Articles Posted in Outside Counsel

Marinate on this. When a new case arrives that looks like it will incur significant fees, have a capable firm (the budget firm) prepare a budget — with its key assumptions expressed clearly. Tell the budget firm that another firm will have the opportunity to represent the company in the matter for whatever amount is the budget the first firm proposes.

Then, have a second capable firm (the review firm) review the same facts you gave the budget firm as well as that firm’s budget and assumptions. The review firm can agree to handle the case for that amount or pass. Neither firm knows the name of the other firm and the roles should be swapped randomly (and perhaps a third capable firm thrown into the mix from time to time).

This all may be too clever by half, and certainly no two firms are wholly fungible, but consider the logic: it is much like one child breaking the cookie in half and the other child getting to choose which half to eat. The budget firm will try to be realistic, because a fat budget will be snapped up by the review firm. And if the review firm declines, the law department has a market-based measure of the leanness of the proposed budget.

My accumulating doubts about the efficacy of bonuses dangled before law firms spilled over into an article. Click here for a pdf of my recent article.
The article draws on a number of posts here ((See my post of July 27, 2008: bonuses for law firms with 13 references.).

Sometimes a general counsel may find that a law firm is willing to handle a set of work for a fixed fee, such as all ERISA questions, if the firm in turn enjoys a privileged position when juicy law suits come along, such as employment litigation. Indeed, this “right of first refusal” may be just the bone to leverage favorable terms for the commodity work (See my post of March 1, 2008: fixed or flat fees with 36 references.).

It does not mean that the firm will automatically get the case or matter – think major acquisition – but it has the pole position in any race to be retained for large-fee matters.

A general counsel was describing a flat-fee arrangement he struck with a firm to handle about a million dollars of work in three buckets of services. Among other observations, he stressed that if a law department fashions something unusual like that, it is very important that the partner who agrees to it has the clout to carry through. A member of the firm’s governing group has that influence as do big kahuna rainmakers.

Otherwise, sniping, second-guessing, politics, and criticism within the firm may undermine a partner’s ability to honor the terms of the arrangement with you.

At a panel this month, I heard that a year ago Home Depot’s general counsel told his law firms that the law department would not pay for the time of first and second year associates. When asked about the reaction of firms to that prohibition, he said “There has been very little pushback” (See my post of May 11, 2007: associates and complaints about them with 13 references.).

The general counsel made clear that new associates are welcome to work on matters, but not to bill for their time. Is there receptivity for deeply discounted rates?

At a conference recently, an attendee lambasted a law firm that has the temerity to charge a paralegal out at $200 an hour. $200 an hour for a paralegal!?

To couple “paralegal” and “$200” into ludicrous is wrong-headed. If the paralegal delivers value for what they do each hour, no one should care about their title, credentials, or education. Sometimes the absence of credentials betrays limited opportunities in the past, such as money to pay for law school or discrimination. Brains, ability, and productivity are all that should determine whether someone delivers value commensurate with their cost (See my post of Sept. 21, 2008: why not allow experienced in-house lawyers to hire non-attorneys for legal services.).

Fifth-year associates who bill $200 an hour – yes, they exist outside BigLaw – may be an extravagant waste of time if they know little about the law and take too long to accomplish tasks, some of which might not even advance the cause.

From a survey on Legal OnRamp, a professional networking site for lawyers, 84 in-house lawyers responded who work at companies with revenues of at least one billion dollars. The American Lawyer’s Aric Press put the survey in context.

Over the next five years, the reduction in the number of law firms used by these large law departments is projected to continue for about two-thirds of them. Convergence, as it is referred to, of 1-20 percent was selected the most , at 37 percent. A smaller percentage (21%) anticipate even more drastic convergence. Bear in mind you, however, that the paring is expected over five years, which could mean modest cuts each year.

Contrariwise, a bit more than four out of ten of the law department lawyers foresee no drop in the number of law firms serving their departments, or even the opposite of convergence. Some 30 percent of these big-company departments forecast that the total number of outside law firms their department uses will stay the same. Even worse for the future of convergence, 12 percent of the respondents foresee the number of firms they use increasing (See my post of Feb. 16, 2008: convergence with 26 references.).

E-billing has steadily ascended the ladder of popularity and penetration among law departments. Accordingly, this blog has compiled at least 45 posts on e-billing (See my post of Aug. 15, 2008: ranking of e-billing as IT application; Aug. 27, 2008 #4: blog on e-billing; Jan. 4, 2006: spreading acceptance of e-billing; Sept. 13, 2005: a $2 billion market; and Aug. 21, 2005: e-billing software compared to matter management software.). Sometimes lessons appear from specific law departments (See my post of Feb. 4, 2007: IP e-billing at Honeywell; and Nov. 3, 2005: Microsoft and GE.).

A cluster of posts comment on vendors (See my post of April 17, 2008: pricing models of vendors; Oct. 18, 2006: leading e-billing vendors; July 11, 2006: cottage industry of e-billing; Oct. 18, 2006: leading e-billing software used by Amlaw 200 firms; Oct. 26, 2007: bizarre market share data from 2006 to 2007 on e-billing software; Nov. 4, 2007: comments on data; and Dec. 16, 2007 #1: additional comment;

Inside a law department, the introduction of electronically-received bills changes procedures (See my post of Nov. 20, 2007: e-billing might reduce fee-bill reductions; June 10, 2007: accounting complexities; Nov. 11, 2007: implementation tips; April 22, 2007: protections of an ASP platform; Sept 18, 2006: e-billing rules; Oct. 15, 2007: maintenance of e-billing systems; Nov. 28, 2007: internal staff required; Jan. 30, 2008: tips on e-billing implementations; and Aug. 21, 2005: invoice approval routing.).

To a survey on Legal OnRamp, a professional networking site for lawyers, 84 lawyers responded who work at companies that have revenues of at least one billion dollars. The American Lawyer’s Aric Press put the survey in context.

Sixty-three of these respondents estimated the number of law firms their departments had retained for the first time in 2008. The median was three firms while the average was 4.5 firms. In other words, these huge companies turned to new firms only occasionally. The survey did not ask how much the newcomers were paid, so some of them may have been hired to give small amounts of specialty advice or to serve as local counsel in a minor lawsuit. The small number of newcomers belies notions that the age has arrived of no loyalty and ruthless transactional retentions.

Nor did these law departments dismiss many firms They turfed on average 1.8 law firms, while the median was a mere one firm. Among companies of the size of this group, in a given year they probably retain 50+ law firms. Hence, dismissals are few and far between. Further, it could well be that some “dismissals” were actually following a favorite partner to his or her new firm (See my post of Feb. 19, 2007: fire law firms with 8 references and the PDF of my article that douses firing firms.).

Sometimes General Counsel feel it is appropriate to bring in a “hired gun” to take the lead at trial. Skill at trial advocacy is all well and good but to insert a lawyer not intimately familiar with the facts, people, politics, and economics of the case is a dangerous practice. Indeed, according to an article in 8-K, Vol. 4, Fall 2008 at 28, “In most cases it is wise to have the counsel who prepared the case in its earlier litigation stages take the lead in trying the case.”

On the other hand, the litigation partner you are now using may not have significant courtroom experience and it may make sense to add another lawyer that experience to play some role in the case. The article also goes further regarding appellate counsel: “If the amount of money at stake is substantial enough, consider retaining an appellate lawyer to supplement your trial team.”