Articles Posted in Outside Counsel

Cell phone calls by lawyers and their locations may some day automatically record data to time tracking systems. That prospect becomes clear from a disturbing item in the Lond. Rev. of Books, Vol. 30, Aug. 14, 2008 at 24.

Here is an illustration. If the partner you rely on has a late-model iPhone you can locate the partner as a bright green dot on a map. The location information is available to anyone with the required resources to make use of it. Moreover, since the origin, destination, time and duration of cell phone calls are all logged, it will be technically possible for a law department to compile data on all calls by timekeepers at law firms who work on its projects. Eventually, e-billing vendors will collate cell phone usage and location to time entries on invoices, or bypass them altogether and collect them independently (See my post of May 19, 2006: disparages real-time billing information.).

Partnering with law firms gets a huge play in the law-department press. Several law departments, in addition to DuPont, have publicized their close relationships with their key firms (See my post of March 12, 2007: Pfizer’s Partnering Program; May 3, 2006: UPS’s 25 core law firms; July 20, 2007: YTC’s partnering program; and June 20, 2008: Tyco’s partnering with Eversheds in Europe.). Partnering fits with convergence (See my post of Feb. 16, 2008: convergence with 26 references.)

Even so, most of my writings on Law Department Management Blog have been critical of partnering (See my post of May 1, 2005: dark side of partnering; July 3, 2007: risks of consolidation of firms; Dec. 16, 2005: complacency among partner firms; and March 11, 2007: partner mobility risks partnering arrangement.).

I am all for law departments and law firms working closely together, but I believe they have fundamentally different interests and therefore partnering won’t achieve what its proponents trumpet (See my post of Aug. 13, 2006: clashing meanings of the terms between firms and departments; April 26, 2006: firms vying for direct access to corporate executives; and Dec. 21, 2005: how far partnered departments intervene.).

A quote in a recent article set me thinking. The writer was discussing the cost advantage larger departments have over smaller ones, in terms of lower total legal costs as a percentage of annual revenue. My thoughts on why total legal spending as a percentage of revenue (TLS/Rev) is negatively correlated with revenue appeared in Legal Times, Jan. 28, 2008.

Among the reasons adduced in the article is that “the companies are placing the appropriate legal work with the appropriate outside counsel.” That slippery phrase admits at least three interpretations.

It could be interpreted that larger departments keep more work inside, at a lower cost per hour than external counsel charge (See my post of Aug. 27, 2008: fully-loaded cost per attorney hour with 31 references.).

This blog does bang on about the drawbacks of relying on junior associates in law firms (See my post of May 11, 2007: associates and complaints about them with 13 references.)

In-house managers believe newbie associates don’t know enough, work too slowly, pile on the hours with a heavy hand, and are not worth their billing rates. Some believe they are forever sitting in intra-firm meetings, or that they lack judgment, or they are learning on our dime. But now another ugly truth should waken general counsel at night: young associates are asleep.

A survey sponsored by the National Association of Law Placement (NALP) Foundation for Law Career Research and Education roused me in the Fin. Times, April 6, 2006. The NALP survey found that more than a third of lawyers sleep only five or six hours a night.

After six years as the general counsel of Affymetrix, Barbara Caulfield resigned and joined Dewey & LeBoeuf. Nothing unusual, but she brought with her three litigation lawyers from the law department. This news in Corp. Counsel, Vol. 15, July 2008 at 20, made me wonder about the propriety of a general counsel negotiating to leave a company for a law firm and recruiting other lawyers from the department to leave as a group at the same time. The ethics and conflicts of it all make me shake my head.

The piece says that Affymetrix will use that team of four lawyers to handle its litigation – what else can it do? All companies are vulnerable to having their inside lawyers leave, ripping out their institutional knowledge and the intimate familiarity with the legal and business issues at hand. To join a nearby law firm as a group and to offer to handle the gaping hole that remains strikes me as collusive hardball.

Caulfield murmers, perhaps ingenuously: “We just got a great call with a great offer, and you’ve got to consider those.” From my experience as a consultant and law department employee, a huge amount more must be considered and negotiated for such a wrenching change to occur than that innocent carrot implies. How many other law firms might extend great offers to clumps of in-house lawyers, including the general counsel, and win this different kind of competitive bid? Perhaps general counsel will have to sign no-poaching agreements.

At a recent presentation, a client who uses an e-billing system mentioned that the software helps cull through bills and detect administrative errors. For example, the software makes sure the law firm is an approved firm, that the matter number and mathematics of the invoice are correct, and that there are no duplicate line items – even from prior bills. That latter inspection would be very difficult for a human to do.

