March 22, 2013
Michael Brown, Advisory Services Director, Interviewed in The Metropolitan Corporate Counsel Article "Forensic Experts Weigh In On Litigation Costs"
Editor: Please give us an overview of the financial aspects of litigation. Where can surprise costs arise?
Mukamal: The key financial aspects of litigation obviously include legal fees and ancillary costs, such as travel, court reporters and expert witness fees; however, parties often overlook third-party legal fees or the cost of potentially bad publicity or embarrassment as issues are uncovered during litigation. Unlike car repairs, for example, litigation can't be handed off wholesale to a third party; it requires a substantial investment of time and money, and it disrupts normal business activities. The key point is to understand what resources are required and vet all possible costs during the early stages of case evaluation.
Brown: From a forensic perspective – that is, using financial knowledge and skill in conjunction with investigative techniques – I would stress the value of conducting a cost/benefit analysis as a tool for both plaintiffs and defendants to determine whether the litigation is worth pursuing at all. Toward that goal, we routinely provide an estimate for our time as it relates to the forensic work and testimony required for a specific matter.
Surprise costs also can arise from litigation gamesmanship, such as extensive motion practice or discovery requests. Depositions and the trial process itself can easily cost more than originally expected, and "scope creep" sometimes comes into play, where initially we're engaged for one task that ultimately evolves into multiple unique tasks not accounted for in our original estimate.
Editor: Data management has emerged as an enterprise-wide issue. What's your perspective on controlling discovery costs?
Brown: In terms of data management and discovery issues, electronic discovery is here to stay, as are its often overwhelming costs. The good news is that technology can make information a more manageable, even valuable, asset and enable forensic accountants to do our jobs efficiently. In my experience, while witnesses might end up making your case, it's always imperative that all knowable facts be learned, and electronic discovery has helped us to achieve that goal. While e-discovery is a factor in the cost/benefit analysis, generally it's a good strategy to embrace today's data volumes rather than fight them. It is pennywise but pound foolish to consider those costs in a vacuum.
Mukamal: I agree and would add that technology can also be an obstacle inasmuch as the access to information it provides may trigger costly gamesmanship tactics. For instance, motions to compel discovery are of no use when your adversary lacks the technical ability to comply. And the mere fact that information exists does not guarantee that it is properly indexed or that compelling its production from a third party will be worth the cost. This is distinct from situations in which a party willfully destroys information, but there are forensic methods for detecting spoliation, as opposed to a party’s bona fide inability to produce.