How to manage budget risks – The example of enforcing a non-compete

This guest post was written by Richard Rosenblatt, a partner in Morgan Lewis's Labor and Employment Practice.  It is an edited version of an essay he wrote as a participant in our Certified Legal Project Manager^TM program.

When we represent clients seeking to enforce non-competes, there are many risk factors that can affect the success and cost of the matter.  I used the Project Risk Analysis Template (from the Legal Project Management Quick Reference Guide) to rate eight top risks to non-compete budgets, including large scale e-discovery, a change in venue, and the defendant filing a motion to dismiss.  Then I considered ways to reduce each risk. 

The factor that posed the highest risk to realization of our time charges was simple:  the client is surprised at the fees.

Typically clients will ask how much it will cost to enforce a non-compete agreement before we have much idea of the work that will be required, how the adversary is likely to react and even the court in which the matter will be litigated.  If these matters need to be aggressively litigated through an accelerated court hearing, it is akin to compressing two years of litigation into two months, causing the fees to quickly escalate.  At some point, the principle that drives a client to enforce a non-compete often gives way to concerns about whether further pursuit is worth the expense.  

The first key to avoid having a dissatisfied client is to openly communicate how much the matter is likely to cost, before it begins.  A detailed fee estimate should be presented with specific assumptions as to the number of depositions, motions practice, etc.  The lawyer must stress that this is only an estimate, and that additional information would be required to turn it into a fixed budget.  That way, the client cannot be lulled into thinking that an enforcement action is a slam-dunk with no expense. 

During the course of the matter, it is important to constantly communicate legal spend.  These matters move quickly and can get out of control before a client ever sees the first bill.  This will result in sticker shock if it is not managed in advance. 

Another big problem that can result in a dissatisfied client is failing to push back upon an unreasonable client.  Very often, lawyers tell clients what they want to hear because they do not want to appear weak or contradictory of the client's desires.  That is a recipe for disaster. 

It is imperative to push the client's interests zealously, but prudently.  If the client expects to win and outside counsel identifies risks, outside counsel needs to explain the risk and suggest strategies to reduce it.  The lawyer must give an honest assessment to ensure that the client makes the right business decision.  In the long run, the client will be satisfied with candid advice -- even if it is not always what it wants to hear. 

As I often say to clients:  "You pay me way too much money to be less than candid with you. . ."  This creates realistic expectations, and also motivates the client to prioritize the work flows necessary to succeed.  Ultimately, this is the only way to meet a client's needs.

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