August 6 2014 Managing Litigation to Contain Costs

Managing Litigation to Contain Costs and Build Predictability About Legal Spend Presented by: Jake Modla, Angela Cummings and Lani Quarmby Presented by: Jake Modla Shareholder Littler Mendelson, P.C Charlotte Office 704.972.7047 jmodla@littler.com Angela Cummings Shareholder Littler Mendelson, P.C Charlotte Office 704.972.7005 acummings@littler.com Lani Quarmby Associate General Counsel and Senior Vice President Bank of America Charlotte Office 980.386.8368 Lani.Quarmby@bankofamerica.com Quick Introduction: "Managing Litigation as a Business" (MLB) • Challenges We Are Facing – – Who has had formal training in business process re-engineering or value engineering (BPE / VE)? – Who has had formal training in managing litigation in a cost-effective, business-like manner? – Who has extra time, dollars and human resources on hand to experiment with new approaches for doing a better job at managing your company’s litigation? Quick Introduction to MLB • The Obvious Need – – State-of-the-art education – Discovering what is working well – Sharing best practices – Ongoing collaborative effort among law departments to develop knowledge and resources and improve risk, dispute and litigation management skills among in-house legal teams – Additional resources for managing these disciplines effectively and driving continuous improvement programs Billing Arrangements • The traditional practice of hiring a law firm and paying the requested hourly rate for each hour worked is not an arrangement that is going to drive “value” for the client nor require efficiency on the part of the law firm in how they manage the matter • There are many alternatives to the traditional arrangement • However, the client must collect and understand its own historical data before it can begin to select an alternative fee arrangement Know Your Data • Lawsuits/Administrative Charges – – – – – – – – – Number new per year Number resolved each year Number pending at end of year Resolution ration (Resolved/New) Current matter life ratio ( X% greater than months) Total : Fees, costs, settlements Average/Median: Fees, costs, settlements per matter Frequency compared to employee population Average/Median days to settle/close each matter Know Your Data • Internal Complaints – Severity Level – Number new – Time to acknowledge complaint – Time to investigate – Time to close – Number closed – Number pending – Frequency compared to employee population Know Your Data • For all matters – Sort by protected class (race, sex, age etc.) – Sort by status (applicant , current, former) – Sort by where they come from ( Ex Region 35) – Sort by leader The more you know the better the pricing you can obtain from a law firm Know Your Data • If you have been using a law firm for several years-they should be able to give you this data • Possession of this data also allows you to set objective/measurable goals for those responsible for the management of these matters 2014 Portfolio Work Regions: Mortgage • The map below highlights the firms responsible for Mortgage portfolio matters in each state for 2014 RI Not shown but assigned to Firm 2: Alaska and Hawaii Law Firm Firm Firm Firm Firm Firm Firm Firm *Indicates a state that will divide matters among multiple firms with capacity in that area Color coding on divided states not correlated to actual case location 10 Programs Bank of America uses when retaining law firms: The Litigation Roundtable • Convergence of over 700 litigation law firms to 30 primary firms for all new defensive litigation work; • Consolidated thousands of high-volume single plaintiff matters to 13 Roundtable firms managing matters nationally These matters have been place on a fixed fee for the life of the matter; • Annual summit for all 26 firms and in-house litigators The Summit is an opportunity to share best practices, subject matter expertise, coming litigation trends and effective budget management skills; • Foster collaboration and information sharing among Roundtable firms and through peer networking (COO conversations) via working groups; • Savings are a product of fixed and alternative fee arrangements, volume discounts and efficiencies gained from streamlined firms performing similar work 11 What stresses we are under / what challenges we face? • • Expense forecasting and vendor spend reductions with both law firm and non-law firm vendors continue to be a challenge In complex litigation we use budgets and fixed fees to better predict vendor spend All matters with anticipated spend of more than $250,000 must utilize a Bank developed budget template – Budgets include an