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Sophie Ross of FTI wrote recently that “many analysts estimate that the cost of legal review comprises about 70 to 80 percent of total e-discovery costs.” This is from Met. Corp. Counsel, Dec. 2011 at 15. sophie.ross@fticonsulting.com Earlier, she states that Fulbright & Jaworski found recently that “on average a corporation spends $3 million per legal case.” The quote about review costs follows, implying that about 75 percent of the average $3 million case goes to document review, or something over $2 million per case. Clearly, the implied and extrapolated conclusion is unsupportable.

The Eighth Annual Litigation Trends Survey Report of F&J (at 21) found that 47 percent of the 275 U.S. companies it surveyed spent less than $1 million on litigation annually. After all, as seen on page 5 of the report, one third of the respondents had only 1-5 lawsuits in 2010 and another quarter had 6 to 20. Only about one-half of the companies had revenues greater than $1 billion. Thus, at typical figures of a half percent of revenue going to legal expenses, the other half of the survey population would have been unlikely to spend in total more than $5-6 million, of which two-thirds or so went to external counsel and vendors. So half the survey population came nowhere near spending $3 million per lawsuit.

Moreover, the most common causes of litigation pending against U.S. companies (at page 11), were disputes over contracts (about 44%), labor and employment (46%), and personal injury (23%). Few suits of those kinds incur costs in the millions of dollars.

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Good advice, in my view, about use of e-mail comes from the NY Times, Dec. 25, 2011 at BU 8. In a column that interviews CEOs, the most recent one explained a rule about disagreements by e-mail. Basically, after the second e-mail of disagreement (I write: “The moon is solid.” You write, “It’s made of green cheese.” After I write, “No, solid swiss.”) that’s the end of writing online to each other. The cultural rule in that company says you pick up the phone, or Skype for a video discussion, and hammer out your views. I strongly support that rule: if you want to understand someone and figure out a solution, talk to them.

The CEO added: “It takes 90 percent less time to resolve conflicts when we talk, compared with when we write.” Of course, the CEO has done no study of the time it takes to resolve conflicting by discussion compared to by e-mail but the faux metric has rhetorical punch.

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The most recent Annual Litigation Trends Survey Report of Fulbright & Jaworski presents data on levels of satisfaction the responding companies feel about how well outside counsel meet their litigation needs. Displayed at page 16, the two points that struck me were the critical overall views and the gulf between U.S. and UK respondents.

“Electronic discovery,” “budget forecast reliability,” “overall cost management,” and “pricing and alternative fee management” all fell at around eight out of ten or more were either “satisfied” or dissatisfied (the chart shows the percentages of respondents who were completely satisfied or very satisfied). That luke-warm assessment is pretty damning. Perhaps clients are so peeved by being sued that it is hard to feel good about the law firm that you have to pay large amounts to defend you. Even so, the indictment of how those firms handle discovery, cost projections, invoice amounts, and creative pricing is strong.

The chart also shows the corresponding assessments by UK respondents. Overall, three times as many of them were on the positive side of satisfied (completely satisfied or very satisfied) as were companies on the other side of the Atlantic. Do British firms perform that much better? Are UK clients less demanding? The gap seems hard to explain.

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An obvious but nonsensical, answer would be “all matters.” That cannot be the solution since it begs the question “What makes something a matter?” (See my post of March 26, 2008: definition of the term “matter”.).

Many law departments deem a set of legal activities a matter for purposes of tracking them on a matter management system when the law department retains outside counsel to assist. To keep track of how much goes to each firm, and to all law firms in general, and perhaps to charge those fees back to a business unit or staff function justifies creating and updating a matter.

More of the work of a legal department finds its way into a matter management database if the department defines matters to be tracked along the lines of those that are “significant” or “more than four hours of work” or some other criteria.

