The awkward conversation on billing arrangements must happen. There is no way around it if in-house and outside counsels are going to assure the best value for the client. No matter how many years of practice you have under your belt, this conversation can be as uncomfortable as confronting a teenager about their romantic activities. Likewise, the closer the relationship, the more difficult this can be to accomplish. Nonetheless, it must be done.
My first word of advice to outside counsel is to approach this topic yourselves. Don’t wait for in-house counsel to raise it, and don’t let the first statement for the New Year be the means of communicating rate increases. One of my best (and often repeated) accounts of outside counsel addressing billing rates was also, selfishly, one that provided for no increase in billing rate. Our local counsel contacted me during a recent autumn to discuss how our company was handling the difficult market. He let me know he understood the difficulties we were facing in the industry and promised me no rate increase the following year.
This discussion can only be described as positive. First, local counsel was keeping up with our industry regionally and nationally. He was well informed on the economic challenges and pressures the construction industry faced in the down economy. In house counsel obviously value outside lawyers who keep up with their businesses and industries. Second, he was aware that, although we were profitable, we experienced layoffs in some regional offices and significantly fewer employees received bonuses or salary increases. If our employees weren’t getting increases, why should we pay our outside counsel more? An empathetic outside lawyer will always be welcome in my office. Third, the client was pleased all the way around. Holding a billing rate steady and empathizing with your client goes a long way with management. This was a great discussion to recount to our CFO and CEO. Fourth, and finally, the conversation was a great segue to broach the topic of alternative billing arrangements.
The reality, especially for a small or medium law department, is that every time the call is made to outside counsel, in house counsel considers the cost ramifications of the contact. I once told local counsel, “Everyone in our company is directed to reduce overhead in this economy, and for some, the Legal Department is overhead. I have to assure top value.” The partnership between in house and outside counsel is critical and counsel must keep in mind the overarching business realities when approaching any legal task, litigation or otherwise.
My final word of advice is for in house counsel. Don’t learn the hard way that you do “get what you pay for.” I learned this lesson the hard way, and if it can be avoided, avoid it. Take the time to communicate frankly with outside counsel. Their reputations are essential to their practices, and their priority is to provide you quality legal services. Surely they are worth the time and effort of the awkward conversation.