CYA Attitudes Can Costs Clients Money

// The first time I ever heard the term CYA was when I was completing an Army ROTC program In Fort Knox, Kentucky. One of the drill sergeants told me that this stood for “cover your ass,” and sometimes you needed to perform certain tasks so you aren’t chewed out by a superior if things go south. Although this expression definitely applies to military life, it is also applicable to many industries, including the law. Sometimes, clients and attorneys alike need to take steps purely so they will not get into too much trouble if something goes wrong down the line. However, taking a CYA attitude too far can cost clients money in certain circumstances, and clients should reconsider some strategies they may take in order to shield themselves.

When I was an associate in Biglaw, I mostly worked on several multibillion-dollar lawsuits that were extremely important to the companies involved. Of course, if a business is engaged in a bet-the-company lawsuit, they are going to hire the best lawyers that they can, and they will not care too much about the cost. However, as an associate in Biglaw, I once had to handle a commercial lawsuit that was worth maybe a mid-five-figure sum. It seemed odd to me that a client would hire our law firm, which costs several times more than other shops, to handle this relatively small matter.

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I asked the partner why he thought we had been hired for this matter, and he gave me two possible reasons. First, we had a good relationship with the client, so the client perhaps did not want to go hunting for different counsel for this matter with whom it did not have a strong connection. Second, the partner said that we might have been hired for CYA purposes. If the lawsuit went poorly, a higher-up might ask the in-house counsel about the matter. The in-house counsel could respond by saying that they hired a big firm with a proven track record so it was not the in-house counsel’s fault that the lawsuit went poorly for the company. However, if the in-house counsel hired a smaller firm that did not obtain a favorable result, it might be harder for the in-house lawyer to avoid scrutiny. Since big companies have deep pockets and layers of bureaucracy, the business and people who work for it might not be incentivized to save money and might be more incentivized to insulate themselves from liability.

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Sometimes when clients take CYA attitudes with the selection of counsel, not only might it cost them additional money in attorneys’ fees, but it can also make it more difficult for them to win a case. Since higher-paid lawyers might easily consume litigation budgets, there might not be enough money remaining for expert reports, private investigators, and all of the other services that might be needed to win a case. However, clients who spend less money on counsel might have additional options that can give them a solid footing in litigation, and this can even give them the upper hand when matched against a larger law firm.

One time, I was at a firm that represented a plaintiff in a run-of-the-mill breach of contract matter. The case was definitely a five-figure matter, and the issues were not too complicated. This definitely was not a bet-the-company lawsuit for either of the parties involved in the dispute. To our surprise, the defendant hired a massive law firm that likely charged several times more than us to handle the defense. Some at the firm were nervous about the implications of this larger firm being hired to defend the case, but I figured that this might be to our advantage.

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Since the larger law firm was charging an arm and a legal for legal services, it soon became apparent that, before long, the defendant would probably spend more money on legal fees defending the case than settling the matter. Even though the defendant had solid defenses, and the prevailing party was entitled to attorneys’ fees, this party soon realized that a settlement was its best options given the expenses that the party would face. Of course, I have no idea why the defendant chose a massive law firm to defend it in that matter. Perhaps it was because they had relationships with this law firm and did not want to forge connections with new counsel. But if the decision to use this law firm was based on a CYA attitude, that strategy might have cost the party money in the long run.

All told, sometimes it is good for clients to make CYA a big part of their strategies since larger lawsuits and other types of matters require seasoned counsel that might charge more money. However, in some instances, CYA attitudes can cost clients money in the long run.

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Jordan Rothman is a partner of The Rothman Law Firm, a full-service New York and New Jersey law firm. He is also the founder of Student Debt Diaries, a website discussing how he paid off his student loans. You can reach Jordan through email at [email protected].

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Biglaw, Jordan Rothman, Small Law Firms