Articles Posted in Thoughts/Observations

This blog footnoted in a treatise, in Blue Book citation form! Proudly I hail a citation to a post on this blog in a leading treatise, nothing less than Robert Haig, Ed., Successful Partnering Between Inside and Outside Counsel (Thomson Reuters/West 2009 Supp.), Vol. 1, Chapter 7 at §7.2. Paul Kaleta, the general counsel of Alcoa, cites this blog as “But see Morrison, Posts on LawDepartmentManagement Blog (February 20, 2005)(discussing a possible greater role in the future for the corporate procurement function in retaining outside counsel).” Not too shabby, although compulsive law review beavers might need to add some notation for exactly which post it was on that day.

The utility of standard deviations. I hadn’t realized how many posts have explained and applied this versatile statistical tool (See my post of Oct. 24, 2005: standard deviation and bell curves; Nov. 13, 2005: fractals and standard deviations; Jan. 17, 2006: Black-Scholes uses standard deviations; Nov. 6, 2006: primer on standard deviations; Feb. 19, 2007: a measure of volatility; March 23, 2007: moments; Sept. 9, 2008 #1: Bayesian statistics and standard deviations; March 12, 2009: compare benchmarks; and Aug. 4, 2009: standard deviations let you compare metrics from different scales.).

Tracking pro bono time. Abbott Lab’s 162 attorneys logged 3,450 pro bono hours in 2008, 2,850 in 2007 and 1,770 in 2006 for a three-year total of more than 8,000 hours. That pace means about 20 hours per attorney per year. The data comes from Richard Acello, Nat’l L.J., Aug. 6, 2009.

Laura Empson, ed., Managing the Modern Law Firm: New Challenges New Perspectives (Oxford Univ. Press 2007), will mostly interest managing partners of law firms. That said, three chapters speak to concerns of general counsel, one on diversity, a fascinating chapter on law firm pricing, and a theoretical chapter on organizational capital. From those three chapters particularly, and elsewhere in the book, many points deserved mention on this blog.

Thirteen entries, to be exact, drew on ideas from Empson’s book (See my post of June 23, 2009: whether diverse work groups function more effectively; June 24, 2009: law firms that learn on a client’s dime; June 24, 2009 #5: 1290 AD advice on legal fees; June 24, 2009: some history on collective efforts to boost diversity in legal departments; June 26, 2009: time series data on larger law departments; July 1, 2009 #1: the F-statistic test; July 29, 2009: organizational capital in legal departments; July 30, 2009: cluster analysis; July 31, 2009: managerial consequences of lawyer intelligence; July 31, 2009: large departments use large firms; Aug. 4, 2009: standardize variables in terms of standard deviations; Aug. 3, 2009: Board membership and rates; and Aug. 5, 2009: partnered law firms and lower hourly rates.).

Independent counsel to a Board of Directors. Even when a company has a legal department, Board members sometimes retain outside counsel (See my post of July 25, 2005: costs of Boards retaining independent counsel; Sept. 13, 2005: Carey International; Sept. 27, 2005 #3: Arizona Electric Power Boards retain independent counsel; Oct. 30, 2005 #2: especially if there are allegations of managerial misconduct; Nov. 16, 2005 #1: Raytheon’s Board; Nov. 24, 2005 #3: two years of non-use allows a firm to be “independent”; Feb. 18, 2006 #2: more than 35% of Boards had retained their own lawyers since Sarbanes-Oxley passed; Feb. 19, 2006 #2: Rite-Aid Board also hired forensic accountants; and July 25, 2007: payment by a company of Board members’ fees of outside counsel.).

Metaphors from physics for general counsel. A number of metaphors applicable to legal departments and their management suggest themselves from the discipline of physics. Without management, legal departments can unravel into entropy (See my post of Sept. 10, 2005: larger law departments combat entropy and the second law of thermodynamics.). Sometimes management initiatives unleash a quantum leap (See my post of Dec. 21, 2005: jargon of “quantum leaps.” Plus, Heisenbergian uncertainty rules.

Percentage of GCs are among the five highest paid executives. The many studies that describe general counsel compensation never say what percentage of the general counsel are in the select group of corporate executives. I wish we knew (See my post of Aug. 12, 2008: handsomely rewarded GCs.).

I poked around on a site operated by the Library of Congress that has , compiled 1.2 million pages of American newspapers published between 1880 and 1922. Naturally, I searched the terms “legal department” and “law department.” “Legal department” returned 2,242 hits. Here is the earliest, from the New York Tribune, June 21, 1910.

“Every railroad maintains a legal department that gives plenty of employment for a varying number of lawyers, always, however, large. Questions are coming up all the time in railroad practice that the public never hears about, but the legal department of a railroad is one of its busiest, whether the fact becomes a matter of general knowledge or not. It is not only accidents that lead to claims that keep the railroad’s lawyers busy. Shippers and consignees have constant complaints to make of damage to freight, and an enormous number of cases of this sort have to be handled in the course of a year.”

The term “law department” returned twice as many hits, 4,722 results, in part because law departments of universities show up. The earliest substantive reference was from The Independent (Honolulu, H.I.), Feb. 17, 1904, Image 2, which referred to the law department of Hawaii in a tax issue (See my post of Dec. 31, 2006: early history of law departments in the US; and Dec. 31, 2006: NY Times articles on law departments.).

