The Relationship Between In-House and Outside Counsel

THE RELATIONSHIP BETWEEN IN-HOUSE & OUTSIDE COUNSEL

Presented toSoutheastern Admiralty Law Institute

Annual Seminar June 20-21, 2008

Presented by Marc G. Marling

Vice President and General CounselCMA CGM (America) LLC

June 20-21, 2008 The Relationship Between In-House and Outside Counsel

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(at this time)

DO NOT READ THE ACCOMPANYING PAPER!

Pay attention to learn:How in-house counsel really pick lawyers

How in-house counsel want to receive communications

What makes in-house counsel call you first


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Not just Marc Marling!

Katharine Newman, Senior Counsel, ConocoPhillipsCounsel for a Fortune 500 "Big Box" retailer

Cynthia Stewart, General Counsel, Terranova (a commercial real estate company)General Counsel for a large restaurant chainDavid Akers, General Counsel, Grand Crowne Vacation Resorts

Kathleen Mahoney, SVP, General Counsel and Secretary, Nash Finch

Steven Jackman, VP and Corporate Counsel, Sanmina-SCI

Anthony Filiato, VP and General Counsel, Signal Administration


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In-house attorneys wear two hats

Understand the pressureLearn to work with in-house counsel as a partner

Realize that in-house counsel are not just lawyers (we make business decisions too)


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What is your biggest pet peeve when working

with outside counsel?

Cynthia StewartNot keeping to the billing agreements, or charging things like secretarial time. Also with some, it is hard to get them to respond to status requests.

Kathleen MahoneyThey often don’t listen, assuming “outside counsel knows best.”


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Pet Peeves (continued)

Katharine NewmanThey do not follow the instructions they are given – they think and do too much on their own. On the litigation side, it results in charges I cannot justify or pay for, which sours the relationship. On the transactional side, it means they are not aligned with my company’s business needs.They act too much as advocate – sometimes there is an element of showing off behind it, thinking that I will be impressed by what they would like to bring to the table. As a result, they do not evaluate a case fairly from both sides to get to an effective risk analysis. On the transactional side, it means they do not incorporate an appropriate understanding of my company’s business needs and wants, resulting in technically sound, but not always effective documents. In dispute resolution, it means they don’t put down the litigator’s sword, and a mediation is less effective. A more realistic view is essential to providing usable advice on all fronts.


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Selecting Outside Counsel

Pre-existing relationship ≠ work

Less likely to use a one-size fits all type firm

Firms continue to market as a one-stop shop – not a good idea.


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What criteria do you consider when engaging a new firm or when deciding to send work to a particular firm or lawyer?

Anthony Filiato:New firms are usually recommended by Members

They must have an established practice in the area of law in question with strong “word of mouth”

Counsel must understand our Members’ businesses

We utilize specific expertise and will assign cases outside of geographic region where warranted.


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Criteria continued . . .

Big Box Store Counsel:Reputation and expertise

To some extent geographic location

And always cost

Restaurant Chain Counsel:Primarily experience in the area of law

I must get the right feeling about the lawyer/firm

I utilize major firms on most important matters

But match cost (regional firms) on smaller matters


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Selecting outside counsel(continued)

Relationship with counsel as important as relationship with a particular business person

Can business units engage outside counsel directly or must it be “blessed” by the in-house legal department?


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Blessing the choice of counsel

Big Box Store CounselWe try to manage the outside counsel usage through the legal department.

Kathleen MahoneyBusiness units cannot engage outside counsel directly.

Cynthia StewartNeeds to be blessed by in-house counsel, and our Chairman (who is also a lawyer). He often uses attorney selection for political advantage in the area.


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Establishing the Relationship

Comprehensive Engagement Letters

require outside counsel to budget for specific matters

contain objectives and measurements so that in-house counsel can regularly “grade” performance

outside counsel should encourage such performance reviews to help solidify the relationship

clearly define the roles of the in-house counsel as well as the outside counsel.


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Fees and Billing

The concept of the billable hour is confusing to the budgeting process (read business people)

Can cause great anxiety

Steven JackmanThe fact that they don’t know how to provide cost effective service – the combination of rates and hours … The fact that they will try a $1 million case the same way as they would a $20 million case (e.g., turn over every stone…take every depo). Their use of associates (particularly 1st-2nd year)…the fact that they can’t understand that I would rather spend $400 on one hour of a “partner’s” time rather than on 1 hour and 20 minutes of an associate’s (who bills at $300 per hour) time.

