Steps to Help Control Your Legal Costs

Social inflation has drastically increased the cost of liability claims, and rising legal fees are a significant contributor.

For example, in the first quarter of 2023, law firms raised rates an average of 5.5%, the largest quarterly increase in years. K-12 schools, colleges, and universities have experienced escalating expenses in multiple areas, including legal costs.

Although all institutions want to rein in legal costs, the need is most acute for smaller schools with fewer resources.

Begin controlling your legal costs by evaluating your school’s overall legal needs. Also consider the potential impact of insurance when it’s available.

• Do you have in-house counsel? If your school doesn’t employ its own attorney, periodically assess whether your situation justifies creating the position. Weigh the attorney’s probable salary and benefits against the number, cost, and complexity of matters you refer to outside lawyers. It can be more cost-effective to have an in-house lawyer handle some of these. And in-house counsel is often better positioned to give regular legal advice that is important for compliance and risk management.
• Do you have insurance? If your school seeks insurance coverage for a matter, review the carrier’s counsel guidelines before hiring an attorney. Insurance carriers typically have the right to appoint or approve counsel you select. Particularly in the latter case, ensure your attorney receives and complies with the carrier’s guidelines to avoid jeopardizing coverage.

Reviewing and revising your practices for hiring outside counsel can help reduce legal costs. Consider these steps:

• Limit officials authorized to hire counsel. To improve awareness, tracking, and ultimately control of legal expenses, restrict who can retain outside counsel. Schools with in-house counsel usually require authorization from that office. Identify anyone else, such as the President or Head of School, with hiring authority.
• Reevaluate hiring criteria. Selecting lawyers with appropriate expertise helps control costs since they don’t need to spend and potentially charge for time getting up to speed in an unfamiliar legal area. Look for a specialist, such as an attorney with Title IX experience if a student alleges campus sexual misconduct. Avoid hiring attorneys simply because they’ve done work for you in another area or have connections to your school, its board, or administrators. Instead, consider a firm with multiple practice areas (such as employment law, tax, and real estate) you can tap.
• Create an annual budget for legal costs. If you don’t have an overall legal budget, audit your outside legal costs (for example, over the last five years) and use the average as a guide to estimate a budget for the next year, taking into consideration potential matters that are likely to develop further. Include not just bills for representation before courts and agencies but charges for other legal work, such as training, policy review and revision, crisis consultation, and general counseling. An audit also may reveal inappropriate practices to curb going forward.
• Explore alternative fee arrangements. Modified fee arrangements, such as blended and capped rates (respectively, applying a combined rate to firm attorneys and setting a maximum on rates), can be more cost-effective for schools than the hourly billing attorneys often favor, especially when matters take longer to resolve. Certain alternatives, such as flat-fee (or fixed-fee) billing, can be particularly beneficial for your school — although potentially unattractive to lawyers because of the risk that unexpected developments could result in greater effort and cost than anticipated. Especially if you have an existing relationship with an attorney, consider trying to negotiate flat-fee agreements for matters whose duration and cost is generally predictable.

If your school doesn’t already have outside counsel guidelines, consider creating them. As legal expenses continue spiraling upward, it’s increasingly common for institutions to adopt such guidelines as an important tool to help control these costs.

(Note: While this report focuses specifically on legal costs, guidelines are typically broader and address multiple aspects of the school-attorney relationship, such as conflicts of interest, ethics, confidentiality, data security, and diversity considerations.)

By making your expectations clear, written standards reduce excessive or inappropriate bills because attorneys understand from the beginning you won’t pay certain costs. Although their length and complexity vary, guidelines often stress the importance of avoiding surprises.

At a minimum, consider these components:

• Requiring counsel to provide a written case assessment and realistic budget — and updating them timely as matters develop
• Outlining your reporting and communication requirements, including necessary preapprovals for work
• Identifying documents you should receive throughout the matter, including legal research memos, discovery responses, dispositive motions, and deposition transcripts in litigation
• Defining appropriate firm staffing on your matters
• Limiting the number of timekeepers who may bill for one task, such as attending meetings or court hearings
• Prohibiting unilateral or unannounced increases to billing rates, especially in the middle of a matter or project
• Requiring counsel to notify you of significant status changes, including (in litigation) court rulings, discovery developments (such as important emails, documents, or witness testimony, especially if adverse to your school), and settlement overtures from the other side
• Specifying the necessary frequency, content, and detail of legal bills
• Stating you must receive timely invoices and reserving your right to reject bills not received within a specified period after a matter concludes
• Listing fees and expenses you will reimburse (such as court filing or expert witness fees and approved travel costs) and those you won’t (such as overtime, attorney/summer associate training time, secretarial/clerical work, and firm overhead costs)

Enforce your requirements. Make explicit that attorney departures from the guidelines must be approved in advance, and by whom. Explain potential consequences for violations, such as your refusal to pay unauthorized amounts or a lawyer’s disqualification from future work. Closely review legal bills and disallow impermissible charges according to your guidelines.

For each matter, send outside attorneys a retention letter and attach your guidelines. State that accepting the assignment constitutes counsel’s agreement to comply.

Appropriate planning and preparation can save outside attorneys time and effort, reducing legal costs. Follow these sound practices for working together to keep costs down:

• Establish a collaborative relationship. Particularly with new lawyers, set the tone with a meeting designed to foster teamwork. Proactively discuss your expectations and goals, including your desired timeframe. Invite relevant school officials, especially those outside counsel may need to work with, to attend.
• Organize in advance. The more efficient you can be, the better for legal cost control. Before discussing a new project or defense of a matter with outside counsel, prepare a written summary of relevant information (including known dates, potential witnesses, and documents for disputes or relevant policies for training or policy revision). Try to anticipate and answer their questions. Take steps to reduce attorney legwork (and resulting costs) by collecting missing information.
• Ensure employee cooperation. Lawyers can incur significant time and expense pursuing school employees who avoid meetings, conceal evidence, or otherwise hinder counsel’s work. Make clear to employees they must cooperate with the school’s attorney or face discipline for failing to do so.

Regardless of a matter’s merit, remain open to possibilities for resolution that not only offer your school certainty (and can help the community heal) but ultimately may cost less (in money, time, resources, and/or reputational damage) than letting the matter drag out. Mediation, for example, can effectively let the parties “be heard” and still negotiate a mutually acceptable resolution.

Regularly consult with counsel to assess the strengths and weaknesses of your case as developments warrant. In some matters, such as employment litigation under certain discrimination laws, your school faces potential additional liability for a prevailing plaintiff’s attorney fees, which often exceed damages.

Some laws let prevailing defendants recover fees, but this usually requires proving the plaintiff’s case was frivolous or brought in bad faith — a high bar to clear. Settling is sometimes the most cost-effective legal outcome.