Articles Posted in Outside Counsel

A quote in the IBA Daily News, Oct. 5, 2010 at 1, stunned me.

Speaking on a panel at the International Bar Association Vancouver Conference, a partner from Simpson Thacher & Bartlett openly shared a set of beliefs that should have been long discredited. On the subject of invoicing, Todd Crider declared “I try my best to send a one page, one paragraph invoice with the description of the deal and the fee. If pushed, I’ll provide a list of the lawyers and what they did.” So, unless “pushed,” at the end of the matter here is the only information he feels clients deserve: “For legal services rendered in your acquisition of XYZ Corporation, $2,500,000.”

Dismayingly, but straight out of the guild attitude of patronizing superiority, Crider went on to reveal his justification. “But I think it’s harmful to the profession to give too much information. Clients will begin to manage you based on it.”

Little uncertainty surrounds the typical costs of common forms of US patent and trademark services. For 18 US utility patent services, 9 trademark services, and 9 other kinds of IP services, a detailed report lays out the median charges by US law firms. Even more, the American Intellectual Property Law Association’s Rep. of the Ec. Survey 2005, at 18, provides several years of data on these costs so you can calculate the trend line.

To know that the median charges of law firms (no copying, drawing or government fees) for an “original application, relatively complex, biotech/chemical” was $12,000 gives legal departments an enormous advantage when negotiating fee arrangements.

I heard a week or so ago of some dissatisfaction with the services offered by law firms that offer themselves as centers of excellence for discovery work. True, they have banks of computers; yes they know software packages; of course they rely on temps and contract attorneys; and sure there’s the brand name (See my post of Dec. 9, 2008: law firms and contract attorneys in their discovery operations; and Nov. 13, 2007: should law firms run discovery centers.).

But the dark side is that they suffer high turnover and they may not be as closely tied to their litigation brethren as would be hoped. Additionally, the services provided may be lures for doing the really lucrative work of representing defendant corporations in big-ticket lawsuits.

If a favored law firm possesses specialized depth of knowledge, a department might negotiate a retainer agreement. Under such an agreement, some or all the department’s lawyers can call the firm with questions in a defined area. For example, FCPA compliance, anti-trust, bankruptcy, or export/import complexities might do well for a fill-your-plate arrangement. The cost of that telephonic advice would be fixed and paid in equal monthly installments.

The underlying idea is that the firm’s experts can answer nearly all the questions quickly, without research or writing. If the issue is bigger, the firm probably gets first crack at handling it. The department solves episodic needs that don’t support a full-time lawyer or even a subject matter expert (See my post of Jan. 7, 2009: retainer agreements to let your lawyers call a firm whenever they want.).

Examples have appeared in the past two years of specific legal departments and how they handled aspects of their RFP processes (See my post of May 5, 2008: NEC NA; June 10, 2008: Exelon’s multiple RFPs; June 10, 2008: RFP for single matters with Votartium Investments; Sept. 12, 2008: Pfizer’s massive process; Feb. 14, 2009: CA and its RFP process; Oct. 24, 2009: claimed savings by GE Canada; and May 13, 2009: FMC.).

They join the plethora of posts already present on proposals (See my post of March 30, 2008: RFP with 22 references; Oct. 11, 2010: RFP posts with 36 references; and Aug. 15, 2008: competitive bids with 35 references.).

Other metaposts address beauty contests and related topics (See my post of March 16, 2009: rigged competitions with 6 references; April 16, 2009: incumbent firms with 11 references; May 28, 2010: bidders’ conferences in connection with RFPs with 6 references.).

As reported in Corp. Counsel, Oct. 2010 at 15, Wal-Mart has started to track its law firms “to make sure that the promotions and pay of flex-time lawyers are proportional to those who work full-time.” The retail giant also requires its firms to propose as candidates for the position of relationship partner someone who is working flex-time. The Wal-Mart legal department has taken to heart the research and findings of the Project for Attorney Retention so it has imposed these requirements and is embracing its own flex-time workers.

The article mentions that eleven other legal departments have joined a PAR program called the Diversity and Flexibility Connection. As an example, at Allstate, 21 lawyers were working remotely from home one or more days of the week as far back as May 2009.

Admirable as flex-time is, I find myself wondering how far law departments can intervene in the operations of their law firms. Of course, the firms can decline to represent any client that over-reaches (See my post of Aug. 4, 2008: interventions with three posts and 40 references.).

One of the most popular topics on this blog in the past two years has been competitive bid projects and the Requests for Proposal at their core.

The format and content of the RFP have enjoyed ample attention (See my post of Aug. 13, 2008: ask questions about flex-time arrangements; Sept. 26, 2008: no need for an NDA; Sept. 28, 2008: a 12-week RFP process; Sept. 28, 2008: lay out the format for responses; Sept. 28, 2008: boilerplate, guidelines and benchmarks; Feb. 7, 2009: five verboten questions; Feb. 12, 2009: four ideas to guide format of responses; April 2, 2009: pros and cons of specifying the format of response; April 15, 2009: attach your form of contract; July 20, 2009: ask about secondment; Sept. 12, 2010: question regarding protections against hackers; Sept. 17, 2009: poor historical data mars RFP; and Dec. 21, 2009: RFPs strengthen with benchmarks.).

How you run the project elicited several blog posts (See my post of Nov. 22, 2008: control of communications during the RFP activities; Nov. 23, 2008: don’t manage all the information flows; July 17, 2009: send to fewer firms to get greater effort; Nov. 23, 2009: set deadlines for responses; Nov. 30, 2009: the RFP process; April 16, 2009: favoring non-incumbents; July 1, 2010: expect questions from firms; and Dec. 17, 2009: send the RFP to nine law firms.).

I increasingly believe that a sounder approach than reduction of the numbers of firms used is to increase the number so that the firm retained better matches the matter’s risk and complexity (See my post of Oct. 19, 2009: dozen arguments against convergence; Sept. 9, 2010: Sony Ericsson’s GC doubts the touted benefits; and Oct. 4, 2010: sourcing counts for more than pricing.).

The right tool for the task outperforms a few sledgehammers for everything. Aphorisms aside, here is the latest clutch of other posts related to convergence (See my post of Aug. 5, 2009: allows more collective evaluations; Oct. 24, 2009: savings claimed from convergence; May 26, 2009: concentration of spend measured four ways; Nov. 25, 2009: Levi Strauss and almost-complete convergence; Jan. 12, 2010: departments need to intervene more; Aug. 9, 2010: law firms bow out and cause convergence; and Aug. 17, 2010: number of firms or number of partners.).

One of the panelists at the IBA annual conference this week stated that the accounting functions of some companies have problems with arrangements struck between the law department and law firms that vary from traditional hourly billing. The reason is that the companies, and their internal audit functions, are worried more broadly about corruption with vendors.

Software flags arrangements for payment that leave room for discretion by the company. From their perspective, open-ended procurements and vague terms about payment for value raise risks of third-party payee abuse. As if alternative fee arrangements weren’t tricky enough!

One of the panelists at the IBA annual conference this week showed the results of a survey of what law departments in Latin America want from their law firms. Norm Clarke, the speaker, showed that “unavailability of partners” was the key factor in client satisfaction. Partner inaccessibility may be a constant concern or irritant south of the border, but it is not particularly high on lists of general counsel in the United States. Diligent partners keep themselves in touch.

Incidentally, Norm’s surveys have shown very high levels of satisfaction by clients with their outside counsel. On both sides of the border this holds true.