The speaker said that in 2006 the savings for his department from use of the software was 11 percent and in 2007 climbed to 14 percent. Some 70 law firms use the e-billing software. The savings include discounts plus “adjustments to bills of about 3-4 percent.” Did the software itself spot amounts billed equal to that as overcharges or errors to be written off? Would manual reviewers not have spotted any of those charges?

I continue to be troubled that e-billing vendors claim as savings emanating from their software many of the cost-reduction steps taken by the law department. For example, if the department shifts work to lower billing-rate firms, can the e-billing vendor count that as a system-produced saving because the software monitors those firms’ bills?

A case note in PLCLaw Dept. Quart., Vol. 3, Jan.-March 2007 at 32, has some points about secondment by the law department of BT, the $38 billion telecoms company (See my post of July 17, 2008: secondment with 12 references; and Jan. 23, 2008.).

The legal team of approximately 150 lawyers worldwide believes, according to group general counsel, Anne Fletcher, that “secondments are a law firm’s single biggest marketing opportunity.” Many law firms might look askance at secondments, fearing loss of revenue and even loss of the valued associate. As to that risk, BT’s legal department scrupulously avoids poaching secondees from firms (See my post of Sept. 21, 2005: no-hire provisions in secondment agreements.).

BT also honors two-way secondments. For years it “has regularly sent in-house trainees to law firms.” The item in the Quarterly does not say whether the reverse secondment was available only to trainees – non-qualified solicitors – or also to more experienced in-house lawyers. It does say that the secondees work with a wide range of clients.

The law department of BT, the 150 or so lawyers worldwide who serve the $38 billion telecoms giant, conducted its first panel review in 2002, according to PLCLaw Dept. Quart., Vol. 3, Jan.-March 2007 at 31. Based on that case note in the Quarterly, I extracted some points of interest about panels (See my post of June 18, 2007: law-firm panels with 13 references.).

After a second panel review led by BT’s group general counsel, Anne Fletcher, took place in April 2006, BT had a general panel of four firms (Linklaters, Bird & Bird, Addleshaw Goddard, and HBJ Gately Waring) alongside a specialist panel (Freshfields, Gilbert and Tobin, Pinsent Masons, Paul Weiss, Reed Smith, and Hogan & Hartson.). As befits a global company headquartered in Britain, the generalist firms are all UK based, whereas the specialist firms include two from the UK, one from Australia firm, and three from the United States.

Each firm entered into a formal engagement agreement, which were likely quite similar to each other aside from the scope of work. Additionally, “each law firm has a corresponding relationship partner in the BT legal team” (See my post of May 18, 2007: inside counterpart to firm’s relationship partner appointed for each major firm; and July 26, 2008: relationship partners with 8 references.).

A recent article by two partners in a small litigation firm, published in Met. Corp. Counsel, Vol. 16, July 2008 at 39, starts with a provocative claim. The authors believe there are “two very simple reasons why litigation costs have spiraled out of control.” First, law firm attorneys are motivated to overwork the case because doing so generates more fees and thus compensation.”

This post addresses the second reason: “corporate counsel often hire expensive, big name law firms for the political ‘cover’ it provides them in the event the ultimate disposition of the litigation is unsatisfactory.” Many people allege that self-protection wins out over prudent spending (See my post of Sept. 10, 2005: the “Buy-IBM effect; Aug. 16, 2006: cynics mention self-protection as a reason to hire firms; Dec. 28, 2006: second opinions from outside; May 4, 2007: firms not hired due to their “prestige”; May 23, 2007: firm name must impress CEO and Board for it to provide CYA protection; and June 30, 2007: one of 13 obstacles to cost control is the “insurance policy” of the name firm.).

The slur surfaces all the time, but how can anyone ever prove it or disprove it unless a large number of general counsel were preternaturally candid?

Earlier I describe 18 good practices for competitive bids and RFP processes (See my post of Nov. 30, 2007: 10 recommendations and 11 references; Aug. 13, 2008: 8 tips on competitive tenders and 2 references.). Despite some assertions to the contrary, law firms eagerly seek opportunities to compete for sizeable bundles of work (See my post of April 5, 2005: lackluster response levels by law firms to requests for proposals; May 19, 2006: Nestlé initially invited 30 firms, then winnowed them down after proposals and presentations; Dec. 14, 2005: in 2001 Viacom chose from among 20 law firms to handle its patent prosecution work.).

Seven more suggestions for how to pick law firms after a competition are below.

Disclose the names of the firms invited to compete (See my post of Sept. 13, 2006: disclose bidders’ names;.). I am less in favor of publicizing to the actual bidders the names of the other firms that submitted a response.