Understanding the obligations outlined in Outside Counsel Guidelines (OCGs) is essential for law firms seeking to uphold their client commitments and streamline their operations. These guidelines encompass a range of critical aspects in the law firm-client relationship, spanning billing practices, conflicts of interest, confidentiality, data security, records retention, and privilege. OCGs are contracts, necessitating a strategic approach to systematically review and tag requirements, transforming dense prose into reportable information.
To both properly serve their clients and effectively run their business, the firm must ensure that its OCGs are not just understood but reported within the firm and that those reports are directed to the appropriate stakeholder. While the relationship partner will want to know about provisions relating to communication, performance indicators, and conflicts, the IT Security group needs to get reports about reporting deadlines for data breach, and the Information Governance and Records department needs to know obligations relating to records retention. All of this stakeholder reporting can be accomplished by ingesting OCGs into law firm-specific software and reviewing and tagging the obligations contained in those OCGs. Turning the dense prose in your firm’s OCGs into individual summary reports allows each group to access the information they need to conduct their day-to-day business without reading through client contracts constantly.
Most OCGs will have detailed billing, payment, and expense terms. These can include requirements that the firm use a specific e-billing system, restrictions on the type of timekeepers who are allowed to work on a project (e.g., not allowing summer or first-year associates to bill on a project), restrictions on block billing, and provisions regarding rate increases and/or rate freezes. Understanding these billing restrictions and requirements is imperative to ensuring that firms are billing their clients fairly and not leaving money on the table. If the billing restrictions in OCGs are not tagged and are not in a system that talks to the invoice and timekeeping system, no mechanism prevents attorneys from making time entries that violate the OCGs; firms could be invoicing clients for charges that they never agreed to pay. Additionally, suppose a relationship partner feels that an invoice is too high for a particular project or client and wants to reduce the overall amount. In that case, the firm must be certain that everything on the invoice is allowed by the OCGs. Otherwise, a partner could wind up cutting hours from an invoice that could have been charged to the client and leaving hours restricted by the OCGs. When the client comes back and disputes the part of the invoice for which they were improperly billed, the total amount the client is required to pay will now drop below the discounted amount the partner billed.
There are other key loss prevention terms in the OCG that also need to be well understood and reported. These include override provisions, ethical conflicts of interest, and business conflicts of interest. Override provisions state that if the terms of the OCG conflict with the terms of an Engagement Letter (or another document regarding a specific matter), the terms of the OCG prevail. It is crucial for firms to flag any clients whose OCGs contain an override provision so that they do not rely on the terms in another document, even if executed by the client, for understanding the terms of engagement.
Conflicts of interest are also one of the most important loss prevention issues a firm can face. Firms need to understand obligations regarding ethical conflicts of interest and business conflicts. In addition to restricting ethical conflicts of interest, OCGs can also prohibit business conflicts (sometimes called reputational conflicts) that prevent firms from doing business with client’s competitors. Understanding these obligations will allow the firm to manage them by obtaining conflicts waivers. The OCG should cover whether the client has granted an advance or blanket waiver or whether matter-specific waivers are required. The OCG will also cover who is considered the client for conflicts purposes (e.g., just the named entity, the client’s entire corporate family, a select number of entities, etc.), which will also impact which other possible clients could raise conflict issues and circumstances in which the firm will need to obtain conflicts waivers.
OCGs are contracts, and law firms must take the time to understand the obligations and restrictions in their OCGs to avoid being in breach of contract. The easiest way for a firm to manage these obligations is to take a deliberate, managed approach to its OCGs. Firms should systematically review and tag their OCGs, turning contracts into reportable information, granting different attorneys and groups within the firm easy access to information they need to manage their business and client relationships.
Author:
Beth Anderson, Director, Contract Solutions at Epiq, has more than 15 years of experience in contract review, abstraction and analysis. Beth has managed contract reviews in connection with M&A due diligence, financing transactions, and contract management system implementation projects. Beth works with clients to understand their specific business needs and builds targeted processes to provide useful and meaningful data from their universe of contracts.
