What Are Your (Legal- and Business-Related) New Year's Resolutions?

OK, this is just a different (some might say lame) way of asking what your goals are in 2010… but ‘tis the season, eh?

There’s never been more at stake in the legal profession than there is now. There’s a palpable sense of change in the air… especially concerning the new legal model of law firms and the impact it will have on the way law is practiced and billed. But I’m not one to wait around for that to truly happen, so why not start moving forward? Here are just a few of the things attorneys have to tackle in 2010:

True cost containment of legal expenses … If you’re one of the thousands of in-house managers who has taken the reigns of your budget, designed new processes, brought more work in-house, cultivated new outside counsel relationships, and engaged alternative legal services providers… well, here’s hoping that you get more sleep in 2010, because you’ve likely been busier than ever. Those who’ve undertaken the commitment to cost containment should be applauded and hopefully the work they’ve done will make life easier down the road. This process will continue to evolve for these good people, and thousands more will start down this path anew in 2010. The point: This is the new way of life for corporate legal departments.

Alternative Fee Arrangements … Many of you have spent the last few months working on new billing structures with outside counsel, and many are still in the process. There are scores of conflicting reports about these arrangements, so it will be interesting to see how it plays out. My guess is that we’ll hear plenty about the arrangements that work – after all, law firms have wonderful PR people – and we won’t hear much about the efforts that fail. But here’s the key: AFAs must be mutually beneficial, or they simply won’t work long-term. A certain amount of risk-sharing must take place and there must be value. I think AFAs have the ability to change the age-old approach utilized within law firms – and who handles what -- but a lot of the AFAs in use might really just be window dressing.

The Document/ESI Retention Policy… Interest in the design of document retention policies (or ESI Management Policies, as Barry likes to say) exploded in 2009. There’s just so much data now that companies are overwhelmed, and everyone is leery of 1) the smoking gun e-mail that’s been sitting in someone’s inbox for six years and 2) getting exposed for not implementing a solid policy. There is an obvious marriage between these two fears that in-house lawyers must officiate, and there’s no sign this responsibility will ebb in 2010. The key is in the implementation, and as our wise scribe Barry likes to say: “If you’re not enforcing your ESI policy, you have no ESI policy.”

Consistency, Process Across the EDRM… Everyone is dealing with e-discovery at some level, and many companies already have created some sort of approach to the actual review of documents when litigation hits. At the same time, most have spent their time and resources trying to figure out the document retention policy first before fully diving into project management, software and the attorney review. But this is where real dollars are saved and the spotlight will continue to shine on the processing, review and production of documents and creating a cohesive model encompassing all phases of the discovery process.

Convenience Versus Cost … Ah, the age-old question! Traditionally, when an in-house department has overflow work, it’s sent to outside counsel. Litigation, due diligence, employment work and other heavy lifting might also be completely turned over to the law firm simply because a department doesn’t have the resources. This approach is being evaluated, to say the least. But it doesn’t end there; many in-house departments now seek unit pricing that blends services (software + attorneys) for e-discovery matters because it makes budgeting easier and there is (or should be) some risk-sharing with the partner. The key for those who must closely monitor their legal spend is to understand that some providers don’t exactly assume any risk in this scenario because of the excessive padding they’ve built into their per-unit price. A general rule of thumb: if you can’t buy a super-value meal for the price you’re paying per-document, you’re paying too much.

Of course there are myriad other issues that in-house managers must create goals around in 2010, and we look forward to discussing many of those in the coming months. In the meantime, I hope you have a wonderful and prosperous 2010.

Legal Savings Needed - STAT!

In early January, I read an interesting piece by Susan Hackett of ACC wherein she laid out a few tips for GC’s on weathering the economic storm. Although things are beginning to look up (for some), lots of questions remain about 2010. Many of our in-house comrades have weathered or are currently going through the budgeting process; the open questions about the upcoming year have made that process almost like shooting at a target in a dark room.

Despite this cloud of uncertainty, it seems there remain a few things that every GC and budgeting lawyer should focus on as we move through the last few months of 2009. During my time as a GC (and admittedly, I’m a list building, check it off, constant evaluator type) I regularly went through some of the exercises below to help determine if our department (and company) was meeting its objectives.

1. In the short view (the next two months), are you going to hit your budget projections? If not, your high-volume, repetitious work could provide the relief you need. There are short-term fixes that can turn into long-term solutions, too … e-discovery, contracts, employment matters, etc. – there are simple measures you can take to generate significant savings quickly.

