Articles Posted in Outside Counsel

Much data is available about US patent cases and their costs (See my post of Oct. 2, 2008: costs of patent litigation, with 13 references.). Nothing has appeared on this blog, however, about costs north of the border.

Now I can venture up there: “Canadian litigators estimate that it takes about C$500,000 of a client’s money to bring a case to trial, and another million or two to see it through to end-game.” This quote, from Lexpert (Guide to Leading Cross-Border Litigation Lawyers), Nov. 2009 at 24, suggests that Canadian costs through trial are a million US dollars or so less than south of the border.

Some of the information you include in your Requests for Proposal should be comparative benchmarks. Especially if your legal department wants to find a firm that will handle the services you need on a fixed fee, you want to provide and set some performance measures. Sometimes, you can provide benchmarks such as cycle time, disposition costs (defense vs. indemnification costs), charges dismissed, and discovery fees.

More commonly, tell the firms about your average number of cases (or whatever types of matters you cover in the RFP). Tell them about the number of firms you have retained and the broad strokes of your spend. If you can express workload in metrics, they will feel more comfortable with their proposals and will have better targets to shoot for. Metrics give RFPs texture and reality; comparative metrics give them crunchiness.

In one post I suggested that legal departments, when they decide to send out an RFP, think like seniors who apply to college: three stretch firms that might be too costly for the work, three sure-fire firms that probably share the economics of the department, and three safeties that are lower cost.

Likewise, when you send out RFPs, nine law firms seems to be a good number of recipients. Support for my consultant’s sense of the right number comes from the Harvard Bus. Rev., Vol. 87, Dec. 2009 at 102. That article about whether to negotiate or conduct an auction says that “In many contexts, sellers consider the magic number of bidders to be somewhere between five and eight.” Elsewhere: “After about 15 bidders, auction theory estimates, the value of having an extra bidder becomes negligible – as long as the bidders are similarly situated.” Based upon this, invite about nine law firms capable of doing the work you have on offer.

Amidst all the hoopla about rating law firms online, along comes a respected organization that hopes to have online ratings of “neutrals” available in early 2010 (See my post of Nov. 5, 2009: collected assessments by law departments of their firms with 10 references.).

The ABA J., Vol. 95, Dec. 2009 at 29, explains that the International Institute for Conflict Prevention & Resolution (CPR) has decided on a clever methodology. Of the roughly 600 mediators and arbitrators (called “neutrals”) the Institute has approved to provide services in complex business-to-business situations, those who sign up for the rating program must provide 20 references to a third-party company, Positively Neutral. That company will interview the references regarding a variety of categories. After Positively Neutral compiles the scores and anecdotes, the neutral can review the conclusion and agree to have the information posted or opt out.

I like the approach and can see it working with large law firms. If the third-party is tough minded, listens to what is said and fills in what is not said, and has a defensible formula for scoring and rating, the results would be useful for in-house lawyers who seek capable firms.

Clients rightfully want law firms to bill promptly. No surprise bills late in the year! No laggard invoices – management delayed is management denied.

That granted, chief legal officers can consider two techniques: (1) insist that law firms submit all bills within 30 days of the end of a month and (2) refuse to pay time recorded more than 45 days before the bill is sent.

Meanwhile, law departments ought to look in the mirror and ask why there is no corresponding commitment by them to pay promptly. One way to instill some discipline is to say “We will pay within 45 days or the discount granted by the law firm does not apply” (See my post of May 11, 2008: prompt payment with 10 references.).

Consulting to a large government agency, I have come to appreciate the Federal Government’s billing arrangement known as the “per diem.” For every major city, the Government sets an amount that it will reimburse each day for meals and incidentals. My life is immensely easier and less full of receipts and records.

General counsel would do well to consider a per diem for their outside lawyers to cover all meals, such as $65, and no need for receipts (See my post of Dec. 1, 2006: disbursements of law firms with 7 references.). In terms of aggravation reduced, petty processes eliminated, paper saved, and accounting eased, the idea has much merit.

Nick Cronin, an attorney who works in-house at a Wisconsin corporation, founded Law Bidding early this year.

He wrote me and explained that “LawBidding.com lets businesses (and individuals) post legal issues and then allows attorneys who have registered with the site to search cases and place bids on the work. The website is totally free for all users.”

Attorneys can offer to help on a flat, hourly or contingent basis. When I reviewed the site, it had mostly legal issues for individuals (DUIs, divorce, custody, personal injury), but the capability has potential for in-house counsel. It is like E-Lance for lawyers.

Last month, Susan Blount, the general counsel of Prudential Financial, wrote to the 60 law firms the insurance giant uses regularly. She informed them that in 2010 the company expects to pay for legal services at 2008 hourly rates. It wasn’t a request as much as a take it or leave it deal, in the words of a post on the Am Law Daily Blog, Dec. 10, 2009

“The response,” Blount says, “has run the gamut, from acceptance to disgruntled acceptance to firms saying, ‘You just don’t understand!'” She is not alone in the rollback mode.

A year ago Paul Hurd, general counsel of Daimler Trucks North America, asked the 75 firms Daimler uses to set 2009 billing rates at about 90 percent of 2008 rates. For 2010? Hurd says Daimler will ask firms to stick with the current hourly rate. That translates to rates in 2010 that will be lower than the firms’ 2008 rates (See my post of Feb. 9, 2009: rate freezes with 8 references.).

Will Irving, general counsel at Telstra, says Telstra has put the Australian law firm Gilbert + Tobin on a fixed fee retainer arrangement after telling panel firms he wanted then to come up with something innovative. Gilbert+Tobin shares a “volume” risk if it takes on more work than it budgeted for. Boutique alternative firm Advent is also on Telstra’s panel for its innovative pricing and resource arrangements.

John Chisholm notes this based on a published reported www.brw.com.au So far, 30 percent of Telstra’s legal work is not based on time. Chisholm’s view: “When this ratio is reversed we will know both the client and the law firms are far better off and that time based billing is truly only left for the dinosaurs.”

Geoff Kelly, Coca-Cola’s general counsel, describes one step taken by his legal department does, being a 2009 Employers of Choice winner cited in Diversity & the Bar, Vol. 11, Nov./Dec. 2009 at 12. Each year the department sends a questionnaire to its 32 US “partner” firms that asks them to describe “established systems for measuring diversity progress and accountability among senior management at the firms.”

What particularly interests me about this process is that the department evaluates the responses against the best-in-class practices in each area. The firm with the highest aggregate score is awarded the “Living the Values” award.

Do they normalize responses by size of firm, since a larger firm can support more practices? Where do they derive their best-in-class standards? The evaluation pool includes only the firms that Coca-Cola has selected as its key firms and the brief mention does not explain whether the standards are derived only from the best of THAT class. Do they describe for the firms their measuring posts?