The Real Cost of Litigation: How to Budget for a Legal Fight

Litigation is one of the most unpredictable and costly challenges a business can face. Colleen McKnight, trial attorney and founder of McKnight Law, explains why budgeting for litigation is so difficult, the key cost drivers every business leader should anticipate, and how to make strategic decisions about when to fight, when to settle, and when to walk away.

Why are litigation costs so difficult to predict?

Colleen McKnight emphasizes that litigation is unlike most business services because it comes with no fixed cost, no guaranteed timeline, and no predictable outcome. A case that looks straightforward at the beginning could quickly escalate into a multi-million-dollar battle.

She advises clients that instead of offering one lump estimate, she breaks down litigation into stages. By mapping out potential exit points—such as summary judgment, settlement, or trial—clients can better understand the range of possible costs and plan accordingly.

What are the key cost drivers in commercial disputes?

Several factors contribute to rising litigation expenses. According to Colleen McKnight, the most common drivers include:

• Pleadings and Motions to Dismiss – Early motions by the opposing side can create substantial upfront costs.

• Temporary Restraining Orders and Injunctions – These “mini trials” at the start of a case can significantly increase spending.

• Discovery – Often the most expensive phase, discovery involves document review, depositions, and disputes over evidence. Reviewing millions of documents or handling multiple depositions can quickly escalate costs.

• Expert Witnesses – Technical, financial, and forensic experts add another layer of expense, both in preparation and in countering the opposing side’s experts.

• Delays – Postponements and rescheduled hearings force attorneys to revisit case materials, adding billable time.

How do trial, settlement, and arbitration differ in cost?

Trial is the most expensive path, often involving long hours, expert preparation, technology, and staff support. Settlement and arbitration can reduce costs, but they also involve negotiation and strategic trade-offs. Sometimes, insurance coverage can lower expenses, though it often requires clients to surrender some control over the process.

What alternative billing arrangements are available?

While hourly billing is standard, Colleen McKnight notes that alternative fee structures can provide predictability. Options include:

• Flat Rates – Common for tasks like contract review or limited litigation stages.

• Monthly Flat Rates – Spreading costs evenly across the duration of a case.

• Hybrid Arrangements – Combining reduced hourly fees with success-based compensation.

• Contingency – Rare in business disputes but possible in certain high-value cases.

These structures allow flexibility but must make economic sense for both lawyer and client.

What hidden costs often surprise clients?

Even with careful planning, unexpected costs can emerge. Colleen highlights expenses such as e-discovery fees, expert challenges, or opposing strategies designed to increase delays. She stresses that litigation is adversarial by nature, and opposing counsel may deliberately drive up costs as a strategy.

How can clients work efficiently with their legal counsel?

To control costs, business leaders must stay engaged. Colleen advises clients to assist with document collection, provide quick access to relevant information, and designate a point person to coordinate with legal counsel. This reduces attorney time spent “stabbing in the dark” and lowers billable hours.

When isn’t litigation worth the cost?

Not every dispute should be fought in court. Colleen McKnight is candid with clients about when litigation costs outweigh potential benefits. Sometimes the better business decision is to settle early, pay severance, or walk away. Other times, she encourages clients to fight back, especially if the opposing party’s claims are baseless or extortionate.

How can businesses budget proactively for legal risks?

For business leaders and in-house counsel, the best strategy is proactive planning. Colleen recommends sitting down with attorneys early to review potential risks, understand cost structures, and set clear expectations. While uncertainty will always exist, transparency and open communication help businesses make smarter financial decisions in the face of litigation.