.”

When he presented his list of non-billable items to the law firms, Scaletta says the biggest pushback was on not paying for photocopying.

“It has to be a huge profit centre because every firm pushed back on the photocopying,” he says. “It’s irritating to get a bill for $8,000 to $10,000 in fees and then see a list of 50-cent photocopying charges that goes on for six pages. We rarely if ever quibble about hourly rates.”

The philosophy Scaletta has put forward to the external firms Manitoba Public Insurance deals with is this: “Each task is to be performed at the most cost-efficient staffing level without compromising quality. We also ask that they focus on the quickest and least expensive route to a conclusion of a matter, rather than completion of all prescribed procedural steps.”

In addition to that, as long as privacy and confidentiality is maintained, he encourages firms to use technology to streamline processes and share information and documents with the company.

Scaletta says his litigation management protocols were 18 months in development. He met with stakeholders internally at Manitoba Public Insurance to discuss the initial draft and receive feedback. A second draft was accepted by the management committee.

The protocol includes early case assessment to formalize what lawyers should be doing when assigned a new file. It was designed to answer questions such as, “Where are we now?” “Where do we want to be with the file in six months? In 12 months?”

Protocols also address settlement approvals. Lawyers are expected to keep the business unit informed and secure instructions before concluding a settlement or taking some other irrevocable step. The business units are also expected to provide input and instructions on a timely basis.

Litigation file post-mortems were also introduced and can be initiated by the law firm lawyer or the business unit. The post-mortem examines what went right, what went wrong, and looks at whether similar cases could be avoided with better front-line training.

For handling out-of-province litigation there are approximately 165 lawyers on Manitoba Public Insurance’s approved list of defence counsel. Firms are regularly added or deleted depending on performance.

“We approached the two largest firms in Manitoba about handling the personal injury litigation — one for Alberta, the other for B.C.,” says Scaletta.

The standard retainer agreement developed for out-of-province litigation states that hourly rates are to be discounted (about 10 per cent) and locked in for three years. Travel time is non-billable, unless they are actually working on the file.

The result, says Scaletta, is that Manitoba Public Insurance gets “top-notch litigation counsel at rates far below those of local counsel, and in-person consultations are a 10-minute walk away. Both firms also have Jets tickets,” he mused.


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