Articles Posted in Outside Counsel

Weil, Gotshal & Manges has set up an ancillary function that is unusual. “One of the things that we have done is to create an in-house graphics group for trials and hearings. They do all the in-court graphics rather than our going outside and paying extraordinary fees.” The quote comes from Met. Corp. Counsel, Vol. 18, Feb. 2010 at 11, by a partner at Weil (James Quinn james.quinn@weil.com). Only the most mega of mega firms can support such a specialized service but it does distinguish the firm.

Other instances of law firms that set up complementary services have been pointed out on this blog. Most plentiful these days are firms that advise on and handle discovery. But many other forms of extra assistance, at a charge, are available.

Law departments have not lacked for opportunities to obtain from law firms services that complement legal advice (See my post of June 28, 2006: added-value services – IT support, access to work product, CLE, secondees, extranets, recruitment, and contract tracking; July 21, 2005: higher-level listing; Feb. 25, 2007: law firm training of in-house counsel; June 5, 2007: rules-based guidance; June 18, 2007: software development; May 28, 2007: TV for CLE; Nov. 18, 2007: appellate advocacy training; and Feb. 17, 2008: team at a law firm includes academics.).

On a panel summarized in the ACC Docket, Jan./Feb. 2010 at 91, the always thoughtful Sabine Chalmers, chief legal officer of Anheuser-InBev, spoke admiringly of a “law firm that came to her with an analysis of a previous deal, explaining 10 ways they could be more efficient with similar deals in the future.”

A general counsel might invite a few firms to critique a recent deal, in part to learn ways to handle the next one better and in part to let firms strut their stuff about creativity, knowledge of the legal service area, etc. It would be something like creating a case study for an MBA course. You put in enough details to make the problem credible and then let the firms analyze it and put forward improvements (See my post of May 27, 2008: post mortems with 7 references.).

Martine Turcotte, Chief Legal & Regulatory Officer of BCE, Inc., lobbed out a provocative idea at a recent panel. In the words of the ACC Docket, Jan./Feb. 2010 at 91, she “mentioned an interest in exploring the pooling of resources with other companies to get lower rates based on volume.”

If my leasing work combined with your leasing work gives us a sufficient spend to get better service and deeper discounts from a firm, why not negotiate jointly with it? Some British agencies already share pricing information (See my post of Jan. 21, 2010: UK government legal departments collect fee data from firms.).

To be sure, the negotiation would be fraught with lawyerly issues and concerns. Ideally the firm already represents both (or all) the clients. The kernel of this idea makes sense to explore.

Brad Smith, Microsoft’s general counsel, made some comments on a panel reported in the ACC Docket, Jan./Feb. 2010 at 89-90. He said his budget had been reduced by 10 percent. Given some figures previously published, he may have taken a haircut of something like $40-60 million (See my post of June 30, 2009: Microsoft’s management initiatives with 30 references.).

Later, Smith said that he “anticipates that 45 percent of Microsoft’s legal bills will be on an alternative fee basis, up from 31 percent two years ago.” At seven percent a year, the shift amounted to more than ten million dollars a year (based on an estimated 450 lawyers and a typical benchmark figure of $600,000 in outside costs per lawyer).

When coalescing its group of outside counsel into a smaller number of primary firms or selecting a firm for a multi-year commitment, a law department rightfully wants to select firms that are financially solid, that will prosper during the term of the agreement. That desire prompts questions in the Request for Proposal about firms’ financial and management strength. But are there limits to the breadth and depth of those questions?

Say you believe that retention figures tell something about how stable a firm is, so you ask for data on partner departures in the past two years. But why not go back five years? And what about associates? Or you believe a firm that grows by bolt-on acquisitions is riskier as a long-term bet than a firm that shows steady organic growth. Is it fair to ask about all mergers (and how do you define a merger) and for how many years back? Is the capitalization of the firm a legitimate inquiry? What about unfunded pension obligations? Can you ask the number of clients that account in total for 30 percent of the firm’s revenue in the past year? Their names?

