Articles Posted in Outside Counsel

According to surveys, law department managers say they consider a huge array of attributes when they select outside counsel (See my post of Dec. 28, 2006: summary of four surveys and 37 attributes.). Readers can find more on those four surveys (See my post of Oct. 31, 2005: European law departments and 11 attributes; Jan. 30, 2006: Kirkpatrick Lockhart’s findings about 8 attributes; March 13, 2006: LexisNexis Martindale-Hubble’s findings on 8 attributes; and Oct. 30, 2006: 10 attributes in the insurance industry.).

Other surveys I have cited identify a range of other law-firm attributes law departments reportedly take into consideration (See my post of Nov. 14, 2005: attributes of new firms compared to incumbent firms; May 4, 2007: general counsel don’t hire a law firm because of the firm’s “prestige”; May 23, 2007: law firm’s reputation makes a difference; May 27, 2007: considerations of Canadian in-house lawyers; July 19, 2007: creativity; July 20, 2007: minor factors when law departments retain outside counsel; and July 28, 2008: hiring criteria.).

Compare these 12 points that favor reducing the number of law firms used by a law department to a dozen reasons that oppose convergence (See my post of Oct. 19, 2008: reasons against convergence.).

1. Better service delivery

2. Better billing rates and alternative arrangements

A number of publications rate law firms according to various systems, and I have made observations about them generally (See my post of July 4, 2006: ranking sources of guidance on law firms; July 21, 2005: Zagat-style ratings for law firms; April 6, 2007: risks of crowd-hacking on evaluation systems; and Nov. 11, 2005: referrals and networks of firms.).

When managers in law departments want to find firms who might represent them, they can peruse these listings (See my post of June 9, 2008: various sources, including Best Lawyers, Chambers, SuperLawyers, Law Dragon and Avvo; Oct. 12, 2008: Executive Counsel and its methodology; Aug. 14, 2006: ratings of law firm websites; Jan. 25, 2008: Martindale Hubble ratings; Feb. 7, 2007 on several rating systems; Nov. 19, 2007: InsideCounsel offering; and Sept. 10, 2005: law firm size and ratings on league tables.).

A very smart general counsel shared with me an iconoclastic view. He argued that excellent partners only bill a fraction of the value they deliver and gave an example.

Say your company has decided to buy a company for $100 million. You know partners at two law firms who could handle the transaction, but you believe that one of the partners is five percent better than the other. Five percent of $100 million equals $5 million, so the argument of the general counsel is that paying the superior partner anything less than $5 million is a bargain.

That argument would hold up better if the success of the deal depended only on the work of the partner. It doesn’t, not at all, nor do even the legal services depend only on the work of the single partner. In-house lawyers are not potted plants and the partner is not the only lawyer from the law firm who works on the matter.

Lawyers who work for corporations object to convergence programs for many reasons. The ones I have heard include the following, listed roughly in order of their significance.

1. Geographic dispersion of our matters means we need firms admitted in many states and familiar with many courts

2. Complacency on the part of law firms once they are selected to the small group

Several managing partners at big law firms moan about the “molasses-paced payment process” at clients. The piece in the Am. Lawyer, Vol. 30, Sept. 2008 at 33, does not distinguish between clients with a law department and clients without, but widespread deliberate delays in paying invoices appears to rankle many law firms.

I doubt that a general counsel would unilaterally slow payments to law firms from the typical 30 or 45 days to a much longer period, but the CFO might impose such a freeze to conserve cash.

Toward the end, the article adds a strange statement. “One saving grace: electronic payment processes that are now common in many major corporations.” As explained by one law firm chairman, “With electronic payment systems, you submit a bill and it pays it in a specific time.” I do not know of law departments that have agreed to pay bills automatically in a set number of days, even if they have not had a chance to review the bill.

General counsel often want to know which law firms lead in various practice areas. One source of that information are the many surveys and lists that purport to rank law firms by their experience, capability, and performance.

As another resource, Exec. Counsel, Vol. 5, July/Aug. 2008 at 34, declares that it will rely on the methodology of Chambers and Partners and will produce its own short list of leading firms. That methodology has been approved by the British Market Research Bureau British and includes “thousands of in-depth interviews with clients and lawyers … using a team of more than 50 full-time researchers. Each interview lasts about a half hour. All interviews are confidential and no findings are attributed to any respondent.

Chambers gives greater weight to the views of clients about law firms than the views of law firm partners. All this sounds like a substantial and reliable resource for general counsel.

At a recent panel, general counsel from several small law departments dumped on RFPs. As described in the Legal Intelligencer, Oct. 3, 2008 (by Zack Needles), one of them is put off by the “dog-and-pony show” aspect of presentations. Another panned bait-and-switch tactics.

A proponent of RFPs, I read this as their misunderstanding the role of RFPs and the power of buyers. RFPs are about collecting market information and winnowing out firms; they are not solely stilted presentations sugared with marketing froth. You have the absolute right to tell the firm who should attend the presentation and what those lawyers should do. You are not the passive recipient of whatever the firm decides to unveil. If you let a firm trot out the trained dogs and ponies, shame on you. Tell them what you need, or see how well they extemporize. Experienced lawyers should be able to parry effectively.

As for bait and switch, that comes down to your toughness. With no breath bated, switch firms. Short of that, list the core team members at the firm and heavily discount the rates charged by other timekeepers. If you want the time of a particular lawyer, establish that quota at the start and refuse to pay for lesser talent.

A general counsel on a recent panel criticized what he called a “centralized attorney structure,” where all communication must go through the relationship partner of the law firm. That hub structure is especially inefficient if the partner is not personally handling a fair portion of the legal work.

As this situation was described in the Legal Intelligencer, Oct. 3, 2008 (by Zack Needles), I would completely agree. A relationship partner’s raison d’être is to facilitate legal services provided a client, not clog them and impose costs (See my post of July 26, 2008: relationship partners with 8 references.). The panel general counsel, and all in-house counsel, want direct contact with the attorneys working on their matters.

Ironically, outside counsel would prefer to work directly with business executives, without the intercession of the inside lawyers.

Many posts on this blog give insights into how law departments attempt to regulate the wallet-busting costs of patent litigation. A previous post pulled together 13 comments on costs (See my post of Oct. 2, 2008: patent litigation costs; July 21, 2005: an update on patent litigation costs; and Jan. 15, 2007: commentary on reductions of awards.).

This one assembles comments on litigation management techniques (See my post of Jan. 20, 2006: patent trolls; July 17, 2007: patent litigation managers; Nov. 30, 2005: which type of firm to select; May 3, 2006: how to choose litigation counsel; and Dec. 2, 2007: project management software;.).

Information abounds on patent litigation (See my post of July 14, 2007: patent litigation metrics; Nov. 27, 2005: metrics on patent litigation; May 21, 2006: suspicious data on patent litigation; and April 9, 2006: 1992-2003 data.).