Managing Outside Counsel - Tips for Getting the Most “Bang for the Buck”

Having a good relationship and strong collaboration with your law firms should never come at the expense of being able to ask tough questions, get the best pricing, or expect excellent service. You should, and can, have it all.

The key to a good relationship and strong collaboration with your law firms is communication. Communication of your expectations starts at the beginning of the relationship, with your Request for Proposal (RFP), and continues throughout the firm’s representation.

Use Requests For Proposals (RFPs).

Perhaps most importantly, since law firms are competing against other firms for your business, you will probably never get better pricing than when law firms participate in an RFP. Also, RFPs give your company the opportunity to set expectations with your outside counsel.

Carefully Review the Law Firm’s Engagement Letter.

Once the company decides which firm it wants to hire, an Engagement Letter is signed. The engagement letter is typically a form letter, and is offered by the law firm. The typical engagement letter addresses fees and expenses, the scope of representation, conflict waivers, and the method for resolving disputes. The company should read the engagement letter carefully, rather than just signing it. If the Engagement Letter is like most, its provisions regarding conflicts of interest will “conflict” with the company’s Outside Counsel Guidelines. Those issues should be addressed.

Use Outside Counsel Guidelines.

Outside Counsel Guidelines provide your company with the best opportunity to communicate its expectations to your law firms, regarding such things as staffing, preferred methods and frequency of communication, and billing. It is important that the company be fair and reasonable with its outside law firms when communicating its expectations through its Outside Counsel Guidelines. The law firms are much more likely to work hard for your company, and listen when you have legitimate concerns, if the law firms believe the company is being fair.

Communicating your expectations:

• Staffing: Your company should expect to pay for an experienced attorney who can handle your company’s work. Your company will not want to pay for staffing levels beyond what it takes to get the work done effectively and efficiently, nor will your company want to pay for the training of inexperienced associates.
  
  
• Method and Frequency of Communications: Email should be the preferable means of communication, as it is faster and cheaper than a letter containing a “polished” memorandum. Verbal conversations (in person or by phone) do not provide you with a written opinion on which you can rely, and are more subject to faulty interpretation or recollection. On the subject of communications, how often does the client want updates, and to whom should they be addressed?
  
  
• Billing: Law firm invoices should be detailed enough to be informative: Who did the work? What did they do? How much time did they spend? And perhaps most importantly, how did the law firm deliver value to the company with the time billed? I recommend that you encourage your law firms to describe how their representation delivered value to the company. The law firms should view doing so as a “win-win” for the firm, as the company will be happier paying a law firm invoice if they believe the law firm added value. Of the four examples below, you can see that Example # 4 best describes value delivered to the client.

Example # 1
7/20/21 Conference

Example # 2
7/20/21 Conference with Client

Example # 3
7/20/21 Conference with Mr. John Doe, President of XYZ Corporation, to discuss proposed merger.

Example # 4
7/20/21 All-day conference with Mr. John Doe, President of XYZ Corporation, to discuss a proposed merger with AAA Inc., involving a detailed analysis of the advantages and disadvantages of the proposed merger, and resulting in the decision to recommend to the Board of Directors of XYZ Corporation that the merger proposal not be accepted.

• Budgets or Estimated Expenses: Some companies require formal case budgets and some prefer to only require that their firms estimate expenses. The argument for budgets is that we, as business people, are used to operating on a budget; we have to live within a budget to survive. The argument against formal budgets is that if law firms believe they are going to be locked in to a formal budget, they will likely “pad” the budget to allow for all imagined contingencies, and that the expense of the matter will end up being greater in the long run because the budgeted amount has been authorized.
  
  Whatever you choose to require, the value of requiring either a budget or an expense estimate is that it forces the company and its law firms to think through the legal matters and to anticipate the contingencies that the company could encounter (how much research will be required; what issues are in question; how many depositions will be required, will the company have to allocate resources to the case; how much business distraction or interruption should the company expect; will there be reputational cost to the litigation?) The result of the process is that the company is better educated and better prepared to deal with the litigation or transaction.
  
  
• Early Case (or Matter) Evaluation: I recommend that companies have their outside counsel conduct an early case evaluation with respect to every matter. While these early evaluations can be helpful in all matters (including transactions or investigations) they are particularly helpful in litigation matters.
  
  Some say if 90 plus per cent of all cases settle before trial, shouldn’t we consider whether this is a case we should settle now, instead of spending $50,000 or even $300,000 getting the case ready for trial? To me, the benefit of a very thorough early case evaluation, like that of a budgeting process, is that even if you conclude that the case is not “ripe” for settlement now, you can learn what it will take to get the case ready for either trial or settlement. This is where experience and judgment are invaluable. Your attorney, if experienced, can help you understand the cost of preparing for litigation versus the cost of settling, the impact on the business, both from the standpoint of devoting the company’s resources and from the standpoint of reputation. Get an honest evaluation. And be honest in your own evaluation.

Case Management by The Law Firm.

Select law firms which can and will manage themselves. The attorney responsible for managing the relationship with your company should be able and willing to help manage his/her law firm. The attorney should make sure your company is getting the best, most effective and efficient representation, including appropriate staffing and billing. The attorney should review and, if appropriate, adjust the bills before they ever get to the company.

Measure Everything About your Law Firm Relationships.

I believe the truth of the old saying: “What gets measured gets done.”

I recommend using available tools to measure law firm performance. Look at historical spend; compare firms; compare hourly rates, compare success rates. Ask questions. Is our firm the right firm for everything? Should we try a different firm for a certain kind of work? You may be pleasantly surprised by using a different firm for certain matters. At the very least, sending work to a new firm may force your usual firm to “step up their game.”

Lessons Learned.

After every significant matter (litigation or transaction,) conduct a postmortem review. Identify and capitalize on lessons learned.

Conclusion.

Managing outside counsel effectively is an art, not a science. The most successful relationships are ones that involve collaborative partnerships, where the company is viewed as being fair and reasonable to the law firm, and the law firm understands that the company has a business to run.