Lawdable : Cost-Effective & Flexible Legal Solutions for Corporate Legal Departments & Law Firms : Cost-Effective & Flexible Legal Solutions for Corporate Legal Departments & Law Firms: Counsel On Call

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.
 

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I would say that’s been one of the things I’ve been able to do in my three years here at Fidelity that has undoubtedly saved the company the most money of everything I’ve done, and I would put that in the millions, easily."

- Martha A. Mazzone, V.P. and Associate General Counsel, Fidelity Investments, on creating a "three-legged stool" with Counsel On Call and outside counsel
 

As demonstrated on what's become a popular podcast for LegalTalk Network, Marty Mazzone is incredibly well-versed in the discovery process and data management. Her candid comments and detailed descriptions of how Fidelity handles the litigation process have been helpful to many in-house attorneys. 

We've had numerous requests for a transcript of Marty's podcast, and have pasted at least a partial version below... to listen to all of Marty's interview, including an in-depth discussion on data management, please visit LegalTalk's website or our Media Center.


Paul Boynton, LegalTalk Network: In addition to bringing some of this work in-house, are there other service providers other than law firms that have been assistance to you?

Marty Mazzone: Yes, that is key, actually. And this is not to be disparaging of law firms, not at all. But I do think that all of us – clients and law firms, and I was in the law firm for many years -- have to address this changing model.

First of all, there is the whole technology vendor world in e-discovery, and they can be extremely helpful and critical partners in a major e-discovery effort. There are also these groups that I would call something like “discovery attorneys,” or maybe at one time you would have called them “staffing groups,” but they provide high quality attorneys for an extremely minimal cost compared to the cost of law firms. And by using those groups to do your review and manage that in-house, you’re saving your law firm attorneys for building the legal defense.

So to me … I’m building my factual defense up over here with my in-house contract or discovery attorneys, and then I’m transferring the knowledge they’re gaining to our legal defense team out of the law firm who are writing our briefs … and that transfer of knowledge becomes a very important element in what I’m trying to do. But I definitely think that we can almost see a third leg to the stool now instead of a direct link just from client to law firm.

You’ve also now got an opportunity to get a good set of discovery counsel who will continue to work with my company case after case, who will know what I do, will know acronyms, will know leaders and so forth, and they’ll be able to dig out the facts.

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You can’t scan a legal rag nowadays without seeing an article predicting the end of the billable hour, or the revamping of the business of the practice of law, or some other projection of how the practice is going to look at the end of this recession. Some insights are better than others, like the recent Law.com article about in-house departments requesting their outside counsel to reduce rates or present an alternative fee arrangement. Patrick Lamb’s commentary on the matter on his blog also really drew my interest – I think he hits the nail on the head.

Undoubtedly there is some room for firms to reduce rates and I believe, in time, the market will bear that out (I love the anecdote from a lawyer who told Susan Hackett at ACC that $700/hour was a “suicide” rate). But what’s more central – and the article skims over this while Patrick calls attention to it – is that hourly rates are really only a small part of the equation and that efficiency and quality are the key elements. I'd add one more factor to this cost-saving/value formula: maximizing resources.

Based on hundreds of conversations I’ve had with in-house attorneys in recent months, there really isn’t as much pushback on the partners’ high hourly rates. Sure, clients would like them to be lower, but they also understand you have to pay for great legal counsel. The real problem is at the associate level, where it’s much tougher in some instances to defend the value received. In many cases they’ve turned to smaller or regional firms to get the rates they seek across all levels.

But where we’re seeing in-house departments achieve budgetary success is in conducting an audit of the work that needs to be done and overlaying that with the available resources. Here’s a rudimentary example of how the process works for a fictional department that has (only) three operational units: litigation, contracts and labor and employment:

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