What Drives Corporate Counsel in Their Relationship with Outside Counsel?

  • Trust at a DNA level
  • Matter management/partnership
  • Cost
  • Fair and flexible billing
  • No surprises/Results
  • Value

That is my 10-second executive summary of Understanding What Drives Corporate Counsel in Their Relationship with Outside Counsel, the Legal Marketing Association – New England Chapter’s pre-conference event sponsored by LexisNexis Martindale-Hubbell, November 16 in Boston. The corporate counsel panel, moderated by John Lipsey of LexisNexis, included: Emily Dickinson (Hannaford Bros. Co.), Eric Cohen (Terex Corporation), Catherine Kortlandt (Praxair, Inc.), and Gregory Butler (Northeast Utilities).

Like last year’s Chief Legal Officers Speak, it’s always great to hear directly from THE CLIENT. If you’ve got 10 minutes, then you can too. What follows is a rough transcript, slightly truncated and paraphrased in spots.

On “partnering” with outside counsel / identification and selection

Greg: Competence/experience is given, so let’s set that aside. Culturally, at a DNA level, do they understand what’s driving not just the company, but what’s driving the legal department. We’re looking for “true partners.” We have very established relationships with a shared history and shared DNA. I’m looking for a comfort level that they are going to fit that. As for a new firm? I try them out in a very small way. If they treat that job like it’s not very sexy, not a big deal, then I probably won’t do business with them again. I’m looking for attentiveness — even on a modest task.

Emily: Similar. We work with a local regional firm that we’ve had for 25+ years. We use trial and error to try new firms and attorneys. We’re in the retail industry, so we deal with lots of acronyms. When I hire a new firm, I take them on store tours and show them our business. I can tell right away if they are going to meet my needs.

Eric: Is the lawyer thinking about me beyond the billable hour? That gets to the DNA issue. Do they care about my business? Do you care about me?

On identifying new attorneys/firms

Catherine: You look to Martindale-Hubbell, directories, who we’ve used in the past decade. After that it’s about response and are they telling me what I need to know. If an attorney came to me about A, but tell’s me I should know about B — that’s what I need.

Eric: Do they stick with you when things get tough? Will counsel step up? Who’s standing behind you in the tough times?

Gregory: I’ll tell you what’s a big turn-off. If I get the sense that the lawyer is inventing a problem only he or she can solve. I want to make sure you’re not creating the “tough times.”

Emily: Never, ever underestimate word of mouth. If I hear from a colleague that a firm hasn’t stepped up or has created a problem, that’s all I have to hear.

On capabilities

Emily: If I’m looking for local counsel, I’m looking for different depth. It’s difficult to be all things to all people. So, I’m looking for local expertise. Would I like one law firm in all locations? Yes, but that is unrealistic. And it’s the difference between paying $600/hr. verses $200/hr.

Eric: We hire lawyers not law firms — yes, but if we hire the right lawyer and he manages his firm correctly, then that reflects well on the firm.

Greg: I have a mental Rolodex of “Oh My God!” lawyers that I can call. I’ve developed it over time. I have lawyers with whom I have a bond of trust, that as I have different needs, stays involved to make sure a matter gets handled (my engagement partner)… who stays involved without 30 to 40 hours of his time being billed to me.

Eric: I ask for referrals — “If you were me… who would you hire?”

Greg: The theme is Trust — I want to know this is a person I would trust my child to. It’s a dangerous world. I want someone who will say, “We’ve got some immigration lawyers here, but here’s who’s the best immigration lawyer in the city.”

Emily: What Eric said — I want to hire the lawyer who will manage the issue.

On what differentiates between equals

Eric: It’s easy to eliminate … technology doesn’t come into it. An extranet isn’t going to make the difference. I don’t really care.

Emily: Slick doesn’t do it.

I recently was considering two lawyers. One had more experience with us, but I picked the other one because I felt confident that lawyer B and my CEO would get along better.

Catherine: We are looking at cost. We do ask for a 10% discount with longer term relationships.

Emily: If not a discount, at least be open minded about billing options.

Eric: Some firms have a machine that spits out a bill and no one looks at it to see if it makes sense. Other firms look at the bill and say this is a little out of whack for what was done. Are they looking out for me? or are they looking at me as a cash box?

Gregory: When all things are equal, and if this a large matter, if the firm is a bit more multidisciplinary, that is often better. One-stop shopping has some appeal.

On diversity as differentiator

Eric: Diversity is difficult. We don’t meet it yet internally, so we don’t impose it as a requirement.

Greg: I do try to push our luxury law firms on this pretty hard. When I entered law school, we were the first class to be 50/50 — men and women. So I don’t have a lot of patience with firms that can’t hire good women. Most of our firms get pushed on this. I push law firms because we hire our in-house attorneys from large firms who have trained the lawyers that we steal.

