Morrison on Metrics: Total cost of resolution ought to include internal time

Data on the value of time consumed internally for legal matters is murky.

The most common metric law that departments track regarding amounts spent on matters is outside counsel fees and expenses. Matter management systems handle that tracking with precision, or accounts payable systems aggregate those figures more grossly. Some law departments go a step further and track settlement payments; some even track settlement receipts. But what law departments do not collect is data on the value of time consumed internally by clients of the law department or those within the law department. If your law department tracks lawyer and paralegal time to specific matters, those numbers also can contribute figures regarding a law department’s internal investment in particular matters. This column focuses on the former: client time.

It would prove impossible to pin down the amount of time individual employees devote to particular legal matters. To try to tease out “legal time” defies practicality and sensibility because legal issues and decisions weave through so many aspects of transactions and decisions.

If clients are caught up in a lawsuit, however, there could be some estimates about time spent by custodians of records in the discovery context. There could be estimates of time spent in preparation for depositions and in the depositions themselves. Lawyers would have a handle, to some degree, on how much time employees spent in meetings to discuss to strategy or settlement. Even so, lawsuit-related time would be painstaking to keep track of, many people would forget, and even those clumsy numbers would not signal the end of the effort. Someone would need to convert the hours spent into fully loaded costs. True, for each of these pools of time there could be rules of thumb and assumptions, but the end result would be a very squishy figure.

Not surprisingly, actual data on this internal cost of resolution—what is incurred within a company but outside the law department—rarely surfaces. When companies seek recovery of their legal fees, they don’t seek recovery of their internal employee costs for lost time.

And, after all the prodding, estimating and correcting, it might turn out that the law department and its direct expenditures account for 90 percent of the corporate legal expenditures, so all the rest carries little water.

In short, the total legal costs of litigation resolution (ignoring transactional law-related costs) consists of a couple of components that can be relied on, notably external counsel fees, some vendor costs such as for e-discovery, and cash paid for settlements or judgments. Other components remain elusive: the internal law department investment of time, and even more so, the investment by others in the company remains opaque.

Contributing Author

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Rees Morrison

Rees Morrison, Esq. is the founder of General Counsel Metrics, LLC. Based in Princeton, NJ, Rees has for the past 25 years consulted solely to...

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