Subscribe
Share
Share
Embed
The Effective Lawyer teaches ambitious trial lawyers how to grow their skills and create a prosperous law firm. Using lessons learned by accomplished attorneys from around the country, we discuss lessons learned through their trials and tribulations. Our discussions cover a vast range of topics sought out by attorneys looking for advice, from depositions to how to market your law firm.
The show is hosted by Jack Zinda, Founder and Senior Trial Lawyer at Zinda Law Group. In less than 15 years, Jack and his team have grown Zinda Law Group from 3 attorneys to over 30, spanning several states and handling a variety of personal injury cases from gas explosions to truck accidents.
Jack and his guests share their knowledge and skills that they’ve acquired through the process of building one of the most successful plaintiff’s law firms in the country.
In each show we cover a new topic that an ambitious attorney would want to better understand, while providing practical skills to improve their legal practice.
For more information, visit https://www.zdfirm.com/the-effective-lawyer
00:00
Speaker 1
Welcome to the Effective Lawyer, a podcast for ambitious attorneys who want to improve their practice. My name is Jack Zinda and I'll be your host. Welcome to another episode of the Effective Lawyer podcast. Today we're going to talk about one of those areas that are typically not distressed at cles but could make or break your practice. Case expenses. You know, if you are a contingency fee law firm, especially personal injury law firms, you have to outlay tens of thousands, hundreds of thousands, and sometimes millions of dollars in case expenses. That is money that you're putting out there that you're not going to get back unless you're successful in the case. And a question that I used to wonder and that kept me up at night was how much do I spend as a firm as a whole and then on an individual case?
01:06
Speaker 1
And this is a really important question for a few reasons. One, your job is to get the client the best outcome possible. If you eat up all of the client's money on case expenses, you have done them a massive, big service. Even if you got them a $10 million verdict, if you spent $6 million in case expenses, that they're not going to be happy. Two, if you lose the case, you're going to be out that money and it goes from something you were going to get back to something now that you have to write off and handle on your own. And that can make you go broke. So I think this is an area that us as lawyers don't talk about enough. I think one, a lot of lawyers aren't comfortable with numbers and financials.
01:47
Speaker 1
I think two, they're embarrassed to admit they don't have the answer for it. And three, they're not thinking about it enough. I've seen a lot of really sad stories where really successful law firms go out of business because they didn't pay attention to case expenses. So let's start talking about first, what do we use our case expenses for? How do we track it? And then how do we decide if we're going to invest more or less and then how much our firm as a whole has to spend on case expenses? And I'm going to reference some documents or checklist recipes. And as always, if you want to reach out and we're happy to share any information we have or provide a quick phone call to talk through these things with you.
02:34
Speaker 1
So first, on case expenses itself, we typically use case expenses to pay to get medical records and bills. That's a huge chunk of our case expenses because you have to get those in every single Case, we use them to pay for things like depositions, court reporters, of course, which part of depositions? Videographers, things like that. Open records, requests, photographs, videos, hiring expert witnesses. One thing that you want to do is create a list of things that are case expenses and that are not. Occasionally, we have to bring in another attorney on a case. For example, we have a case right now where one of the largest trucking companies in the nation declared bankruptcy in a really large case. And they declared bankruptcy across the country. We're not a bankruptcy law firm, so we hired an outside attorney to assist us with that.
03:29
Speaker 1
That typically cannot be a case expense. Consult your local bar rules. But we charge that as an attorney fee, and we actually will take it out of the attorney fee at the end of the case. Every situation is different. So just know that. The other reason why you want to have a list is as you grow, you want your paralegals and attorneys to know what counts and what doesn't count. Does a flight count? Does a business class flight count? You know, that's a big difference there, you know, why are you flying? Is it in pursuit of somewhere in the case that you would not have to go ordinarily? For example, let's say the explosion happened in rural, you know, Alaska. That might make sense. If you're going to just one of your offices.
