Law Department Management Blog

David Wilkins of Harvard Law School gave a presentation a couple of weeks ago where he used a memorable metaphor for a useful idea. Referring to the much greater frequency with which general counsel reduce the work going to a firm rather than terminating the firm, he puckishly drew on ice hockey: “they put the firm in the penalty box.”

It’s a good image – a check, a time-out, a shot-across-the-bow, a slap on the wrist – of how to signal discontent. Wilkins didn’t spell it out but the reason for turning the spigot to the right could be poor results, poor client relationships, poor management of matters, or simply pique.

Wilkins extended the point. In his view, the disenchantment and tangible effect of it, lower fees for a period of time or less choice assignments, chills not only the partner who was the culprit but also the larger practice group and indeed the entire firm. Firms might not be red-carded, but they may to cool their skates for a bit.

Michael Caplan, the financial coordinator for Marsh & McLennan’s law department, commented recently in a column about his department’s efforts at outside counsel cost control.

“Back in June [2011], we ran a request-for-information on what were the best-in-class outside counsel billing guidelines and how to utilize technology to align to our billing guidelines. We put 48 firms—large, medium and small—in the RFI …[who] represented about 85% to 90% of our spend. We put some rules in place that were not previously standardized, such as stating that we will no longer pay for first-year associates to work on our matters.”

It sounds as if Marsh used its request for information to learn from many of its law firms how to improve management of firms (See my post of Jan. 5, 2010: survey your firms, but judiciously.).

A meaty footnote in Michelle Beardsley’s article in the Fordham Law Review, Vol. 79 (2011) at 1924 (fn 314), cites several studies that have highlighted a dramatic drop in the number of trials in the United States. For example, there were roughly 45 percent fewer tort, contract, and real property cases in state and federal courts during the decade before 2001. This trend has been long term and gradual.

The moderating effect on general counsels’ budgets must have been as momentous, because the costs of litigation bulk so large and trial costs can be extreme (See my post of May 20, 2005: budget depletion just before trial.). Fewer trials, less expense.

The countervailing cost of e-discovery during the past decade may have masked the increasing scarcity of trials – and might even have caused more cases to settle. Either the daunting cost of document collection and production spurred resolutions or discovery clarified the strength of arguments and spurred settlement.