Articles Posted in Non-Law Firm Costs

A panelist from EBay, speaking at the InsideCounsel SuperConference, mentioned four specifics about the practices followed by the procurement group. They are to be involved with any project that expects to cost more than $1 million or any vendor who is likely to receive more than $1 million during a year. Wouldn’t that snare retentions of law firms in many acquisitions, all major litigations, and even some licensing or transactional deals?

Second, everyone in the company who wants a contract executed must complete and submit a Contract Request Form. The law department of EBay monitors the flow of those Forms and I believe handles each one in some fashion.

Third, she said that Procurement is underway with risk-ranking suppliers. That initiave is unlikely to implicate law firms, I suppose, but there may be broader definitions of risks than I am taking into account.

The global e-discovery counsel of Google, Theresa Beaumont, shared recently her nine “key components of a successful, defensible e-discovery process.” As reproduced in InsideCounsel, May 2011 at 61, the second component raised my eyebrows.

“Accomplish what you must with the most elegant solutions and processes you can.”

One eyebrow jumped because that advice could just as easily (and implausibly) apply to any list of any recommended activities. It’s a useful as exhorting someone to “Think as hard and as well as you can.”

The ACC chooses a handful of companies to promote to its member as exclusive providers for various services. For example, according to Met. Corp. Counsel, May 2011 at 35, Applied Discovery holds that coveted position for electronic discovery, which led me to look at the other service providers with like recognition. The Association’s website merely says that it has Alliances: “ACC has formed partnerships with leading legal and business service providers” and members of the Association are entitled to benefits. I could find no justifications for the choices. For ACC to explain its methodology, facts, and basis for selection would make a big difference to all in-house lawyers who want to rely on or find such a service provider.

On the ACC website are listed Chubb (“Employed Lawyers Professional Liability Insurance”), Copyright Clearance Center, IntraLinks (“market leader in online workspace solutions”), Practical Law Company, Robert Half Legal (“exclusive staffing partner of the ACC Alliance”), WeComply (“the leading provider of customizable online compliance training”), and West (“the foremost provider of integrated information solutions, software and services to the U.S. legal market”). The companies have competitors; law department managers would deeply appreciate specific reasons why the ACC chose one over another.

On what basis did the ACC choose these favored Alliance members? Perhaps it is as simple as pay to play. If the criteria and process discriminate better between the chosen vendor and alternatives, it would help members if the Association explained the basis of the decisions, with specificity, so that members could know what distinct capabilities distinguished them from the other providers of similar services. It would allay the admittedly cynical question of whether whoever pays the most to the Association gets the garland.

Whether or not responsible for them in their budgets, general counsel should track and report capitalized legal costs. The accounting treatment of a legal expense doesn’t whisk away the cost to the company. Checks written are real (See my post of July 30, 2005: capitalized legal expenditures; Nov. 25, 2006: stock options and how to account for their value; Nov. 9, 2008: more legal costs will have to be expensed; Feb. 25, 2009: capitalized (depreciated) patent costs; March 11, 2009: capitalized legal fees; Aug. 12, 2008: options expensed; and Nov. 9, 2008: deal costs must be expensed, not capitalized.).

A similar reasoning applies where business units pay for parts of patent costs. For example, a law department might absorb the costs of prosecution but once a patent is granted, the business unit that “owns” it pays for maintenance fees and other costs. Likewise for settlement costs. To shift a legal cost to some other budget line should not hide it.

I would go so far as to include legal fees paid by insurance companies. Premiums reflect those payments at some point to some degree. Capitalization, cost absorption, and cost transmutation make it harder to accumulate, report on and analyze what is truly the total legal expenditures by a company. If not done, however, a company cannot get an accurate read on the budgetary impact of its legal operations.

Since my last collection, several more posts have made points settlements. Some particularly concern law firms (See my post of April 9, 2009: advantage of fixed fee when negotiating settlements; Oct. 7, 2009 #4: empowering outside counsel to settle cases; March 16, 2010: fixed-fee arrangements; Oct. 3, 2010: heavier billing when firms sense imminent settlement; and Nov. 17, 2010: parallel settlement counsel.).

Other posts look at metrics associated with settlements (See my post of Dec. 1, 2009: delay of settlement for financial benefits; Dec. 3, 2009: insights from clusters of settlement amounts; March 23, 2010: litigation-loss bonds and swaps; Sept. 21, 2010: structured settlements; Oct. 27, 2010: data on settlements; Jan. 8, 2009: sometimes settlements are split among business units; and Jan. 20, 2009: settlement costs in relation to costs of outside counsel.).

