February 2008

In-House Counsel Keeping Closer Tabs on Outside Lawyers

By Kristine L. Roberts, LITIGATION NEWS Associate Editor

Law departments use vendor management techniques to monitor billing

In-house counsel are more systematic than ever in how they monitor outside attorneys, according to a recent survey by the Association of Corporate Counsel and Serengeti Law, a legal consulting firm. The annual survey of company law departments compiles data on the methods they use to manage work assigned to outside lawyers.

The survey results show a broad increase in the use of vendor management techniques by law departments. In-house attorneys are imposing more requirements on outside counsel. For example, three-fourths of the companies surveyed insist that their law firms provide budgets for at least some matters. Other common requirements include periodic bills, specific billing formats, discounted rates, regular status reports, and involvement in staffing decisions. Companies are increasingly using technology to track work, such as electronic billing systems that compare bills with budgets. Many law departments have also used convergence (i.e., reducing the number of outside firms with which they regularly work) to control legal costs.

A driving force behind these trends is the growth of company law departments. Horace W. Jordan Jr., Lake Forest, IL, cochair of the ABA Section of Litigation’s Corporate Counsel Committee and a participant in the survey, explains that “there are more in-house lawyers today; legal departments are bigger and doing a lot more work. With the ability to handle matters in-house, general counsel must justify their decision to hire outside firms. What are they using them for? What is the cost benefit analysis?”

Jordan recalls an era when outside attorneys could send out vague bills that merely stated “for services rendered,” and agrees with the survey’s finding that those days are gone. He advises attorneys to review bills carefully before sending them out. “Lawyers should realize how much they communicate through their invoices.”

Robert M. Craig III, Houston, codirector of Division V of the Section of Litigation (Substantive Areas of Litigation) says that “the use of metrics allows in-house lawyers to identify which firms and outside counsel are inefficient.” He adds that “if law firms are unwilling to work this way, they will lose business.”

In fact, half of the respondents reported having terminated relationships with law firms during the prior year. Inside counsel cited poor communication, high costs, and inadequate performance as reasons for termination. One lesson for outside counsel is that communication and client service are critical. As Jordan says, “outside lawyers must understand in-house counsel—go to their office, go to their trade shows, and learn what they deal with on a daily basis—and then focus on helping in-house counsel do their job well.”

Craig cautions that “there is not a lot in the survey that deals with in-house lawyers adding substantive legal value to litigation. The priority of adding legal value should not be lost.” Craig notes that although law departments must use vendor management tools to monitor outside counsel, the most important responsibility of in-house counsel is to ensure the best legal representation and quality of work for their client.” Jordan says that “we get caught up in hours and budgets, but relationships are still important.”

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