Articles Posted in Outside Counsel

Most associations of law firms boast about their size and international reach. The likes of TerraLex, LexMundi, Primerus and others believe that global coverage matters to clients. Other networks stress their regional expertise and footprint.

Still other networks of firms orient themselves around specialized areas of law. There are groups for employment law (See my post of March 11, 2010: Ius Laboris.) as well as for intellectual property law (See my post of April 10, 2006 # 4: Association of Patent Law Firms.) and litigation (See my post of April 15, 2011: The Network of Trial Law Firms.). It seems logical that there would be such groups, which share research, referrals, and marketing, in more areas of law, such as environmental or import/export and customs or perhaps immigration. I welcome hearing about them since I have probably simply not run across mention of them.

During late 2009 and much of 2010, U.K. heads of legal showed significant appetite to use more “mid-tier firms” in that country as well as more “international firms.” This shift in reliance for outsourced legal work appears graphically in a Winmark survey of CLO Programme membership (at 13). It is based on data obtained in the Autumn of 2010 from 124 UK general counsel. You can request the report from John Jeffcock.

Thirty percent of the respondents indicated they had increased their use of “UK Mid-Tier Firms” and 25 percent had done so with International Firms. The greater use of those two tranches of firms came at the expense of Silver Circle and Magic Circle firms. (I learned from the omniscient Wikipedia that the six Silver Circle firms are deemed to be Ashurst, Berwin Leighton Paisner, Herbert Smith, Macfarlanes, SJ Berwin and Travers Smith.) This data supports my point that if you really want to change your costs, change your firms.

A final note, 12 percent of the respondents stated that they had increased the amount of work outsourced to LPO providers. This movement will likely continue.

Most outside counsel guidelines that I have reviewed make it clear: “You may not comment to the media or disclose your representation of our company.” Even so, I can only conclude from a survey I just saw that some law departments are more tolerant of publicity. The choices included permitted disclosures by external counsel of

The fact that they are acting for your company;

Press releases on completion of a particular deal or project; or

Every now and then I run across another association of law firms eager to help law departments in a region, a specialty area of law, or globally (See my post of Feb. 21, 2008 #2: law-firm networks with 7 references; and April 14, 2010: associations with 7 references.). First Law International (FLI) recently came to my attention. Its website says that “over the course of 10 years, FLI has expanded worldwide at a very robust pace in over 50 countries, and growing (expected 45 by summer 2011).

“FLI NET™ Member firms currently employ more than 4000 lawyers in over 60 of the world’s most thriving economic centers.” Consider yourself informed!

An indicator of your law department’s attachment to a law firm is the number of offices of a firm that you work with. According to Baker & McKenzie, it pulled in $2.1 billion in 2010, “half of it from clients that use the firm in ten or more places.” This quote from the Economist, May 7, 2011, at 75, shows the degree of enmeshment between the firm and many of its clients: they rely on it for international legal advice from multiple locations.

I have suggested that a metric for loyalty and reliance is the number of a law firm’s partners used during a year, but the number of offices used offers a different spin (See my post of Aug. 17, 2010: don’t think firm, think number of partners or practice groups.). Multi-office and multi-partner dealings speak to a widespread network of respect and reliance.

The first experiment with competitive bids for fixed-fee arrangements having been conducted by many law departments, their general counsel contemplate the next round. What can they do differently to improve the process and outcome?

All manner of improvements to the RFP process might help. As discussed on this blog, these range from a better-crafted description of the work to conference calls to tighter selection of candidate firms to more objective methods of selecting winners.

The data obtained during the first tranche of set fee work can inform the second round (See my post of May 25, 2011: don’t ask for bills with hours on the first round.), such as to frame costs, scope the work, or set benchmarks.

With nearly 7,000 posts under this blogger’s belt, about 6,999 of them have dealt with companies that have a law department – even if only one lawyer (See my post of July 5, 2011: reasons to hire a first lawyer.). Yet thousands of established, profitable and well-run companies have no employee lawyer. Unblessed, we would all agree, they still manage to navigate the legal rivers.

