GPSolo Magazine - July/August 2004

Partnering with In-House Counsel

Traditionally, it is the in-house counsel who retains outside attorneys and makes the final decisions on legal services required by a corporate or government entity. Establishing and maintaining an effective relationship with the in-house counsel is an important factor in becoming and remaining an outside counsel for a corporation or government.

There are those who believe that lawyers from large law firms are better able to establish and maintain that relationship. However, my experience as both an outside and in-house counsel has shown me that sole practitioners and small firm lawyers frequently provide high-quality, cost-effective legal services to these government and corporate entities.

There is no magic formula that guarantees success in establishing or maintaining a relationship with the in-house corporate or government counsel. There are instead any number of ways to establish and maintain that relationship. None is exclusively the province of the large-firm attorney. All are open to small law firms or solos.

Getting Picked for the Team

Outsourcing decisions by in-house counsel often involve an analysis of four issues. The in-house counsel must first determine the legal needs of the corporate or government entity. The in-house counsel then determines the ability and capacity of the entity’s legal department to handle that workload internally. Like any client, the in-house counsel must then consider the cost of outsourcing the legal work. After considering these issues, the in-house counsel must identify an appropriate outside attorney or law firm to perform the legal services.

Determining the workload. The amount and type of legal services a corporate or government entity may require will vary depending on the size and nature of the entity. However, any corporate or government entity large enough to have an in-house counsel or legal department probably requires a significant amount and variety of legal services.

The legal services my municipal government requires range from the mundane to the arcane, from the fairly general to the highly specialized. During the past year, for example, these services involved the following areas of law: contracts (general, construction, and real estate); election law; health law; intellectual property law; labor law (general personnel issues and collective bargaining); land-use law; litigation (both general civil litigation and specialized litigation such as eminent domain and tax assessment challenges); and municipal finance and ordinance violation prosecutions.

Determining the capacity of in-house counsel. Once the workload is determined, whether to outsource or retain a particular legal matter will depend on a number of factors, particularly the size and the expertise of the in-house legal department. Are the attorneys on staff available to do the work, and do they have the necessary expertise?

The relative influence of these factors on a particular decision to outsource legal services will vary. In my own case, staff size is a critical factor. My legal department consists of one attorney (me) and one legal assistant. In addition to my role as general corporate counsel, I also perform other nonlegal management functions. Because of the small size of my legal department and my other duties, I often must retain outside counsel just to get the work done on a timely basis.

For most in-house counsel, however, lack of in-house expertise is probably the more important factor. Many corporations or government entities will seek outside counsel for matters requiring special expertise, or where the issue does not recur with sufficient frequency to develop that expertise in-house.

The particular expertise of the inside attorneys may influence not only the types of matters an in-house counsel delegates to outside counsel, but also the role the in-house counsel plays in the particular matter being delegated. I have very little background in labor law, municipal finance, or environmental law. In those areas I tend to take a more hands-off approach. I will delegate almost the entire matter to outside counsel and serve primarily as the conduit between the outside counsel and the policy makers.

On the other hand, I was a trial attorney when I was in private practice, so I take a different approach to litigation. If my workload permits, I retain certain types of litigation in-house. I also tend to take a more active role when I outsource a litigation matter. I am interested in receiving copies of pleadings and briefs—and I actually read them. I am willing to give input if asked on litigation documents and strategy. I expect to be involved in some way with any settlement discussions.

Recognizing that my litigation background may become a burden to the lawyers handling litigation for my employer, I usually invite outside litigation counsel to tell me if I start to micromanage their case. At least one outside litigation counsel regularly accepts that invitation.

Determining the costs of outside counsel. All in-house counsel are sensitive to the costs of outsourcing legal services. Whether employed by a small municipal government or a large private corporation, the goal of all in-house counsel is the same: We are looking for the best legal representation for the least expense.

Some believe that, as a general proposition, attorneys from small firms or solo practitioners provide legal services that are less costly than the same legal services from large firms. I find this is generally true when comparing respective hourly rates, but not always true for the total project cost.

In litigation and general municipal matters, I retain attorneys from small firms and large firms. The hourly rates of the larger firms do tend to be higher. As a former shareholder of a larger firm, I also believe overhead costs are generally higher for large firms than for small ones. However, the overall costs of outside counsel for a particular matter often depend more on the individual attorney performing the legal services than on that attorney’s status as a member of a large or small law firm. One area where I find lawyers from small law firms to be more flexible is their willingness to consider alternatives to hourly rate billing.

For example, I retain one small-firm attorney to handle all transactions related to certain types of redevelopment loans. For a flat fee, which is ultimately paid by the borrower, this lawyer handles all document generation and loan closings. Our arrangement covers specifically what services fall within the flat fee and what is outside the fee. Items outside the fee are charged at an hourly rate.

Identifying outside counsel with the desired expertise. There are some who believe that larger law firms provide broader expertise or greater depth than small firms or solo practitioners. I find that this is not necessarily true.

More frequently, it is the expertise of a particular lawyer that I am seeking. In that case, the size of the lawyer’s firm is of less importance. Solo practitioners or lawyers with small firms may have more individual expertise and thus be more cost effective. In my area of local government law, for example, more experienced general municipal law practitioners tend to be members of small firms.

Becoming Part of the Team

The attorneys to whom I outsource legal work include a home-based solo practitioner, members of several small law firms, and attorneys from a few large firms. The factors influencing my choices are not that different from those that influence similar decisions by most in-house counsel. One is the personal relationship between in-house and outside counsel. Another is the historical relationship that an attorney or a law firm has with the corporate or government entity.

However, these historical or personal relationships do not preclude other attorneys from performing outside counsel services for a particular corporation or government agency. In many situations, other factors may influence an in-house attorney’s choice of outside counsel.