Big Box Retailer Counselbeing billed for associates to get “up to speed” on issues. If associates are going to be used, they need to offer a discount or write off the work to make the amount comparable with having a few hours of an experienced attorney.


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Alternative Fee Arrangements

Steven JackmanI handled a couple of matters with a reduced hourly rate and a cap on fees PLUS a bonus depending on result.

Cynthia StewartWe use flat fee rates for eviction and collection matters. for some iffy collection, we use a firm that works on contingency.

Kathleen MahoneyI don’t as I am not a fan.

Restaurant Chain CounselI am always open to alternative arrangements but it seems like we always resort to hourly or fixed fee (mostly hourly).

Katharine NewmanWe have used contingency fee arrangements for claims that we raise, or if we participate in a class action.


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Understanding the Client

Outside counsel should expect in-house attorneys to provide the best possible explanation of the inner workings of the company – but they don’t always have time

Big complaint is lack of understanding of corporate culture

Find ways to be educated

Understand client’s business and its corporate culture

These are NOT the same thing


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Big Box Retailer CounselWe expect them to understand after we have explained things to them, but our culture isn’t readily apparent without having “lived” there. We spend some time explaining things to them.

Do you expect your outside counsel to understand your corporate culture and the inner

workings of your business?If so, how do you educate them?

Restaurant Chain CounselI feel like it is my job to educate them. The more I can educate them, the more effective they will be on behalf of the company.

Steven JackmanI expect them to spend time on their own understanding my business…I don’t have a lot of time to train them…


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Kathleen MahoneyI take the time to explain it as we go through decisions and frankly like to use key counsel so the education process isn’t repeated each time a new matter comes in the door.



Cynthia StewartWe let them know that we are aggressive once we are in litigation, and that we will most likely not compromise to settle, unless there is some unusual circumstance. For transactions, in-house counsel stays involved to provide input on corporate culture issues.

Katharine NewmanI tell them specifically what the contours of the iceberg are that they do not see above the water.


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Anthony Filiato:It is imperative that counsel understand the mutual concept

the business of the Member

the protocols established by the Managers of the Mutual, and how all the pieces fit together

The Managers put on regular conferences/ seminars for Members, adjusters, and counsel to explain policy and procedure




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Communications between Counsel

Building and maintaining trust

Keeping in-house counsel well informed at all times during representation

Inside counsel should never be placed in a position of not knowing the actions of outside counsel

The business will look in-house counsel for all current information on any matter whether handled internally or by outside counsel


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In-House Counsel strolling through life with feet propped up and the daily newspaper on their lap -

NOT

Time is a precious commodity to in-house counsel

Imagine if your “client” resided in the office next door

Short, sweet and to the point

Maximum lead time to obtain a response


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How do you like to receive communications from outside counsel (e.g., email, telephone, long form

memo) and on what frequency?

Steven Jackman:Email is generally best, unless there is something to discuss (where the phone is better).

Memos are only necessary when I request them (and are often a waste of money).

Cynthia Stewart:I prefer email. We have a lot of matters pending at any one time, so I would love to have weekly updates.

I think it is a waste of time and money to prepare status memos and send them via fax or mail – unless requested.


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Kathleen Mahoney:I prefer email as it is more immediate and typically shorter and more direct.

I appreciate communications alerting me to a development in a matter.

Receiving communications from outside counsel (continued)

Katharine Newman:Email is preferred, but, if they need immediate attention, they should of course call me on the telephone.I disfavor long form memos unless that was my specific instruction.

David Akers:Email is probably my preferred mode, but we generally only want communication that relates something new.Sometimes it seems the communication is for purposes of racking up time.


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What lead time do you need to respond to outside counsel for a discovery request or to obtain any typical client response (beyond your own decision making)?

And, how much notice do you like to receive when time permits?

Restaurant Chain CounselI find that counsel will sometimes send discovery two weeks or so after they have received it and then want the responses back in a matter of days so that they can then formalize the responses.I want to see the discovery as soon as possible and to have as long as possible to respond.I may have days at a time where I am traveling or otherwise in one meeting after another and cannot respond as quickly as counsel would hope.