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In litigation, loser pays in Germany and Australia: This blog has noted that the UK and Germany have loser-pays rules for litigants. According to the Economist, Dec. 10, 2011, that is the norm also in Canada (See my post of July 1, 2009: loser-pays jurisdictions with 6 references; June 2, 2011 #4: FRCP 68 look-alike in Britain; and July 18, 2011: Australia has loser-pay rules.).

Some states bar in-house counsel from providing pro bono assistance. Met. Corp. Counsel, Dec. 2011 at 38, has a column by Amar Sarwal of the Association of Corporate Counsel. He refers to efforts to promote pro bono services by in-house lawyers, then adds “Unfortunately, some states forbid in-house counsel from offering this kind of assistance.” Apparently Hawaii, Iowa and Minnesota are among those benighted states (See my post of Jan. 16, 2009: lack of pro bono opportunities for inside counsel.).

Acedia, also known as the “noonday demon.” The essay in the NYT Book Rev., Dec. 25, 2011 at 31, charmingly writes about the decline in attention at mid-day. A lawyer’s breakdown in concentration around lunch could be psychological (distractions), physical (hypoglycemia, lack of sleep), or ethical (lazy, poor work habits). Whichever the cause, the solution is a change of pace, a choice of a management task to accomplish, some discipline and some knowledge about the acedia effect.

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Total shareholder return (TSR) is a widely used measure of company market performance. Over a period of time, it suggests how analysts and investors value the achievements of a company. Perhaps total legal spending in relation to a rolling three-year TSR makes sense as a benchmark metric (See my post of Jan. 7, 2009: total shareholder return and market cap growth as possible benchmark metrics.). Effective deployment of legal resources should be a part, even if small, in overall returns to shareholders.

One disadvantage immediately apparent is that considerably less than 10,000 U.S. companies are publicly traded and therefore report their revenue and have share prices that permit TSR calculations. For the much, much larger number of privately held companies, this benchmark denominator is not available. Also, it would be important to correct for a given company’s TSR the industry-wide change in that figure (See my post of Dec. 14, 2011 #1: splines.).

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This blog has referred to hotlines a moderate number of times (See my post of Sept. 21, 2011: hotlines with 6 references.). Those anonymous reporting tools would seem to account for many of the disclosures of potential wrongs. Nevertheless, an article in Met. Corp. Counsel, Dec. 2011 at 38, draws on an informal study done by an in-house lawyer. That lawyer looked at reporting processes and discovered that “a majority of useful tips actually were communicated to the supervisors, not to the hotline.” Obviously, to tell your supervisor about a concern means that the supervisor is not the culprit and anonymity is not desired.

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My columns for InsideCounsel, Morrison on Metrics, let me dive into small topics, at least to the depth of 500 words. For my latest plunge, I wrote about two chart choices available in Excel. One lets you show trends better when you turn one axis upside down, the other lets you handle two sets of numbers that have very different scales, such as 1-20 on one and 1,000 to 10,000 on the other. Follow this link to my column published on Dec. 19, 2011.

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This opening sentence from a column in the NY Times, Dec. 24, 2011 at B1, irritated me: “Count the T-Mobile lawyers who negotiated a multibillion dollar breakup fee – [two Wachtell, Lipton lawyers] – and got AT&T to agree to it as among those who will actually deserve their year-end bonuses.” Does the columnist know that T-Mobile has a large and highly qualified legal department? Does he know that their senior corporate lawyer in charge of the negotiations – sorry, I doubt that Wachtell made the business calls – did not dream up and maneuver through the massive breakup rights?

It may be that the Wachtell lawyers had the creativity and audacity to propose asking for the $3 billion in cash and valuable wireless spectrum and had the skills to push it through to the final agreement. But someone on the T-Mobile side, and likely a lawyer, at the least had to agree and back them up.

I do not know what happened late at night in stuffy conference rooms littered with take-out and negotiators under pressure, but praise for this coup may be deserved by the in-house legal team, rather than based on the implicit assumption that outside counsel are more daring, smart and wily.