Still others cover, well, other topics (See my post of Jan. 11, 2009: a policy never to settle; Feb. 7, 2009: e-discovery burdens may force settlement; Feb. 13, 2009 #4: blog by John DeGroote on settlement strategy; and Feb. 24, 2009: power-laws and settlement.).

A conference scheduled to take place in New York City on April 27-29, is called the Litigation Finance & Investment Summit. The agenda includes speakers from organizations that are involved in litigation financing. Listed below in alphabetical order by company are fifteen of them according to the brochure for the conference.

Wayne Rubin, Managing Partner, 5 Star Legal Funding; Bill Tilley, CEO, Amicus Capital Services; Jeffrey Shachat, ARCA Capital; John Fernando, Boston Finance Group; Christopher Bogart, CEO, Burford Group, Aaron Katz, Director, Credit Suisse Securities; Brendan M. Hare, Partner, Hare & Associates; Richard W. Fields, CEO, Juridica Capital Management; David Desser, Managing Director, Juris Capital; Alan Zimmerman, CEO, LawFinanceGroup; Peter Blanton, Managing Director, Macquarie Capital (USA); Gary Chodes, CEO, Oasis Legal Finance; Howard Liberson, President, Trial & Appellate Resources; Ray Chan, TTM Capital; and Ralph J. Sutton, Managing Director, Validity Capital Partners.

To get a copy of the brochure or to learn more about this Infocast conference, write Erin Dolleris. To read more on this blog about litigation financing, you can start with my first metapost (See my post of May 21, 2009: lawsuit financing by groups with 8 references.) and then move to more recent items (See my post of July 7, 2009: data from Juridica Investments; July 7, 2009 #3: additional players in litigation funding; Sept. 29, 2009 #2: contingent fee financing; Oct. 12, 2009: top 17 litigation funding firms; Dec. 23, 2009: publicly traded companies include two; June 15, 2010: detail on Burford and Juridica and Rand study; June 25, 2010: law firm offers funding of a sort; and Jan. 23, 2011: a UK funder.).

Courtesy of World Trademark Rev., June/July 2010 at 36, law departments that have significant trademark activity can see the top ten trademark service providers. The ten cited most by respondents to the WTR survey were also ranked. In declining order they were Edital, Onscope, Corporate Service Company (CSC), CT Corsearch, Computer Packages inc, Thomson CompuMark, CPA Global, Avantiq, SMD markeur, and Patrix. On a scale of 10 high to 1 low, these firms ranged from 8.5 at the top score to 6.43 at the bottom.

The specialized niche of trademark-related services has many contenders jostling in it (See my post of Aug. 19, 2009: trademarks with 33 references.).

My friend Jeff Hodge, Executive Director – Corporate at doeLEGAL, wrote a fascinating blog post about law suits per person in major countries. He cites research in Christian Wollschlager, Exploring Global Landscapes of Litigation (Nomos 1998) and testimony before the House Committee on the Judiciary in 2004 by Theodore Eisenberg, a law professor at Cornell.

For a fuller list of countries, see Jeff’s post. In short, over a decade ago Germany came tops in this dubious metric, with 123.2 cases per 1,000 people. The US, in the middle, had 74.5 cases per 1,000; and France was the lowest, at 40.3 cases.

Not having reviewed the underlying data and methodology, all I can say is that if the cases against corporations are roughly similar in scope and expense across countries this information should make law department managers of litigation re-think where their litigation load and cost arises.

The Economist, March 19, 2011 at 69, writes that the European Union has taken a long step toward the creation of a single European patent. If approved by the European Parliament, the new regime would dispense with separate validation in different nations (with attendant translation and other costs) and that “will slash the cost of a European patent to just a few times the cost in America; it now costs about 15 times as much.”

Law departments and their patent lawyers around the world will rejoice.

I thought that the longer a general counsel has served a company, the lower total legal spending would drop as a percentage of revenue. A veteran general counsel would know the company better, understand its key personnel, be close to the company’s strategy and legal risks, and have shaped the law department to cope with all that. Don’t we get better the longer we do something?

Apparently not. Assisted greatly by Aspen Law & Business’ Directory of Corporate Counsel 2010 (more information write here), I combined legal spending data from 29 US manufacturing companies in my benchmark survey with the Directory’s excellent demographic data about their general counsel. The Aspen demographics and the General Counsel Metrics data let us test my hypothesis: tenure correlates negatively with legal spend adjusted for revenue, i.e., the longer in office, the lower the legal spend.

Unfortunately, based on this set of data, the expected correlation between years as the chief legal officer and total legal spend does not show up. To my disappointment it is slight although negative. It does not appear, therefore, that tenure contributes in any material way to managerial efficacy as judged by spending efficiency.