They use outside counsel Oversight of outside counsel when there is no internal legal team usually falls to the chief financial officer. That oversight is primarily on the cost and payment side. Individual executives retain external lawyers as needed and pay for their services out of the function’s budget. It works, and it will always work, so the companies sans lawyer deserve some respect on this blog.

Every law department has a few law firms they view as their stalwarts, their old-reliables, their go-to firms. Sometimes called primary law firms, they are known quantities and qualities – they are the reigning incumbents. A more formal designation, and the more European term, is a panel.

My sense of the differences between the terms is that (1) a panel is generally larger than the normal handful of primary firms, (2) a panel handles a higher percentage of the department’s work, and (3) a panel has a certain duration, such as two years, and a rebidding for positions on it at the end of the term.

Having collected my posts twice before on panels, it fell time to update another metapost (See my post of May 19, 2009: Sainsbury panel; May 21, 2009: Nestles and its core panel; Aug. 19, 2009 #2: best practices for panel retention and management; Sept. 22, 2009 #2: rule of thumb for how many to invite; Nov. 13, 2009: Royal Bank of Scotland; Dec. 7, 2009: Telstra and its panels; Feb. 2, 2010: fairness to panel firms if the department hires a specialist; Oct. 7, 2010 #4: panels protect in-house attorneys from seekers of work; Dec. 3, 2010: Network Rail’s panel; Dec. 10, 2010: ITV’s panel; Jan. 14, 2011: psychological benefit of panels that reduce choices; March 16, 2011: French departments and panels; June 8, 2011: finding specialists even with panel; July 19, 2011: Liberty Mutual and 1,000 on panel; and Aug. 15, 2011: ProcureLaw and panel instructions.).

Lit. Mgt. Mag., fall 2011 at 59, offers an example of a fixed fee for discovery: “no more than 10,000 documents to review, no more than six fact depositions, no more than two experts named by the opponents and no more than one discovery-related motion filed.” That sounds plausible to me as a basis for a set cost.

Articulated parameters such as those lay out the variables and exclude exceptional events (See my post of Aug. 22, 2011: carve-outs and two meanings in fixed fees.). Key terms are defined, or at least available for discussion, and the possibilities are addressed. They attempt to narrow previously unstated assumptions (See my post of Nov. 23, 2010: state bases for pricing.). With such specificity, the arrangement comes closer to unit pricing (See my post of Oct. 24, 2009: J&J unit pricing model.).

Always curating my blog, I went back to early 2009 to see since then what this blog has about alternative fee arrangements. Almost three dozen came to light.

Of course, a number of the posts had to do with metrics (See my post of Sept. 13, 2006: percentage of matters handled under alternative fee arrangements; Dec. 7, 2009: 55% of survey respondents to Hildebrandt said they have used AFAs; June 14, 2010: data from France on AFAs; Aug. 5, 2010: data from Kerma Partners; and Oct. 22, 2010: survey data on AFAs.).

Arguments for and against alternative fee arrangements abound (See my post of Nov. 17, 2006: survey finds that predictability favors alternative fee arrangements; Jan. 13, 2008: delay saps attractiveness of alternative fee arrangements; Sept. 7, 2008: alternative fee arrangements and conflicts; May 6, 2009: you learn when you negotiate an AFA; Jan. 28, 2010: obstacle to AFAs is software and managerial supervision; March 16, 2010: Baer’s four objections to AFAs and my counters; March 24, 2010: alternative fees and transaction costs; April 6, 2010: less resistance in law departments, more perceived at firms; May 26, 2010: failure to pursue AFAs could be dereliction of GC’s duty; June 1, 2010: six boundary conditions; June 2, 2010: mindsets valuable for AFAs; June 9, 2010: three more mental concepts; Oct. 7, 2010: accounting has problems with AFAs; Dec. 21, 2010: scorn for AFAs; Dec. 26, 2010: law firms can profit more under AFAs, but your costs can go down; April 30, 2011: alternative firms over fees; and June 10, 2011: AFAs are not simply a budget;).