Marketing. Three prevalent methods of law firm marketing are brochures, news-letters, and websites. Potential clients may view each method differently. I have strong opinions on all three.

Brochures may be effective when marketing to nonlawyers. However, as an in-house counsel, I do not find them useful in selecting an attorney. I believe I can find better sources of information on a lawyer’s or law firm’s expertise. I do not need a brochure telling me that an attorney might possess a human side or have outside interests. I can probably figure that out on my own.

I find attorney or law firm newsletters to be more valuable than brochures. Whether they are awe inspiring or just plain awful, I tend to read them from beginning to end. Good newsletters identify emerging legal issues and subtly demonstrate the expertise of the lawyers who author its content. Of course, where the quality of the content is bad or uneven, the newsletter also tells me something.

The format of the newsletter affects my reaction as well. I read and subscribe to newsletters that are mailed to me in hard copy. However, I prefer receiving them by e-mail in a digital format. This allows me to retain them electronically and to read them on my computer or PDA at my convenience.

For many of the same reasons, my favorite marketing tool as in-house counsel is a law firm’s or attorney’s website. A well-developed website combines the best elements of the firm brochure and firm newsletter. It enables me to conduct my own background research on the firm or the attorney whose services I may be interested in retaining.

Client entertainment. Just as with non-lawyers, client entertainment can be an effective way to establish a relationship with an in-house government or corporate counsel. However, most government attorneys are subject to codes of ethics imposed by either state law or local ordinance. Some private corporation counsel may be subject to corporate policies that impose similar restrictions.

Bar associations. Given the possible restrictions on a lawyer’s ability to entertain in-house counsel, one alternative is to join bar or other associations frequented by in-house counsel. This could include not only substantive law sections but also sections that are of broader interest, such as a practice management section or one geared to small firms or sole practitioners. Many of the counsel I retain are attorneys I have met through bar activities.

Staying on the Team

Defining the relationship. It is important to define the relative roles of the in-house counsel and the outside attorney. The in-house counsel’s role on a given matter may depend upon the individual counsel’s personality. Some in-house counsel control virtually all the work associated with a particular matter and may only occasionally need to consult with the outside counsel. Others may take the opposite approach, leaving a matter entirely to the outside counsel until the legal goals are accomplished. In between are those who try to create a fully integrated legal team of in-house and outside attorneys on a particular matter or as a general practice.

Even when taking a hands-off approach, inside counsel can still serve a valuable role as a resource for outside counsel. An in-house counsel is generally more familiar with the entity’s operations and strategic goals. In-house counsel’s position within the entity may enable him or her to more easily spot potential problems or to more effectively gather information for the outside counsel.

In matters where the inside counsel has a greater role, both attorneys should discuss the restraints that the inside attorney’s other roles in the entity may place on his or her availability or time commitments. If the legal department is handling document collection or production, give the in-house counsel sufficient lead time to collect and photocopy the documents. If the in-house counsel is to review or comment on documents, the documents should be sent at a point in the drafting process when the in-house counsel’s input will be worthwhile—and when the in-house attorney has enough time to review them, make suggestions, and return them.

You also may want to consider the format of documents you expect the in-house counsel to review. Some prefer receiving paper copies and mailing or faxing them back with handwritten comments. I prefer electronic copies. I can imbed comments or digitally annotate them and can e-mail them to outside counsel.

Maintaining effective communication. Maintaining effective communication is critical to establishing a long-term relationship between the in-house attorney and outside counsel. Find out the inside counsel’s preferred method of communication. Some prefer to meet in person. Others prefer voice mail or e-mail because of those media’s ability to have extended communications without actually having to make personal connect.

Keep the in-house counsel informed on a timely basis of the status of a particular matter, even if there is a lull in the activity on that matter. Whether by hard copy or e-mail, send the in-house counsel a copy of any communication.

Let in-house counsel know if you intend to contact employees of the corporate or government entity. The contacted employee may assume that the in-house counsel is aware of the contact or may call the in-house attorney before responding to you. Failing to let the in-house counsel know of such intended contacts can embarrass the attorney and complicate your contact with the employee.

Determine at the outset which counsel will be the client’s representative to the press. Even if you are to be the primary spokesperson, it is still a good idea to clear any remarks with inside counsel.

Be sensitive to the in-house counsel’s budgetary restraints. Discuss at the outset possible alternatives to certain expenses. Some entities prefer handling large photocopying projects in-house rather than being billed by the law firm. Some also prefer receiving documents digitally instead of incurring charges for photocopies.

Considering the impact of legal bills. The bills you send for legal services are also a method of communicating with the in-house counsel and others at the corporate or government entity who may have to review them. Draft the bills with these audiences in mind.

Obtain the in-house counsel’s input on special needs or preferences in content or format. Find out whether others may have access to your bills. State or federal freedom of information acts may require disclosure of parts of your legal bills to third parties. Other members of the management team may also review parts of the bill.

I prefer bills that provide a detailed description of the services performed, identify all timekeepers, and, where hourly billing is involved, list the time and cost for each entry. Because of the process my employer uses to pay bills and because parts of the bills may be subject to disclosure under our state’s public records law, I prefer a summary sheet and a separate report detailing the services performed. The finance department gets the summary sheet for processing and payment. I retain the separate detailed report.

I also prefer bills in a format that facilitates how I review and analyze them. Most of the attorneys I retain send bills by e-mail in a digital format. I can review them quickly and easily carry them with me to review in more detail. I frequently transfer billing data to spreadsheets, where I can analyze it in greater detail.

Michael J. Morse is the village attorney and the assistant village manager for the Village of Menomonee Falls, Wisconsin. He can be reached at mmorse@menomonee-falls.org.

 

 

Back to Top

< /