Just listing the range of possible questions makes the point: legal departments have a right to assure themselves that a firm will remain able to serve it, but there is a blurry line over which questions step too far.

Shot through and through this blog’s 5,000 posts are references to “primary law firms.” One post tried to define the slippery term and gathered nine earlier references (See my post of March 23, 2009: definition of key, principal, primary, or major law firms of a department.).

Ubiquitous almost, mentions of primary firms actually appear far more often. Most of the posts that I found refer to the special impositions legal departments may place on their primary firms (See my post of Dec. 3, 2005: send partners to your conferences; Sept. 28, 2008: attend summits; Sept. 17, 2006: set up a client team; May 2, 2007: invest in understanding the company’s business; Dec. 3, 2005: have a relationship partner; Aug. 28, 2009: submit a periodic “value report; Feb. 2, 2010: discount rates; and Aug. 4, 2008: interventions with three posts and 40 references.). The more important a firm is to you, the more you may need to intercede in some of its operations (See my post of Jan. 12, 2009: intervention levels correlate with amounts spent on a firm.).

A few posts offer some metrics about primary law firms and metrics (See my post of Feb. 11, 2007: in smaller departments, about three law firms hired regularly per in-house lawyer; March 13, 2007: 11 firms accounted for 75 percent of the median company’s outside counsel costs; and June 18, 2007: law firm panels with 13 references.).

DLA Piper has created a repository of laws from the United Arab Emirates, the confederation of seven states that are part of the Gulf States. The UAE includes seven statelets, the best known being Dubai and Abu Dhabi. As described in the Financial Times, Innovative Lawyers 2009 at 42, the firm has translated the laws into English and made them available online. The translated set of statutes has proved useful to some core clients “and is now being licensed by other law firms.”

Might legal departments that have extensive operations in the region also want to license access to the collection? As huge, international firms expand, might they not assemble other collections of legal knowledge and documents, making them available for law departments? I think legal departments should encourage this development (See my post of Feb. 19, 2010: Orrick Herrington and corporate compliance services.).

You might want to think about these steps taken by two UK firms and an Italian firm, as reprted in the Financial Times, Innovative Lawyers 2009 at 37.

Linklaters has created a “global pricing function.” For the huge UK firm, “pricing professionals within its marketing department advise and implement pricing strategy and provide a pricing ‘centre of excellence,’ including guides and templates.” Legal departments that retain Linklaters might be able to find out more about alternative fee arrangements, for example, if they can draw on the collective intelligence of the pricing group.

Berwin Leighton Paisner in the UK set up a loyalty scheme whereby clients accrue notional points, like frequent flyer points, as they spend more. “Points can be spent on secondments or free access to information systems.” Over time, I predict, such frequent buyer benefits will become standard offerings for free.

When organizations collect evaluations of law firms and make them available to legal departments, there should be some mechanism for deleting out-of-date comments. What was true three years ago may well be obsolete today. Partners change firms; associates have high turnover; firms merge and hive off and alter practice groups.

I assume reviews have a date, but readers may not remember them. Further, when scores are aggregated (“Law Firm XYZ is rated 4.3 on responsiveness”), older comments ought to be dropped or devalued. If older ratings are steadily reduced in weight, however, the calculations will be more complicated and subject to error and the methodology that much more controversial.

My point is that if collective evaluations of law firms make sense, they need to recognize the half-life of assessments and depreciate older ones by some formula (See my post of Nov. 5, 2009: collective assessments by law departments of their firms with 10 references.).

Kraft Foods has appointed DLA Piper as its preferred outside counsel. According to Corp. Counsel, Feb. 2010 at 57, the “nonexclusive appointment took effect on January 1, and applies to all international business units.”

Interestingly, DLA Piper set up a total of five relationship partners to cover four regions (the Americas, Asia-Pacific, Central and Eastern Europe; and European Union and Canada). The article does not say that the huge firm designated a first among equals, so the global relationship rests on a five-person group (See my post of July 26, 2008: relationship partners with 8 references.). One can imagine difficulties in such an arrangement, but it also has its plusses.