1. Complex Litigation | Business Transactions | Intellectual Property | wildman.com © 2010 Wildman, Harrold, Allen & Dixon LLP. The Network of Trial Law Firms May 2011 Setting and Managing Litigation Budgets

2. © 2011 Wildman, Harrold, Allen & Dixon LLP. 2 Introductions  Cindy Abbott  Senior Litigation Counsel, Motorola Mobility  Jim Fiffer  Senior Vice President & Deputy General Counsel, Equity Residential  Mark Durbin  Partner, Wildman Harrold  Craig White  Litigation Department Chair, Wildman Harrold

3. © 2011 Wildman, Harrold, Allen & Dixon LLP. 3 Agenda  Benefits and challenges of accurate budgeting  Assessing the value of a case  Establishing budgets  Managing budgets  Rules of thumb and practical pointers

4. © 2011 Wildman, Harrold, Allen & Dixon LLP. 4 Benefits – Why Bother to Budget?  Helps your business manage its budget  Limits the likelihood of expensive surprises  Helps you set your client’s expectations  Requires early case evaluation  Demands early strategic planning  Necessitates discussion of risks and benefits associated with strategy  Encourages communication with counsel regarding client expectations, requirements, and what will constitute a good result  Limits likelihood of over-lawyering  Leads to fiscal responsibility

5. © 2011 Wildman, Harrold, Allen & Dixon LLP. 5 Challenges – Why Is Accurate Budgeting So Difficult? Limited Information  B udgets are only as good as the information on which they are based  Early on, you know little  It can take 60-90 days after suit to provide a reasonably accurate budget  Even after initial investigation, much remains unknown Client & Attorney Factors  Client expectations and motivations do not always match reality or aren’t practical (e.g., fight to the death!)  In new client-attorney relationships, risk tolerance and work styles are unknown  Lawyers are trained to do everything to protect their client’s interest!  Is the client prepared to take the risk of not doing everything? Things Change  Client motivation and direction changes  Goals change  Risk tolerance changes  Financial/business circumstances change  Court issues significant rulings  New facts discovered  Key witnesses leave, don’t perform as expected, or become uncooperative External Factors  Opposing counsel  Judge  Venue  Changes in law

6. © 2011 Wildman, Harrold, Allen & Dixon LLP. 6 Assessing the Value of a Case Economic Factors  How many dollars can be recovered or lost?  What else is at stake?  Protecting a key revenue stream?  Entering a new market or improving your business position?  Is crucial IP at stake?  Can each side afford to fight?  Will there be anything left to recover when you’re done fighting?  Is there insurance? Business Issues  What are each side’s goals?  How disruptive will the suit be to business operations?  Is there an ongoing business relationship with the other side?  Can the other side apply leverage in other business or legal contexts?  Does the case raise any public relations concerns? Factual / Legal Considerations  Venue  Judge  Opposing Counsel  Context/ history of dispute  Who controls the facts?  Are key issues legal or factual?  Can you win a dispositive motion?  Will this case lead to others?  Will this case set important precedent?

7. © 2011 Wildman, Harrold, Allen & Dixon LLP. 7 The Budget is the Controlling Instrument: From Intake to Case Management  The budget should be the tool that encapsulates:  Case Strategy  Staffing  Timeline  Tasks  Rates  Expenses  Anticipated resolution  Benchmarks to measure performance and to identify potential problems

8. © 2011 Wildman, Harrold, Allen & Dixon LLP. 8 Factors for Setting Initial Case Budgets  What are the client’s and opposing party’s objectives for the case?  How many parties/law firms in the case and who are they?  How aggressive is the other side and their counsel?  Is there a basis for a dispositive motion and is judge likely to grant one?  How fast is the track?  Is it a bench or jury trial?  How many witnesses – fact & expert – and where are they?  How many documents – ours & theirs – and where are they?  How many issue burdens have been assumed and when will they be decided?  What are the client’s case management guidelines?  What are client’s staffing expectations?  What time frame is being budgeted?

9. © 2011 Wildman, Harrold, Allen & Dixon LLP. 9 What might the initial budget look like? Budgets come in all shapes and sizes:  Every client has a unique opinion on what a budget should look like  Detail, timeframes, formats vary from client to client, case to case  No matter what it looks like, the key factors must be captured in any budget In itial Case Budget: reflecting two different scenarios to achieve resolution (file name: Initial Case Budget with Two Scenarios.DOC) Case Management Worksheet: to provoke critical thinking (file name: Case Management Worksheet in MS-Word.doc) Case Budget Forecast: to estimate annual case budget and enable quarterly tracking (file name: Case Budget Forecast for next year.XLS)

10. © 2011 Wildman, Harrold, Allen & Dixon LLP.