2. In 2009, there were never-before-felt pressures on legal departments to cut costs, and a response to these pressures was not only expected, it was demanded. Now is a good time to review those measures. What was the impact of cost-cutting on your ability to protect the company from the multitude of risks, known and unknown, that it faces every day?

3. Of the adjustments made during the economic downturn, which are worthy of making a permanent part of your daily practice?

4. Did your department thrive in the current environment or did it just manage to survive? What can you do to enrich the atmosphere during good and bad times?

5. Value has been defined as receiving a solution to a legal problem that addresses that problem for an appropriate cost. Now is the time to conduct a review of the department’s various 2009 initiatives and determine whether value was received for each of those initiatives. If not, there is no better time to fix that problem than budgeting season.

6. Although no one among us likes to think about a layoff once it’s over, now is the time to revisit that event. You have to ask yourself: Was it worth it? Did you really cut costs or did you simply move those costs from one silo to another? If you lost two or three excellent in-house attorneys to a lay-off -- only to replace that expense with an increase in outside counsel fees in order to get the work done -- that reality must be confronted.

7. Did you make appropriate use of outsourcing opportunities? If you are not looking at various ways of using outsourcing (such as contract attorneys), you should.

Of course, these items on this list are just part of the multitude of decisions and thoughts GCs encounter every day, but it really speaks more to the mindset in-house attorneys are moving towards: value. Value is everything in today’s legal landscape, and there are some quantifiable, transparent ways to determine if you’re receiving it.

Lessons Learned Can Benefit Chinese Drywall Defense

Asbestos then tobacco then pharmaceuticals. Each an extensive and expensive litigation. Now comes Chinese drywall, which could very well be the next tidal wave.

We have already been out in the field working on the Chinese drywall matter and have spoken to several clients that are in the beginning stages of strategic development. If you aren’t familiar, the issue involves the installation of drywall imported from China during the housing boom from 2004 to 2008, as well as after hurricanes Katrina and Rita. During that time, there wasn’t enough supply of U.S.-manufactured drywall to meet demand, so builders were forced to import it. The Chinese drywall in question has proven to be high in sulfur compounds that could potentially cause property damage, emit a “rotten egg” odor and be hazardous to one’s health, although there is undoubtedly much debate to be had about the claims. Initial estimates say that it costs more than $90,000 to rid a residence of the drywall and/or its toxins; as many as 100,000 homes are estimated to contain it (at least partially).

The lawsuit is multi-district litigation; since May 2009, more than 20 defendants have been named in more than 1,000 civil actions filed by homeowners. These are mainly the builders at this time, but everyone from insurance companies to architects to suppliers are likely to be involved at down the road. So this is almost assuredly just the tip of the iceberg, although it’s hard to imagine it being as large as the tobacco litigation.

So what have we learned from past civil actions such as these? I was fortunate (or unfortunate, depending on the day) to work on both the tobacco and pharma litigations, and what we’ve done for our Chinese drywall clients is take a comprehensive view of the past to see what worked, extract best practices, adapt them to the current circumstances, attack the problem and, we anticipate, build some repeatable processes.

One thing I witnessed during both the tobacco and pharma cases was the inefficiency of having dozens of law firms requesting, processing and reviewing the same data; millions upon millions of dollars were likely lost during the process. Constant education of reviewers and outside counsel, no chain of information and consistency were constant concerns. All of this can be easily avoided in the Chinese drywall matter.

Here is a glimpse of the comprehensive planning that’s required as well as a few of our recommendations:

  1. Be proactive. Decide early on to handle the documents head-on and upfront. Don’t wait to start because you think it might go away; it won’t and you’ll only be behind.
  2. Create efficient processes. The proliferation of technology is a true aid versus prior civil matters of similar or larger size, but working with partners who have repeatable, proven protocols is also key.
  3. Budget properly. This is tied closely with #2. With the implementation of repeatable processes, accurate budgeting is a wonderful byproduct.
  4. Collaborate. There is no substitute for collaboration between the discovery team and outside counsel (as well as the client). If it’s not a central component of your planning, then it’s next to impossible to build the processes that are essential in achieving consistency and efficiency.

Streamline, budget, collaborate. These are a few of the hallmarks of successful document management in these large cases. These steps certainly put the client in the best position to handle the many multi-jurisdictional lawsuits.

As I mentioned, we are already working on this matter and will have a lot to report back in the coming months as this issue heats up even more. We anticipate a lot of redundancy and that our discovery team is going to provide efficiency and streamlined processes to each of our clients that face this litigation.