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Lead time for responses and requests

(Continued)

Kathleen MahoneyTo obtain discovery information, I like to receive the request when it is served, and the draft response one to two weeks before it is due.We have, unfortunately, had the experience that the knowledgeable people no longer work for the company, so it takes longer to dig for answers.

Cynthia StewartIt is good to have about three weeks at least for discovery requests if documents need to be gthered or if we need to speak with several employees.

Steven JackmanI hate last minute requests.


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What is the single most memorable (positive) thing that an outside counsel did representing your

company (other than winning a case)?

Steven Jackmanlisten…understand my issues and what is important

learn the 90-10 rule (that sometimes, I just need them to spend 10 minutes on something and give me their answer with 90% confidence than spend 20 hours doing research and get me an answer with 95-99% confidence (no attorney is ever 100%)

tell me when they are NOT the appropriate choice to handle a matter

use the term “bill no charge” on an invoice

Cynthia StewartI always appreciate it when they answer something or offer to assist on a matter at no charge


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Single most memorable thing (continued)

Kathleen MahoneyThey dealt effectively with the business people, making them feel valued, respected and in the hands of a zealous advocate who was committed to solve their problem.

Katharine NewmanThey get me quality work efficiently, and in a timely manner, following instructions. In doing this, they take the time to think through an assignment from a 360° perspective. If they have questions, they ask them and we nail down a path forward together.


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Single most memorable thing (continued)

David AkersYou know, you could really handle this matter in-house by doing ____.Often times, especially with a big firm, they seem to see a cash cow if they are being hired by an in-house counsel because obviously they think the company must be loaded.

Restaurant Chain CounselPicking me up from the hotel and taking me to the emergency room when my back went out. I have engaged this attorney on numerous matters because he genuinely cares for me and for my company.

Anthony FiliatoGraciously helping to update the knowledge base of our claims department through giving all day lectures on specific rather than esoteric areas of their expertise without charging a fee.

Their rationale being the key point of interest: “if your people understand the latest developments on this issue, then it makes all our jobs easier.”


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How would you describe your legal department’s relationship with outside counsel (generally)?

Anthony FiliatoWe believe in long-term relationships and view these relationships with our vendors as partnerships.

Restaurant Chain CounselI choose counsel with whom I feel comfortable immediately. As a result, we build a friendship and a camaraderie. If I am in the city of outside counsel on other business, I might call them to meet for a drink or dinner.

Katharine NewmanIt has to be a cooperative relationship, but, unfortunately, my company does have very strick guidelines. I don’t always have power to allow deviations. I check in to make sure everything is working from the lawyers’ end.

Cynthia StewartFor the most part, we have good outside counsel that work well with us. We currently have one firm that has not been responsive to our complaints about churning and padding their bills, and once our matter concludes, we will not use them anymore.


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CONCLUSION . . .What is the one thing you wish outside counsel

would understand when working with you and your company?

Steven JackmanThat my mission is to provide excellent COST EFFECTIVE legal services … I don’t have time to focus on esoteric issues which might (if the sun, moon, and stars all align in a certain way on the 3rd Tuesday of the month) cause damage. I have to quickly and concisely identify the key risks, and take steps to minimize them.

Cynthia StewartThat we want to have a good result quickly and with efficiency.

Kathleen MahoneyThat responsiveness is important and that when a mistake is made (and we’re human – there will be) step up, take ownership and develop a plan for a fix in the matter and a plan to ensure it will not happen in the future.


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Katharine NewmanThey need to follow my instructions – they aren’t suggestions.

Big Box Retailer CounselWe aren’t the same as any other client off the street. Our culture and corporate personality help inform decisions about how we interact with our customers, our shareholders, our communities, etc. They also need to have very good communication skills because at the end of the day, it needs to be a process that encapsulates all aspects and needs of the business as a total, not just the ‘right’ legal answer.

David AkersThey need to remember that they were hired due to a special need and expertise. If they are fair and direct in their communication as well as ethical in billing, we will, in all likelihood, use them again in the future.


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Restaurant Chain CounselOur corporate culture and my specific objectives or strategy in hiring counsel (i.e., knowing that winning is not always possible but there may be other goals to be accomplished). I want counsel to know and respect my integrity and ideas and those of the company.

Anthony FiliatoSometimes, decisions are impacted by non-legal factors and counsel should not assume that we found their advice any less valuable in the decision-making process.

Documents

The Relationship Between In-House and Outside Counsel