Oops! Plaintiffs want a jury to award them money, but end up with arbitrators making them pay!


            This should be of interest to plaintiffs and attorneys who hope to conduct business litigation or arbitration with a contingent fee.

            Homeowners hired a construction company to build an 8000 square foot house, 2000 square foot guest house, pool and pool house, tennis court, pavilion and multi-car garage on their 12 acre property. The project was to cost $11.3 million. About 2 and ½ years into the project the builder stopped work, alleging the homeowners breached their contract by failing to pay for increased construction costs due to a design change. The homeowners claimed that the builder had delayed work and overrun costs. 

            The homeowners wanted the case heard in court. The builder wanted to arbitrate.  The case was ultimately heard by a three member arbitration panel.  The homeowners were ordered to pay the construction company $5.75 million in legal fees and arbitration costs.

The homeowners believed that they would have won with a jury and that the arbitrators were biased because they had formerly represented construction companies. 

            Obviously, it can matter a great deal to a contingent fee plaintiff whether his case gets tried by a jury or arbitrators. In either case, however, it is very important to pick the right audience, whether they are jurors or arbitrators!


"CYA," the corporate curse!

            When excellent lawyers leave big firms to become entrepreneurial contingent fee trial lawyers, they inevitably run into the “CYA effect.” This is the unfortunate tendency of many fearful General Counsel and corporate executives to hide behind a large, well-known firm in the event a case goes bad.   Such was the experience of Elizabeth Starrs and her partners described in “Starting a Litigation Boutique.” 

            How ridiculous!   It is frequently only the best lawyers who have the courage to strike out on their own. This may leave the bureaucrats and timid folk to handle these risky and important corporate cases.   The big firms tend to hire high-grade law graduates at high dollar prices. To justify their salaries, they charge high hourly fees for the tutoring of neophytes. A corporate client looks at the bill and sees many lawyers, of unknown experience and abilities, charging outrageous fees for too many hours and unnecessary work– all because the corporate employees who hired the large firm want to cover their derrieres. 

            Starrs found that this corporate tendency led her firm toward representing privately owned and cost conscious companies and individuals. We have had the same experience, and it has been most gratifying. We listen. We solve problems. We have incentive to be cost efficient. Our ability to be profitable requires us to find the most efficient path to the goal line. 

            Since “turning from the dark side,” we and lawyers like us now represent David instead of Goliath. This occurs in virtually all forms of business cases, including patent litigation, breach of contract cases and complicated arbitrations. Of course, the “CYA” folks could repent! They could easily find the best, most efficient, trial lawyers, not just the largest firms and motivated hourly billers. Will they? I doubt it.

            The best business people often leave large, cumbersome companies to go on their own. This is the era of the entrepreneur, in business and in law. General Counsel and corporate executives should have courage in seeking out the best lawyers for their case. After all, they were hired to do a job, not hide in the corner.