Is 'Project Manager' The Next Big Legal Job Title?

Once upon a time, there were really only a handful of titles in the legal profession: Associate, Partner, Paralegal; General Counsel, Associate General Counsel; or simply Attorney. Sure, there were mini-steps between these positions and other classifications, but for the most part these titles offered a good snapshot of the profession – especially the way business was done. Everything that couldn’t be handled in-house was sent to the law firm. There were no Account Executives, no Client Liaisons, no Information Systems Administrators ... no other business partners to lean on.

The rise of e-discovery ended that several years ago. With the entrance of the IT and consultancy worlds, and the development of in-house IT departments, titles like Data Analyst and Systems Manager became commonplace. But the title that has seemingly had the biggest impact – at least from outside the walls of an in-house department – could very well be Project Manager, especially from the collection through production phases of the EDRM.

Practically every vendor touching the world of e-discovery has this position. If you don’t have it, or refer to it another way, you might get funny looks (We once did. “So is a Team Leader really a Project Manager? Or does someone oversee the Team Leader? Who is the PM?” Good point. Why make it more confusing than it has to be?). In our line of work, the PM can consult on the technology tools to use, develop the budget of an entire discovery matter, and handle the assembly and work of the review team, among dozens of other issues. These vital roles raise the question: Does this position merit a place, or a more prominent place, within the legal education system? Or will that just mess it up?

Like most things in our profession, top-notch e-discovery project management typically only comes with experience. A good PM has battled through the tough assignments, been able to troubleshoot while under intense deadlines or emergencies, managed matters large and small and understands the different approach each requires, and has the innate ability to become Zen master amidst the myriad roles and personalities at work on a typical discovery matter (between the technology vendors, law firm associates and partners, in-house team and it’s IT department, and the review team), among a million other issues. So it’s difficult to imagine this being taught well in academia. I won’t go into the teaching of practical applications in law school, which is another reason this will never happen.

Additionally, it’s not entirely clear how good lawyers are, as a profession, at project management. I feel like I can make this statement as a lawyer myself. The budget is often front and center of a project, whether it requires staying within it or forecasting. This has never been a strong suit within our profession. Project management also requires the ability to manage teams, work directly with vendors and other partners, and have an understanding of the substance of the case; that’s several jobs rolled into one. By nature lawyers can be good at each of these functions, but collectively it becomes more problematic.

That being said, the project manager is undoubtedly a role that is here to stay and it merits an established, accredited training ground within the profession – something beyond being certified as an e-discovery professional. Many of these training programs happen internally and organically (we do this). But outside of that, a publicly available service might need to be taught by IT professionals or consultants – someone not a lawyer by trade. E-discovery service providers might be able to step in as educators. Or maybe there is a different tract that needs creation: equal parts legal education and on-site, real-world apprenticeship. (Since summer programs are falling by the wayside, maybe this is a real alternative for law schools? Doubtful.) Or maybe there are enough lawyers already searching for new roles in the profession who could fill the need for great e-discovery project managers. Surely it’s only a matter of time before it becomes a more prominent and respected position at law firms.

One thing we hear loud and clear from potential in-house clients is that they understand the essential role a project manager plays in helping to achieve their cost savings and coordination goals. A good project manager is like gold, and I’d like to recognize Richard Stout and his team of PMs at Counsel On Call for consistently being recognized by clients for their outstanding work (Richard truly is the gold standard in the discovery/review world).

But when there’s a rush for gold, the legal profession typically is already waiting to be able to sell its supply … in this case, it doesn’t seem to match the demand – yet. I would love to get some thoughts on the subject.

Legal Budgeting: It's The New Black

Remember your days as a law firm associate when you were told the exact number of hours you must bill to receive a bonus? You focused your attention on the research memo, brief or closing binder at hand and only looked up to count up your weekly hours to make sure that you were hitting your billable quota. You didn’t pay attention to your receivables or whether the partner wrote off your time (you’d worry about those business-related matters later, perhaps during your 7th or 8th year of practice when you were up for partnership), because you knew that if you met that magical 2200 hours at the end of the year, your annual bonus was as good as deposited in the bank.

However, for corporate in-house counsel (and even those same law firm associates just one year later), those days are quickly fading into the rearview mirror. We are now entering the Golden Age of Legal Efficiency -- meaning that an attorney now needs equal expertise with Lexis, Westlaw and Excel.