04:12
Speaker 1
That may not make sense because that's travel you do in the course of your regular course of business. So spend the time on the front end to figure out what's a valid case, expense what isn't, and make sure, make sure you are following your bar guidelines. We made a decision a few years ago to start working with an ethics attorney to get opinion letters on any decision like that. And it just helps me sleep so much better at night because we always want to do the right thing by our clients. But it's not every. Always clear what happens in every state. Okay, so we know what we're going to spend the case expenses on. Now, how in the heck do I figure out what I'm going to expend on each individual case? Okay, that starts with creating rules.
04:51
Speaker 1
Now, why do I want to create rules, you say? Jack, every case is different. It's not black and white. We're lawyers, we're not scientists. How can I have a rule on how much to spend on case expenses? Well, first of all, chill out. I think you're just as good as a scientist. You're smart. You need to have rules, and rules can be broken. Okay, but you want to be intentional about breaking those rules. Rules allow decision making to have happen much quicker on your cases and allow you to move faster. Speed is really important when you're working in a contingency fee practice. We don't get paid by the hour. So our rule is in general, we do not want to spend more than 10% of the value of the case on case expenses. And I'm going to use some simple numbers here.
05:37
Speaker 1
Okay, let's say the case is worth $10. Hopefully it's not. Hopefully it's a better case than that. I would allocate $1 in potential case expenses. Now some cases we'll go over that because it makes sense strategically. But my team knows that's our rule. And if any attorney's going to go over that percentage, that needs to be discussion and then we set a new percentage for that particular case.
06:01
Speaker 1
Okay, so if you have a $2 million case, that would be $200,000 in case expenses you can allocate if you'd like a copy of any of the things you heard about here today or to set up a time to talk one of our team members about a case, please go to Zendalaw IO and we have amazing resources, downloads, guides and you can set up a time to talk to us if you want to talk about how we handle things or any case in particular. So one question I get, what would be some examples of reasons you would go over that 10% rule? Okay, one, keep in mind the idea here is what is the net outcome to the client going to be?
06:48
Speaker 1
So let's say you have a low medical bill case that a lot of the proceeds aren't going to go to the client or aren't going to go to medical providers, which means the client will get more money. But it's a very difficult liability case. Okay, so you need more expert witnesses. We've had that in some of our low speed trucking collisions where they're gonna say the client wasn't really hurt. We bring in an expert that can handle that topic. That puts us over the percentage. You wanna always look at the net to the client to see is this an outcome they can live with.
07:18
Speaker 1
With what you think the case is gonna resolve for that's key because what we typically end up doing if we make a mistake on that, which rarely happens, I'm going to cut my attorney fee to make sure the client is made whole. But I got to make sure I pay my case expenses because those are always owed. So we've talked about reasons we go over that percentage now you want to put together a budget on the case. Okay, this is a lot easier than it sounds. I know a lot of you are terrified of budgets and numbers. That's why you went to law school. You didn't want to be an accountant. Instead of thinking about this way, write down the stuff that you got to do. Then write down or have your assistant to put in.
07:55
Speaker 1
How much have we paid for this stuff in the past? If you don't know, guess. A guess is better than nothing. Then at the bottom, add those things up. Easy way to do this is just go through the steps of the case. Okay, I got signed up on the case. Do I need an expert witness? Yes. What type an accident reconstructionist. In the past, I paid them a $7,500 retainer. $7,500 retainer? Accident reconstructionist. I'm going to need to file the lawsuit. Okay, Filing fee. I'm going to need to get someone served service. I'm going to need Dep. Of the defendant. Depa 1. Do I want a videographer? Yes or no? Practice pointer. We record almost all of our own videos ourselves. Unless it's just a really critical we have a videographer there. You can do that in most states.
08:43
Speaker 1
Don't waste two, $2,000 on a case to have someone hit the record button, especially with the technology. Now I feel like that is such a waste of clients money lots of times, but that's. That's for another time and place. So you write all of those things down. You go through the case, you can whiteboard this stuff out. And then you can either have your assistant, your legal assistant, or paralegal. Hey. Go through prior cases and write in how much we spend for each of these. In the past, you can guess. You can call the people you work with and ask them. Then at the bottom, you add all of that up and you see, what did I value the case at? This is another area that people really hate doing. You don't have to be perfect. Let me repeat that again.
