A roundtable discussion: Bridging the gap between in-house and outside counsel

Allyson Bouldon, Tegrant Corp.

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Bouldon: During the interviews of firms in the past, I’ve had good luck with actually presenting hypotheticals — one in advance so the teams could come in with a prepared response, and one very brief hypothetical that we had literally presented during the interview process.

And the reason we’ve done that is because we wanted to approximate what the experience would be when you call a firm and the CEO or another officer has asked you for information and you call the firm and say, ”Listen, this is my situation.” We wanted to kind of recreate that process.

Von Hoene: Do you get legal advice as a result of the hypothetical or do you get knowledge as to how they would address the problem, how they would staff it, and what their approach would be?

Bouldon: In this instance we received actual legal advice. What we did to make that case work is, we tailored the hypothetical presented onsite to the specialty area of the attorneys who would be present during the interview. Something brief, something that’s clearly answerable. We didn’t go out on the limb with something cutting-edge that would be difficult to answer. But we just did it to see how the process worked and how the person would communicate with us, because that’s important too. Lawyers are very smart people.

There are many, many wonderful outside counsel out there. But at the end of the day, in addition to being smart and being skillful, there are just fit issues, in other words, a communication style, the ability to have a mutual understanding — those things are all very important as well. It worked well. They did very well, and it was very revealing …

Susler: I’ve actually done that in interviewing law firms. I give them a situation. Sometimes a firm will say, ”Of course we can handle that, but I need more facts. Of course we can handle that, because we are so and so.”

Other lawyers will say, ”Well, here is what comes to mind, and we can do this, this, and this.” That type of on-the-spot creativity is going to get me, whereas, just because you have reputation and told me you can do it, I’m not likely to go with you. I like somebody who can think on their feet and is willing to put themselves out there.

Von Hoene: The other point your hypothetical answers raise is, I think one of the least attractive things an outside firm can do, from a perspective of an inside lawyer, is profess expertise in an area where they don’t really possess it. A real solid thing a firm can do, or a lawyer can do, is say, ”We don’t do that. But I’ll find you the right person who does.”

Findlay: Conversely, there is nothing worse for a firm than to say, ”Oh, yes, we can do that.” And then when they staff up the case it becomes clear that they really don’t have the people to do something like that. As the matter goes along, or as you hired someone out of a sense of urgency, you will find out over time whether there are other people who would be better. That is a real relationship-killer with a law firm.

Does it make a difference what large firms pay their new associates? Do you ever consider smaller firms that may provide good service at more-affordable rates?

Findlay: I think it is very hard to be sitting at a company where you are controlling your own salaries, the salaries of your own people, to watch what law firms are doing with first-year associates …

I think, maybe not in the short term, but over the long term, it will affect large firms’ ability to get business, because my management looks at what they see in the paper and they think, ”Why would we allow one of our providers to raise the rates by this much every year? We’re not able to raise our rates for our customers that way. We’re able to push down the price of copiers, or push down the price of everything we buy except legal services.”

In our own place, we are trying to shift work to the extent possible to the smaller, less-expensive firms. And we reserve the big firms for much more complex, difficult, bet-the-company matters.

Von Hoene: We don’t, absent of special circumstances, permit first- or second-year associates to work on any of our matters … It’s very rare that you have somebody right out of law school who is worth $250 an hour to you, to your business, in a way that they almost must charge. I do think, with the exception of probably very few firms that do super-specialty work, it’s going to be hard to sustain this model indefinitely.

There’re going to have to be fairly dramatic changes, and they may not be dramatic in terms of revolutionary. But there is going to have to be an evolution of the relationship between clients and law firms in how [matters are] billed out and in terms of what makes the firms run. We also have a number of smaller firms that we give a lot of work to for economy reasons.

Increasingly today, I think there are going to be additional opportunities because the pressures in the big law firms, and the pressures to have a big book of business means there are a lot of great lawyers who are going on to smaller law firms who are maybe not great business people relative to the big law firms, but are every bit the lawyers. That’s going to be a resource that I think we will all, in corporate America, be drawing more heavily from as time goes on.

Doohan: When I have conversations with outside counsel about new billing rates, it comes out that it’s not the lawyers or the managing partners of these firms that are deciding these increases. It is the business side. They kind of throw up their hands and say, ”Of course, this is ridiculous. My rates should not be going up that much. But it is someone in the back office who has said this is what the billing rate is going to be this year.”

In a way they are caught too, many of them in the firms. But I agree with you that something is going to give because it cannot continue to go up on the hockey stick that it’s been going up on.

How does the discussion go when deciding on budgets?

Von Hoene: The other thing that for us is important from a budgeting standpoint is to update the budgets in a meaningful way. We do it four times a year. We do quarterly updates where outside counsel is required to go back, and our lawyers in-house will proceed to go back and review it, so we can do appropriate business planning, whether a matter is or is not staying within the confines of what we had originally forecasted.

Findlay: We are now doing a formalized early case assessment process that asks outside counsel to put together a memo at the beginning of the case; to do a really quick intensive look at what the case looks like, what it’s going to cost, so we can make a decision as to whether we just want to settle it out early and pay what we’re going to pay, before spending hundreds of thousands of dollars in legal fees, rather than getting to that same point at the end …

We’re not thinking like litigators, like we’ve got to win this case. We don’t really deserve to pay any money at all. We think more like business people, which is, let’s do a cost-benefit analysis on this case and minimize overall what we spend on this matter.

Doohan: As far as holding their feet to the fire, I’ve had some success in having that difficult conversation and saying, ”Look, you’ve got to figure out a way to get it done better because we came into this believing it was going to cost this, and there haven’t been any surprises, so you’ve got to cut back on who you are using, or whatever.”

On the other hand, if the results are really outstanding and they are over budget, then I’m a little less inclined to audit.

Bouldon: I think I’m the newest person here in terms of being in my position. If there was a significant budget overrun and nothing had happened to warrant it, I would want to make a change. Of course, depending on the type of matter, you can’t always pull up midstream, but that would be what I would want to do, if at all possible, because I would expect the budget to be somewhat accurate.

I do ask for potential contingencies. For example, in litigation, is there any potential that this will become a collective action or class action? That opportunity is thrown out as somewhat of a life raft up-front. Absent unusual turns of events, if the budget is very off, that would be a great concern …

Doohan: Is very off 50 percent or more, or 20 percent or more?

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