Budgeting is a huge part of in-house counsel’s struggle for legal efficiency. There is no endless supply of revenue coming into the legal department; there are no bottomless pits of outside counsel spend. Every dollar is under a microscope these days; the ends must justify the means; and we all must do more with less – all points echoed in an article in Metropolitan Corporate Counsel magazine. This trend has had a notable effect on all facets of the legal profession: as an attorney or legal services provider, you better understand your client and know the actual cost of your services in order to survive this tightening of the belt.

Litigation is a great example of the legal-efficiency trend because it’s an enormous line item for many in-house departments. There is so much more data available to in-house counsel now that it has become relatively easy to break down costs and identify areas of savings throughout process, particularly in the discovery phase. The number of documents to review, processing costs, software platforms, attorneys’ review rates, hourly bill rates . . . these all are areas for significant cost savings. And when in-house counsel focuses on getting the work done properly and efficiently, it causes all of his or her partners/vendors to budget properly or risk losing the business. With everyone on the same page (or spreadsheet) and keeping an eye of the bottom line, it helps the client budget for future matters more accurately and to make prudent business decisions on every piece of litigation going forward.

The point is that there are many items that can now be budgeted that previously weren’t observed with a honed eye. You want to charge $200 per hour for your associates to conduct the review? That’s fine, but show me the actual benefit, don’t just pitch me on the law schools they attended. You want to use your preferred hosting company? OK, but give me the cost analysis. You want to handle our litigation moving forward? Give me detailed estimates on all the costs involved and explain to me how you’re going to make our process better and less expensive for the next case.

The emphasis on budgeting is by no means specific to discovery. Due diligence, trademark and copyright, contracts and employment matters, among others, are each just as conducive to scrutiny. It is no longer good enough to simply say, “Sure, we have great attorneys who can handle these cases” or “We can do that for one-third what you’re accustomed to paying.” The service providers who are differentiating themselves are the ones who demonstrate, “Yes, we have the experienced attorneys who can handle these cases. Here’s how many hours we expect it to take, here’s the data to back that up, and here’s what we can do to make it work for your budget.”

Transparency in budgeting and in project execution are here to stay. It is a much better starting point for many clients, or should I say the only starting point. I recently read an article where a senior partner at a large multinational firm in D.C. stated, “I’m not really interested in the business of the law,” explaining that as lawyers focus more on the bottom line their role as a trusted advisor diminishes in value. Well, in my opinion, it’s possible to do both – serve as a trusted advisor, while also recognizing and planning for the costs involved in the legal representation. And if you don’t believe me, just ask an in-house attorney – most of them have to do it every day.

Cost Cutting and Shifting Paradigms

We all know the economy is in the doldrums, but I thought it would be helpful to drill down a little bit to focus more on the legal sector and how it really impacts all of us -- and show why our company is positioned at the fulcrum of the coming change.

Here in Atlanta, we began to see a change beginning in May 2008. It began slowly with a change in complexion of some large projects, mainly with some of our law firm clients who were seeing less transactional work; some of the work our attorneys would normally handle was being handled by their associates. That was soon followed by an increased interest from several large, corporate clients to discuss ways COC could help them to bring their legal costs down. This reached a fever pitch in the late fall as the pressures of budgeting season came to bear. So, much has been made in the last six months – specifically over law firms merging, collapsing, or falling on hard times -- in reality the process truly began filtering down at least a year ago.

We have also seen these budgeting pressures reflected in the number of articles appearing in legal publications that discuss money saving alternatives. One of the most popular is coverage of the use of LPOs (legal process outsourcing) in India. There are pros and cons, and the coverage has been pretty balanced. There have also been articles discussing the wave of smaller firms that are holding rates at 2008 levels or, in some instances, cutting them. And finally, there is no shortage of articles that talk specifically about what law firms are doing to address the current economic climate both internally and for their clients.

It is safe to say that the emphasis on cost containment/reduction will continue for some time, and I think we have reached the tipping point our industry has been waiting for. It's hard to see it now, but this is going to be very good for our profession; I have been incredibly impressed with how many of our law firm clients are truly trying to make changes to meet the needs of their clients, especially concerning costs. As law firms jump on board -- and more opportunities emerge to work collaboratively -- the work product will be better and the client will be happier.

Unfortunately, many of these changes will come too late. The pressures being placed on legal departments by CEOs, CFOs and shareholders -- and sadly in some cases the bankruptcy court -- will be too much, too fast, to accept a change in direction. But ultimately, a multitude of changes will occur in the next several years over how legal services are delivered. We all must accept that these changes are coming and do everything we can to make sure the changes that are implemented by our clients are well-considered and strategic.