estimate of all anticipated expenses including primary outside counsel, local counsel and indemnified counsel, expenses, experts, third party vendors and discovery It is the law firm’s responsibility to compile this information Only approved vendors can be utilized – Alternative fee negotiations are based upon the same phase of the case review Firms provide proposals for fixed fees that are based upon specific assumptions The fee proposal and the assumptions are reviewed by and approved by the handling in-house attorney eDiscovery continues to be about 30% of our vendor spend Other challenges our eDiscovery management team faces is consistency in productions, discovery responses and privilege logs among complex litigation involving multiple law firms Effective collaboration among our law firms, our e-Discovery vendors and our internal discovery management team is a key to overcoming “COO stress.” 12 Changes we are making with law firms: Enhanced Outside Counsel / Vendor Management Processes • Ultimately, we want to be easier to work with as a client Some examples of recent changes include: – Increase use of fixed fees in lines of business outside of litigation – Developed a Relationship Manager / Relationship Partner Program for 50+ top firms; – Conducting onsite information security assessments with our law firms to ensure protection of confidential information; – Outside Counsel Procedures - supplemented terms and conditions are reviewed and revised annually Similar to other financial institutions, our procedures includes protocols for information security, data and document management and indemnification; – Created Performance Management Program and evaluation process for outside counsel; – Created an e-Discovery Management Team consisting of both in-house and outside counsel to foster better communication and collaboration; and – Considering reviewing financial viability of our law firms and vendors, especially in cases of significant partner movement; large lateral changes and mergers 13 Examples of relationships that work and ones that give us difficulty? Works: 1.Firms that collaborate; 2.Firms that escalate issues on a timely basis; 3.Firms that apprise us of market developments and reputational risks; 4.Firms and vendors that have the ability to budget well based upon articulated assumptions; 5.Firms that manage third party vendors and experts well; and 6.Firms that appreciate our customer focus Does not work: 1.Firms focused on hourly rates, rate increases and have not moved to a fixed fee model; 2.Firms that surprise us on budgets by not accounting for experts, discovery vendors or other things that drive up spend; 3.Firms that not collaborate well with each other and/or fail to provide updates to in house counsel; 4.Firms that allow events to develop before we are apprised; and 5.Firms that lack of media savvy or not appreciate potential reputational risk 14 Alternative Fee Arrangements (AFA) – Life Cycle and Benefits •Case Analysis and Budgeting: (1) Determine risk level, (2) Determine if budget use is feasible and (3) Identify period of the AFA term – Life of Matter, Phase, Quarter •Assumption Identification and Negotiation: (1) Identify anticipated work during AFA period, (2) Estimate case phases or most likely to occur during the AFA period, and (3) Adopt a relationship-based approach to negotiating the fee with Outside Counsel while being mindful of the value provided Avoid adopting a worst case scenario basis for setting the fee •AFA Validation at End of Period: (1) Determine work actually performed during AFA period, (2) Review Outside Counsel summary of hours worked by timekeeper level, and (3) If assumptions were misaligned to actual events discuss a true-up with Outside Counsel Mutual Benefits of Using AFAs 15 Littler CaseSmart® Project Customized Managemen Solutions t • Redesigned Legal Process Focus • Advanced Technology Platform • Customized Client Dashboard • Dedicated Alternative Staffing • Business Intelligence Cost Savings 16 Client Dashboard • Transparent Client Access – Daily Updates of Matter Data – Attorney Work Product Matter Status Reporting – Detailed Data Analytics – Actionable Intelligence 17 Client Dashboard – Litigation 18 What is Knowledge Management at Littler? • KM enables Littler’s attorneys to access the knowledge of their peers and improve the quality and efficiency of their work for clients • KM leverages current firm knowledge to create technologies and innovative client services Littler GPS ─ Leave of Absence Comparison Legislative Monitoring Questions? 22 Managing Litigation to Contain Costs and Build Predictability About Legal Spend