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The authors co-chair the Corporate Litigation Counsel Committee of the Commercial and Federal Litigation Section of the New York State Bar Association. Parts of this article were derived from a July 18, 2007 CLE program sponsored by the section. The views expressed are the authors’ own.
IT CANNOT be emphasized enough that in-house and outside litigation counsel need to work well together if they are to address a given matter effectively and efficiently. When problems develop in that relationship, as in any other, the fault often lies in a failure to communicate properly.
Our experiences as outside counsel in litigation and arbitration matters and as in-house litigation counsel, as well as our ongoing tenure as the co-chairs of the Corporate Litigation Counsel Committee of the Commercial and Federal Litigation Section of the New York State Bar Association, have taught us that the same issues, naturally viewed from different perspectives, often disrupt the relationship between outside and in-house litigation counsel. Whether questions arise concerning billing, staffing, document review and production, or any other issue, tension often can be avoided by deciding on ground rules early in the life of a matter. There is, of course, a fundamental divergence between the business imperatives driving law firms and their corporate clients that must be recognized: Law firms raise their revenues through increased billings while, to business people, legal costs—litigation expenses in particular—are an unwelcome expense that necessarily reduces a company’s earnings. It is a fact of corporate life that legal departments are cost centers, not revenue generators. Every dollar spent on legal fees is a dollar that could at least theoretically have been invested in revenue-generating activities.
Beyond those divergent motivations lies a more complex dynamic. Litigation is an inevitable part of business, but one whose costs are often unpredictable because they frequently depend on the uncontrollable actions of third parties. Corporations cannot generally cut litigation costs unilaterally like they sometimes reduce expenses in other areas. In-house and outside litigation counsel can work together, however, to handle cases more efficiently, and thereby control costs, by employing many of these tried and true methods.
Learn the Business Drivers
Toward that goal of greater efficiency, outside litigation counsel should learn as much as possible about their clients’ businesses. The best outside litigation counsel speak their clients’ language, know their business models, and understand what drives their priorities. In doing so, outside litigation counsel can significantly increase their value to clients. Outside litigation counsel should also be sensitive to internal client politics and dynamics. For example, notwithstanding a strong legal position, a client may choose to forego taking some action in favor of preserving a broader business relationship with a potential adversary or settle a dispute on less than ideal terms in an effort to pursue such a relationship with an existing adversary.
Strategize Pre-Litigation
When working collaboratively, in-house and outside counsel can explore a variety of approaches before a business dispute develops into mediation, arbitration or litigation. Waiting until after a dispute has resulted in a judicial or quasi-judicial proceeding to involve outside counsel can complicate matters and increase legal costs over the long term. In some cases, the client may have committed itself to positions which may later prove problematic in a litigation or arbitration setting.
Key points for early discussion include the relative importance of the matter to the client as well as any internal or industry policies that may be relevant. Clients should be willing to engage in a thorough and frank discussion of the merits of a case and to at least consider mediation of the dispute. Outside counsel should often attempt to identify and pursue early settlement opportunities. The desire to discuss the weaknesses of a case should not be mistaken by the client as a sign of a lack of aggressive advocacy; it is simply a part of reaching a realistic assessment of the matter and developing a realistic strategy for resolving it in the most expeditious and cost-effective manner possible. To this end, in-house counsel should provide at the outset any relevant internal memoranda, briefs, and research database information that may be helpful. No client wants to be billed for an associate devoting hours to issues on which the client already has relevant case law and other resources.
Firm Up Communication
Right from the start of a new matter, in-house and outside litigation counsel should discuss their preferred methods of communication and agree upon back-up arrangements if needed, as well as their respective areas of responsibility. In this age of instant communication, the goal of both outside and in-house counsel should be to return telephone calls or e-mail messages during the same business day. When that is not possible, a colleague should reply to at least explain the delay and the likely timing of the reply.
Because in-house counsel’s most important relationships are with their key business people, having outside counsel circumvent established corporate communication channels will often create problems. However, outside counsel should be able to rely on in-house counsel to be proactive in seeking adequate time for meetings with key employee witnesses, no matter how senior they are.
To effectively handle a case, outside counsel also needs to be kept abreast of any relevant factual developments that may affect the matter and key personnel changes at the company.
Outside counsel should communicate key dates to in-house counsel regularly. Absent a compelling need for a truly emergency filing, there is almost never justification for outside counsel to give in-house counsel less than three business days for review of a substantive filing. Additionally, briefs that are sent to clients should be “filing ready,” complete with partner-added value. In response, in-house counsel should reply with focused comments within a reasonable period of time.
Discuss Costs and Staffing
Along with the early assessment of the merits of a case, there should be a fulsome discussion of projected fees as well as any alternative fee arrangements or fee caps right at the start of the matter. A key point for discussion is staffing levels, particularly if the client has very specific staffing requirements generally or for a particular matter. Counsel should agree on the respective roles of both in-house and outside counsel in staffing all aspects of the matter, including the inevitable and often extremely expensive electronic discovery review.
Many companies have gone to great lengths to prepare staffing guidelines for outside counsel. In-house litigation counsel is charged with the responsibility of enforcing these guidelines. If outside litigation counsel find certain guidelines unworkable, they should raise their concerns with the client ahead of time before presenting a bill that does not adhere to the guidelines. In-house counsel generally prefer to work with a core group of partners and associates who are at least somewhat familiar with the company’s businesses, its required billing practices, and the issues the client faces routinely or periodically. Personnel changes in the middle of a matter can create billing inefficiencies associated with the learning curves of the new professionals and should be avoided whenever possible.
Avoid Vitriolic Advocacy
While thorny disputes can give rise to strong emotions between adverse counsel, outside counsel should resist whatever temptation may arise to engage in vitriolic advocacy through letters or otherwise. In the long run, such tactics almost always backfire, destroying goodwill with a judge, magistrate, and/or arbitrator and creating judicial hostility toward the client and counsel.
Prepare Bills in Plain English
When it comes time to submit invoices, clear communication will help to prevent misunderstandings from turning into relationship-ending disagreements. Both sides should work out agreements ahead of time as to the format of invoices and the manner by which they are to be transmitted. Bills that are not presented in clear English and contain cryptic abbreviations for tasks make the review process painful and the approval and payment process prolonged. A clear, concise description of services rendered is the best way to avoid follow-up phone calls requesting explanations which invariably delay payment.
Be Proactive on Billing Issues
While a matter is pending, it is important to address potential billing issues proactively. It is particularly important that in-house counsel raise billing questions promptly so that they do not fester and turn into acrimonious disputes. Clients hate to be surprised by a large invoice for tasks that were neither contemplated at the outset of the matter nor discussed thereafter. Clients generally appreciate an explanation in advance if the billing, however high, is believed to be justified or if outside counsel reduced fees preemptively. In-house counsel should raise concerns with outside counsel concerning apparently excessive fees instead of developing resentment against them. In-house counsel also should avoid unreasonable delays in processing and paying reasonable invoices and advise outside counsel promptly of any new corporate policies regarding staffing and billing.