How to achieve preferred provider status

Catherine: It’s an evolution.

Gregory: I can tell you how not to do it. Don’t tell me about your firm economics. If you want to be my preferred provider, don’t tell me how much you have to pay your first year associates, but do understand what I need and help me get there.

Emily: Here’s an example. I had to hire new counsel in geographic area that I previously have not had an issue. A firm came in and did a big dog and pony show their capabilities, but it wasn’t what I was looking for. Learn my business before you come and do a presentation.

Eric: Firms come to see me and they haven’t even been to my web site, learned about our business, our management team, etc.

Emily: The conflict issue — and in retail, site location is huge. Someone will come to me and say, “Oh, I worked with competitor X!” That’s a big problem for me. I don’t want to hear that.

Eric: For me in my industry that’s not an issue.

Catherine: The conflict issue is very important, we look to avoid potential conflicts of interest.

Greg: The “trust” quotient should manage the sequence of how often your outside counsel has to come in and clear conflicts with you.

Eric: Some firms will ask me to sign a contract to waive conflicts. I won’t do it.

Greg: I wouldn’t hire the firm.

Emily: An intangible is that outside and inside counsel need to have a meeting of the minds. Some inside counsel want to be copied on everything. Others do not. Don’t guess. Find out. Have a meeting at the outset on how to work together.

Greg: I tell new law firms “Not all hours are equal.” Some are more equal than others. Be cognizant of what you’ve doing and how much time your spending on a matter. It may take a Chevy, not a Mercedes.

On bringing new firm up to speed

Emily: I want to know how does the law firm integrate junior lawyers? and is it OK with me? I don’t want a bill to show up with 7 sets of initials of persons I haven’t met. Another peeve I have are internal conferences — Sally met with Joe 1/2 hour, Joe met with Bill 1/2 hour, Bill met with Sally 1/2 hour. It’s very annoying.

Greg: We work with 40 firms. 70% of our work is with 3 firms. We meet with the big firms and set expectations.

On alternative billing situations

Emily: We use an alternative billing method. We wanted to reduce fees and to give 80% of our work to one firm. We worked together with the firm to carve out a budget — $X a year. If you come in under budget, you get 50% of savings, if you go over budget, you only get 50 cents on the dollar.

Eric: Predictability is the key. We use an “In the Bank” concept. We pay 50% and the other half goes into the bank and depending on outcome, they get all or part of the bank. I don’t love flat-fee billing.

Greg: We use the bank concept; we call it Success Fees. We sit down, do a budget, set outcomes, and it comes down to trust. And throughout the year, we sit down and say, “How are we doing? We set the expectations. It works very well for us. There’s no surprises.

Eric: The majority of all matters, though for all of us, remains hourly billing.

On outsourcing large document litigation

Eric: We’re not there yet.

Emily: We outsource IT to India, but I’m not outsourcing legal to India. But if I had a massive litigation case, would I look at it? Maybe.

Greg: No, but we did have a huge case where we hired a bunch of law school students.

Catherine: We’ve done it to a smaller firm, but not to India.

On e-discovery

[Consensus]: “A nightmare” We’ll be looking to outside counsel to help us on that.

On response to RFPs

Greg: We don’t do it a lot. The best ones are not boilerplate, but someone took the time do it well and customize it — they looked at what we really wanted to do. We once had a firm, who offered us a discount if they could forego the response to RFP.

On evaluating the relationship

Emily: My best gauge, other than am I happy?, are my internal business clients — are they happy? If they are pleased with the work product, then I’m happy.

Eric: Outcome is a big measure of performance and whether expectations are met. I want an honest assessment of expectations from the outset. I don’t want to hear we don’t have a case, after we’ve sunk a ton of money into it and that we should settle for this amount — it’s a good offer!

Emily: It’s a value equation. Did this lawyer or this law firm add value. Results count but cost comes into that. It’s a combination of result, client relationship and cost. The law firm needs to communicated with us on the cost issue. Law firms hate a budget and I appreciate that they don’t want to be locked in, but I’m in business, so I need a budget as a guide.

Greg: Success is like the U.S. Supreme Court definition of pornography, “I know it when I see it.” Goes back to relationship/trust issue.

Emily: If you really want to score Brownie points, be the firm that initiates the review. I love it when a firm says we want to come in annually or semi-annually to sit down and ask how are we doing, review services and matters — and it’s not billed — and throw in lunch!

On third-party client surveys

Greg: It’s OK as long as it takes 10 minutes, and I’ll probably reschedule 10 times.

Want more candid remarks from the GC perspective? See transcript from this same event last year — Chief Legal Officers Speak.

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