Environmental nudges on e-mails. I like this message at the bottom of emails (See my post of Dec. 26, 2008 #4:: huge, wasteful disclaimer in the footer of every e-mail from a company.). “Please consider the environment before printing this email or attachments, and print double-sided in draft mode when printing is necessary.”

A good statement of what revenue should mean in benchmark studies. For its Fortune 500 issue, the magazine defines “revenue” this way. “Revenue figures include consolidated subsidiaries and reported revenues from discontinued operations but exclude excise taxes. For banks, revenue is the sum of gross interest income and grows non-interest income. For insurance companies, revenue includes premium and an annuity income, investment income, realized capital gains or losses, and other income but excludes deposits.” These definitions come from Fortune, July 20, 2009 at F-8 (See my post of Aug. 21, 2008: total legal spend as percent of revenue with 9 references and one metapost.). Benchmark studies of legal departments should adopt a similar, consistent definition.

Massive legal department at Homeland Security. According to Corp. Counsel, July 2009, at 16, Ivan Fong, the new general counsel at the U.S. Department of Homeland Security, will oversee 1,700 attorneys (See my post of Nov. 6, 2005: large legal groups in government agencies; and Feb. 16, 2009: FBI has 180 lawyers.).

Exelon has an internal 1,750 billable-hour requirement. Corp. Counsel, June 2009 at 72, mentions this, which bolsters my point that the 1,850 hour “standard” is too high. To put the difference in context, consider a five-lawyer department where inside spend is $400,000 per lawyer. At 1,850 chargeable hours they cost $212 an hour; at 1,750 chargeable hours, the internal rate rises $16 an hour, to $228 (See my post of May 21, 2009: suggested revision to the old standby estimate.).

Transaction costs of tax compliance. “By one estimate, what companies spend in complying with the [corporate income] tax equals almost 13 percent of the tax bill they owe,” from The Atlantic, Vol. 304, July/Aug. 2009 at 61. Tax lawyers in-house are part of that compliance cost (See my post of Feb. 16, 2006: complexity of the tax code.).

Online deluge of (unqualified) applicants. Using online job networks, “one business advertised for a lawyer and received responses from 1,000 applicants – half of whom did not even have law degrees.” This comes from the NY Times, July 19, 2008 at BU 9, and it speaks to the (a) desperate efforts of lawyers to find jobs, (2) the reach of online job boards, (3) the effort HR or the legal department has to wade through resumes, and (4) the value of a search firm to screen applicants (See my post of (See my post of Sept. 16, 2008: search firms with 12 references.). The best place online to look for jobs and post for jobs is Goinhouse.com www.goinhouse.com

Ten more embedded metaposts (See my post of July 13, 2009: Part XXXV), each garnished with the number of its back references, for your perusal.

1. Benchmarks not otherwise covered (See my post of July 15, 2009: benchmarks with specific metrics not otherwise covered with 46 references.).

2. Committees in legal departments (See my post of July 21, 2009: committees with 6 references.).

“America’s lawsuit system is already the world’s most expensive, costing more than $3,300 for every family of four,” announces Trial Lawyer Earmarks. The site adds that “less than 50 cents of every dollar actually [goes] to the victims.”

Roughly speaking, if there are 300 million Americans, that means 75 million “families of four,” right? At $3,300 per family, the total cost of the “lawsuit system” would be $250 BILLION. That “system” must include the courts, perhaps penal institutions, and much more than lawyers, but even if we lop of a chunk for non-law firm costs, that leaves a very large amount for the law firms on both sides of a lawsuit and the internal legal departments that manage many of them. (See my post of July 16, 2009: irreconcilable data on total spending on US law firms.).

The source of the figure, not given on the website, appears to be a study by Tillinghast-TowersPerrin, U.S. Tort Costs: 2004 Update, Trends and Findings on the Costs of the U.S. Tort System app. 1A, 2, at 13, 15 (2004), available here.

Litigation up, or perhaps down, during a recession. “During an economic recession and certainly during this one, litigation revenues can be expected to increase as a percentage of the firm’s total revenues” (See my post of June 28, 2009: spending on litigation ranked dead last in terms of likely to increase.). Whichever view may be correct, the next question has to do with lag times (See my post of March 15 2005: lag and lead times in outside counsel spending.).

Historicism applied to law departments. Johan Åhr’s article in the J. of the Historical Soc., Vol. 9, June 2009 at 161, concerns Primo Levi Levi. Levi disagreed with the notion of historicism, which Åhr defined as “a theory that events are determined or influenced by conditions and inherent processes beyond the control of humans” Anti-historicism is a “skepticism toward any abstract, imposing generalization about the character and trajectory of society and history.” That management views and techniques evolve for in-house legal groups does not mean that the changes evidence the inexorable march of larger forces or toward better management (See my post of Dec. 2, 2008: change among law departments is not teleological, toward an improved end.).

High costs of ex-pat lawyers. Inside Counsel, June 2009 at 55, informs us that “ex-pats usually get two times the basic salary they would receive in a comparable U.S. job, plus other compensation such as school tuition for their children and tax equalization payments” (See my post of Jan. 12, 2009: ex-pat lawyers and their costs, with 7 references.).

Ten more embedded metaposts (See my post of June 19, 2009: Part XXXIV), each embellished with the number of its back references.

1. Evolution, evolve (See my post of June 25, 2008: evolution with 8 references.).

2. General Electric (See my post of July 7, 2009: GE with 35 references.).