09:24
Speaker 1
You don't have to be perfect. You don't even have to be right. This is more of a thought exercise, but you need to have a range. Most of us know if a case is worth 100,000 or 10 million, if it's worth 200,000 or 5 million. And you keep narrowing those until you get in a zone for what you think the case worth. It may be big. Maybe you think the case is worth 300 to 500,000. Okay, great. 30,000 to 50,000 is my expense range. And you know When I get to 30,000, I need to really start thinking about what I'm going to spend money on. And this forces you to make decisions early. Like, am I going to take that Expert Depot? How many experts can I really use?
10:04
Speaker 1
And it's actually part of a cool part of the strategy that makes you even a better lawyer. Okay, so. And you're going to revisit this ideally once a month, but no less than the key inflection points of the case, such as the lawsuit, prior to mediation, prior to trial, and we're talking a few months out. Expert designations. You know, pick some key inflection points when you want to look at this again. It's really important. Okay, Now, I've talked about individual case, I've talked about what I can spend on that. What about me as a firm? I don't have unlimited money. I remember when I started the firm in 2008, I was a year and a half into my practice. I just bought a house. I just got married a year before.
10:51
Speaker 1
I was making no money and I had to figure out how to fund case expenses. And oh, by the way, the market crashed. My house went down in value, I think 35% in the first three months that I owned it. So cash flow was going to be critical to my success. So I started by getting a really small line of credit, a bank of like $20,000. So in the beginning, 20,000 bucks was my firm's max capacity for case expenses. Now you could float it through having a larger line of credit. You could use a credit card potentially, but you need to be careful on the interest expense on that house and you need to pay it back. You could set aside a bucket of cash that you have, maybe from a third party source.
11:32
Speaker 1
You could take out a loan from a friend or a family member. You could joint venture a case where they cover the case expenses and you split the fee. There's a lot of different ways to do it. There's companies that specialize in lending to personal injury lawyers. They're typically want to see some sort of track record of success. And be very careful. Educate yourself on interest. A lot of the situations I've seen charge really high interest rates. And attorneys don't realize they're basically giving their entire net income or profit away for interest payments. But you need to decide how much it is and be okay with that money being gone. You're not going to have access to it on top of your emergency reserve of cash. If you have a slow month or slow quarter. That's why this business is tough.
12:18
Speaker 1
It's not easy to be a successful personal injury because we have to put so much stuff out there on the front end. Okay, so we've talked about how to figure out how much money you can afford to put in or where to get it. Essentially, how much money you need is essentially is going to be 10% of your docket's value and then how much you need for future growth, and then you want to figure out how often you're successful. This isn't to brag. This isn't to say how awesome I am. But you know, we write off very, very few case expenses. We are very good about picking what cases we want to work on, and we're especially good about picking what cases we're going to make big bets on. And you've got to be great at that.
12:55
Speaker 1
And if you're not, you need to acknowledge it and say, hey, I'm going to miss out on 25% of the case expenses we put out there. There is a number you're going to have to miss out on some because you have to spend money at the front end of cases and things like that the case may not turn out the way you wanted it to be. So I hope this has been helpful. I want to do a quick recap on the things we covered today. One, case expenses matter. It's really important and nobody wants to talk about it. Two, you have to set rules for your firm on what percentage you're going to spend on case expenses. Three, always keep the client's interest in mind. Four, create a budget. Five, figure out how much how you can spend as a firm as a whole.
13:35
Speaker 1
And six, figure out where you're going to get the money. If you have more questions or want to talk about this topic more, feel free to reach out. I have made every mistake in the book, so I'm happy to help avoid them on your end. Till next time, thanks.
13:51
Speaker 2
Thanks for listening today's episode of the Effective Lawyer. You can learn more about our team and find other episodes of our podcast at zindalaw.com as always, we'd appreciate that you subscribe, rate and review the pod.
14:03
Speaker 1
Thanks.