11. 11 What might the initial budget look like? Budgets come in all shapes and sizes:  Every client has a unique opinion on what a budget should look like  Detail, timeframes, formats vary from client to client, case to case  No matter what it looks like, the key factors must be captured in any budget In itial Case Budget: reflecting two different scenarios to achieve resolution (file name: Initial Case Budget with Two Scenarios.DOC) Case Management Worksheet: to provoke critical thinking (file name: Case Management Worksheet in MS-Word.doc) Case Budget Forecast: to estimate annual case budget and enable quarterly tracking (file name: Case Budget Forecast for next year.XLS)

12. © 2011 Wildman, Harrold, Allen & Dixon LLP.

13. 13 What might the initial budget look like? Budgets come in all shapes and sizes:  Every client has a unique opinion on what a budget should look like  Detail, timeframes, formats vary from client to client, case to case  No matter what it looks like, the key factors must be captured in any budget In itial Case Budget: reflecting two different scenarios to achieve resolution (file name: Initial Case Budget with Two Scenarios.DOC) Case Management Worksheet: to provoke critical thinking (file name: Case Management Worksheet in MS-Word.doc) Case Budget Forecast: to estimate annual case budget and enable quarterly tracking (file name: Case Budget Forecast for next year.XLS)

14. © 2011 Wildman, Harrold, Allen & Dixon LLP.

15. 15 Keys to Effective Budget Management  Active supervision by the outside attorney who gave you the budget and sends you the bills  Disciplined approach to monitoring status  Regular communication with client  Agreement with client on path forward

16. © 2011 Wildman, Harrold, Allen & Dixon LLP. 16 © 2009 Wildman, Harrold, Allen & Dixon LLP. Thirty Years of Practice: White’s Wisdom

17. © 2011 Wildman, Harrold, Allen & Dixon LLP. 17 Craig White’s Rules of Thumb  CAUTION: The opinions and broad generalizations in this section are those of Craig White and do not necessarily reflect the opinions of the other panelists (or even of any other person on the planet) and some of them are not supported by any form of math currently known to man and are supported only by Craig “having a good feeling” about them, i.e., take them with a grain of salt.

18. © 2011 Wildman, Harrold, Allen & Dixon LLP. 18 Craig White’s Rules of Thumb  “Average” budgets for a “typical” case:  $1-5M case: estimate a budget including trial of about one-third the value of the case  Less than $1M case: budget including trial averages 40-45% of the value of the case  Over $5M case: there are no short-cuts – a case-specific budget is needed  Ordinary cost % for major tasks in a case: (as a percentage of total case cost)  Discovery: 30-45%  Motion practice: 10-20%  Mediation and settlement: 1.5-3%  Litigation support vendors: 5-10%  Pre-trial and trial: 41-48%

19. © 2011 Wildman, Harrold, Allen & Dixon LLP. 19 Craig White’s Rules of Thumb  Depositions:  Each key fact witness is about 35 hours of attorney time  Each expert witness is about 60 hours of attorney time  Each 30(b)(6) witness is about 50 hours of attorney time  20-30 documents can be effectively reviewed for substance per hour.  Every postponement of a trial date increases the total cost by about 3%- 5% per month.  Forums make a difference:  Federal court costs more than state court  A bench trial costs more than a jury trial…even though the number of trial days will be fewer  Binding arbitration costs the same as a bench trial; it just happens sooner

20. © 2011 Wildman, Harrold, Allen & Dixon LLP. 20 Final Thoughts  A key element in setting accurate and efficient budgets is deciding what you are NOT going to do and accepting the risk of not doing everything that could be done.  Communication at the initial stage is critical to valuing a case accurately and setting a realistic initial budget.  The engineering adage holds true: Garbage In = Garbage Out  Litigation is full of surprises and often unpredictable. That should not preclude a budget estimate from being developed.  It is not reasonable to expect initial case budgets to be irrevocable – unless an Alternative Fee arrangement is in place.  Trust and open communication between outside and in-house counsel are important ingredients to setting and managing budgets effectively.  If this does not exist, it will be difficult to accomplish.