Articles Posted in Outside Counsel

At a panel on diversity, reported in 8-K, Vol. 4, Fall 2008 at 18, a partner from Patton Boggs, Mary Beth Bosco, explained that her firm has three tracks for associates, based on the hours they are expected to bill. One track is for 1,650 hours, the next for 1,800 hours, and the third for 1,950 hours. All of the tracks are considered full time and Bosco claims that associate are all eligible to make partner. Hogan & Hartson, also represented on the panel, has a two-tier hours track for its associates.

Should a law department try to choose as its core associates on matters those who are in either a high or low track? Would invoice data reveal that higher-billing track associates tend to bill more time at the same call, meeting, or conference than lower-track associates?

Partly I feel this question is similar to whether law departments should care about a partner being an equity partner or in non-equity partner (See my post of Sept 5, 2005: non-equity partners.). The issue is quality of work in relation to cost, not titles or tracks.

Last spring, Pfizer hosted a Diversity Summit for members of its Pfizer Partnership Program of outside counsel. As described by a Pfizer lawyer in 8-K, Vol. 4, Fall 2008 at 18, “We had an open, engaging discussion regarding the retention and advancement of minority and women lawyers and firms. Firms shared best practices and we presented the Pfizer Diversity Award to two firms.”

All law departments can adopt and massage this technique: invite the relationship partners from your primary firms to a gathering where you introduce, explore, and amplify changes (See my post of Dec. 3, 2005: Wal-Mart used conference of firm to announce diversity efforts; and Feb. 21, 2008: Sainsbury conference; June 19, 2006: another discussion of a law firm gathering; and Dec. 10, 2007: suggestions on conferences for firms.).

Publications and conferences dote on the largest law firms (See my post of Feb. 20, 2008: two law firms break $2 billion in fees; and June 18, 2007: references on this blog to “Magic Circle” firms.). The big shots garner the most publicity and ascend into the heaven of icons.

Unspoken, usually, are the drawbacks of very large aggregations of law-firm lawyers purportedly practicing together. General counsel may sometimes be blinded by the light of magnificent firms, but they also realize that sometimes their partners have clay feet. I wrote about some of the disadvantages that accompany size of law firm in my recent article and I invite readers to email me comments. Click here for my article in PDF format.

Matt Homann wrote a post on his blog, The [Non]Billable Hour, ten “rules” about hourly billing. I thought that was a promising topic, but found the entries to be mostly clever, quasi-aphorisms. But one caught by eye: “Sophisticated clients who insist on hourly billing do so because they’re smarter than you are, not because they want you to be paid fairly.”

I disagree, twice. Sophisticated lawyers in-house probably believe that hourly billing – despite its much maligned flaws – serves better than any other billing method. IQ has nothing to do with it. I also disagree with the insinuation that those lawyers connive to pay any of their firms less than fairly. In-house lawyers know that if their firms feel mistreated, under-paid, and underappreciated they will not perform as well and will sooner or later decamp.

An article in 8-K, Vol. 4, Fall 2008 at 7, describes groups of lawyers that are neither big firms nor boutiques. Reportedly also sometimes called “semi-virtual firms,” they include GCA Law Partners (Mountain View, CA), FSB Corporate Counsel (Atlanta), Axiom (NY), Phillips & Reiter (Houston), and Paragon Legal Group (San Francisco). The contract-services firms make available experienced lawyers on weekly or monthly contracts.

The article mentions several law departments that have availed themselves of such resources, including Network Equipment Technologies, Porsche Cars North America, Yahoo, and Cisco Systems.

An excellent point made by Paul Huie, an associate general counsel at Yahoo, is that hiring someone from one of these organizations “delays the decision point for you” and “gives you great[er] certainty for when you decide you need to make that [new] hire.” In other words, before you commit to bring on a full-time lawyer, you can fill a gap with a contract-service lawyer and keep your options open for a while.

If you launch a competitive bid process and receive a number of RFPs, push your evaluators to articulate why they favor one firm’s proposal over another. Always ask evaluators to rank and to justify – it smokes out biases, lazy thinking, as well as on the one hand, on the other hand.

On the positive side, when evaluators grade 1, 2, and 3 on proposals and state their reasons for the comparative ratings, they inevitably move toward convergence on the relative importance of different attributes and how they spot and rate those attributes (See my post of Aug. 15, 2008: competitive bids with 35 references.).

An additional benefit of transparency and sharing of ratings is that the next time you seek proposals you will ask questions that are more precise and more germane to the later evaluation.

Charge-out rates of law firms inexorably, inevitably and (to some inside lawyers) inequitably rise (See my post of July 30, 2005: nearly 5% increase in rates for partners; Sept. 25, 2006: outside counsel rates average $185 per hour; and Feb. 23, 2008: annual average increases of about 5.5% in outside-counsel hourly rates.).

Worse, the larger the firm you use, the higher the rates move every year (See my post of Oct. 25, 2007: average partner billing rates trend steadily higher as firm size increases; and Jan. 3, 2007: each additional 100 lawyers raised the average partner rate $13.).

The most fundamental improvement a general counsel can make, in decisions on whether to permit requested rate increases by law firms, is to set criteria for inside counsel to grant approval (See my post of Nov. 21, 2005: rate increases linked to productivity increases; Dec. 16, 2005: rate changes not by 12 months but by project experience; March 12, 2006: different rates for the same lawyer, according to value of a task or matter; Dec. 5, 2007: no rate increases for Wal-Mart without strong performance and value added; and Nov. 24, 2005: assess requests against changes in the CPI or a company’s profitability.).

In 2008, the law department of Waste Management asked every one of its outside firms to produce a two-page plan that assesses its people and their assignments to Waste Management matters. The law department graded every plan as “good,” “adequate,” or “poor.”

According to Diversity & the Bar, Vol. 10, Nov./Dec. 2008 at 33, this year, 18 percent of Waste Management’s firms had good plans, 56 percent had adequate plans, and 26 percent had poor plans. Firms that have poor plans resubmit them until the firm shows “demonstrative progress.” That requirement puts some teeth into the effort to encourage more use of diverse lawyers (See my post of June 17, 2008: diversity with 29 references.).

Several posts have discussed aspects of the Legal Electronic Data Exchange Standard (LEDES) (See my post of April 14, 2005: European law departments; Sept. 18, 2006: electronic legal invoice delivery; Sept. 18, 2006: LEDES files for budgets; Feb. 21, 2007: data from law firms; April 22, 2007: UTBMS savings article; Nov. 30, 2007: data from survey of law firms; Nov. 20, 2007: a request for data; Dec. 2, 2007: proliferation of e-billing systems; and Dec. 6, 2007: innovative ideas in law department management.).

For more information, get in touch with the Legal Electronic Data Exchange Standard (LEDES) Oversight Committee.

Ron Pol, recommends a radical concept for your RFP process in terms of setting deadlines for law firms to reply. Writing in ACC Docket, Vol. 25, Sept. 2007 at 23, Pol urges law department managers to “ask how long they [bidding law firms] need to respond, and set the deadline accordingly.”

True, an RFP process should not arbitrarily stunt firms’ processes of deliberation and creativity. But law firms these days have prepared responses to many RFPs and they know the drill. Many have teams that are dedicated to this. They can address your needs, which are not all that unique, within two to three weeks (See my post of March 30, 2008: RFP with 22 references.).

You should run the process, not the inmates.