Articles Posted in Outside Counsel

A previous item mentioned three aspects of Eversheds’ RAPID Resolution™ program (See my post of Nov. 13, 2006.) but a longer article, in Met. Corp. Counsel, Vol. 14, Dec. 2006 at 16, uncovered another one of its noteworthy aspects. The authors state that “[a]ll of our lawyers have received specialist external project management training, which also forms part of our advanced litigation skills training.” That training involves how to think about resources, timetables, and budgets (See my posts of April 18, 2005 about whether to borrow a project manager from your client for a large lawsuit; and Aug. 22, 2006 about project managers at law firms.).

The project management skills must work, because the article concludes on a high note: “In 90% of our cases, we successfully deliver the client’s best practical outcome.”

When a number of law firms propose to handle matters, as part of a competitive process, it can be a challenge to choose among the firms. Usually the firms answer a number of questions, some of which are objective – number of lawyers, diversity percentages – and some of which are subjective – how will you work with our law department, what are your future plans.

One method to help in the process is to create an evaluation scale for each question, say from one to five, where each point on the scale has a pre-defined description. Then, the reviewers can look at each proposal and pick what point value the firm should get based on that scale.

The further step is to weight each of the questions that are scored according to how important the answers to it are to the law department.

That aphorism says that if your law department too aggressively drives down billing rates and the economics of your law firms, you end up with poorer legal work (See my post of June 15, 2006 about meddling in firm management; and July 5, 2006 with several forms of intervention.). If profitability suffers, the best and brightest in law firms will gravitate toward clients that pay full-boat. Over time natural selection will leave the aggressive department a cost-cutter with cut-rate quality.

I have always liked the saying, “Better a fair price for good quality than a good price for fair quality. Tighten the vice; degrade the advice.

Recently, some law firms have ended the long-standing practice of charging clients the costs of electronic legal research. Previously, firms resorted to a discounted “pay-as-you-go” method with its electronic research vendors, and then billed clients for the actual (discounted) charges incurred.

Once firms selected one of the major electronic research providers such as Lexis or Westlaw as its single-source provider and negotiated fixed-price contracts, some firms took the next step of including the cost of electronic research in their lawyers’ billing rates. Those firms absorbed what was formerly a reimbursed expense, if not a profit center.

Law departments should push their firms in this direction (See my post of July 31, 2006 about preferred vendors and national contracts.).

Some law departments might like an arrangement where it and a primary law firm commit to a significant relationship that motivates the department to use the firm frequently. To illustrate, the law firm could create a bank of 5,000 hours of time during an 18-month period for a flat fee, payable semi-annually. Maybe the fee is $1.5 million; maybe it covers all real estate services in Europe; maybe it any local counsel fees; maybe reimbursable expenses are billed separately; maybe every aspect is negotiable – except the cost and hours.

While less precise than a fixed-fee arrangement according to which a firm agrees to handle all of a certain kind of services over a period of time (See my post of Dec. 7, 2005 about collars.), this kind of arrangement benefits both the department and the firm. The former achieves some cost reductions; the latter can afford to invest in systems, knowledge of the client and training.

Rob Thomas, Vice President, Strategic Development, Serengeti Law, offers his “Top 10 Methods To Manage Outside Counsel,” courtesy of ACC.

As part of a broader recommendation – to save money by means of post mortems – Thomas would have law departments assess the “predictive accuracy of outside counsel.” Does that mean to ask the law firm to forecast the ultimate settlement amount and when it will be achieved? Those outcomes are not in control of the law firm. Does it mean to ask outside counsel to predict when the deal will close? Likewise, outside their scope of control. And for all crystal-ball pronouncements, at what point in a matter is a prediction justifiable as a basis for later judging the firm’s predictive accuracy?

I do not think that this characteristic of a law firm is a meaningful component for evaluation of a firm’s performance or a way to save outside counsel fees.

This blog has urged law departments to send enough work to a law firm that they become one of its significant clients (See my post of Jan. 3, 2006 about primary and secondary client roles.). If your billings are small, especially when the work is overseen by a middle-of-the-class partner who lacks pull within the firm, your stature is small. Granted, you might say, but so what?

The firm might decide you are not worth serving. Larry Bodine, writing in Law Practice, Dec. 2006 at 12, cites research done for the US law firm Thomson Hine by RedWood Analytics. The research determined “that the likelihood of a $5,000 client becoming a significant client was only 1/10 of a percent.” Your firms getting driblets of work might hang you out to dry.

The General Counsel of Serono Inc., Thomas G. Gunning, writes in the Boston Bus. J., Feb. 10, 2006 that engagement letters from law firms “are often signed as presented, without negotiation.” Well, that’s his view.

Gunning warns that lurking within those unexamined engagement letters may well be provisions that are completely unacceptable to a law department. For example, ensconced within the firms’ confirmatory letters might be the unfettered right to increase hourly rates, the assumption of prospective waivers of conflicts, and a broad right to use the client’s name in marketing materials.

Gunning advocates a rider, which he uses. He signs the firm’s engagement letter without change, but then requires the law firms to sign his rider without change (See my posts of Nov. 3, 2005 and May 19, 2006 regarding law firm engagement letters.). His rider supersedes any contrary points in the firm’s letter.

“The law department should also maintain a record of challenged entries and amounts written off to ensure that firms follow through on billing revisions.” This recommendation comes from Rob Thomas’ “Top 10 Methods To Manage Outside Counsel.” He implies that law departments should advise their law firms about improper billing entries and that the firms should thereafter resubmit a corrected invoice.

Perhaps the more efficient method is for the law department to pay the reduced amount of the bill, and let the law firm handle the accounts receivable right off. The recommended communication to the firm, revision, and confirmation pile up administrative make-work.

Through ACC, the prolific Rob Thomas, Vice President, Strategic Development for Serengeti Law, recently published his “Top 10 Methods To Manage Outside Counsel.” Thomas cites approvingly from the infamous audit report that excoriated Amtrak’s legal department and in his seventh method instructs law departments to obtain project budgets and track bills against them.

With that much I agree, as to major matters (See my post of Nov. 15, 2005 for a definition of major litigation matters.) and as to invoices showing how amounts billed to date match up against budget projections. What I don’t agree with is the burdensome additional recommendation: “To facilitate the tracking of spending against the budget, budgets should be broken down by phase, major activity, or time. Then, as bills are received they can be compared with corresponding budget categories to quickly note projects that may be getting off track.”

The final requirement exacts too much time and expects too much process, both long after the fact.