Everyone loves a bargain—lawyers included. And despite the fact that many legal departments are accustomed to regularly receiving expensive bills from their outside counsel, some in-house lawyers are finding that it’s not too hard to find good deals on legal services.
Ninety-four percent of companies that participated in HBR Consulting’s 2011 HBR Law Department Survey said their law departments have taken measures to reduce their outside counsel spending. Nearly half of them have attempted to do so by increasing their use of regional or boutique law firms. Almost one-tenth of the surveyed companies said working with regional firms yielded the most cost savings for their law departments, compared with other expense-reducing measures such as alternative fee arrangements and retaining more work in-house.
Working with regional law firms can be rewarding for various reasons. From a cost perspective, regional law firms typically are much less expensive than national or international law firms, with some billing nearly half of what their larger counterparts charge per hour.
“There’s definitely a cost savings to be realized if you make use of these firms in an efficient way, and we’ve done that,” says Alex Liberman, general counsel of Medline Industries, an Illinois-based international health care supplies manufacturer and distributor.
Additionally, Liberman and other in-house lawyers say the regional firms they work with offer local expertise and responsive attorneys who prioritize personal service.
Jonathan Bellis, chair of law department consulting at HBR Consulting, says regional firms are generally leaner, less bureaucratic and faster on their feet than global firms. “The partner is more likely to be hands-on than in the national firms, where they’ll be supervising associates and paralegals,” he adds.
Moreover, many regional firms were founded by former big law firm lawyers. “The point I always try to make is that a regional firm doesn’t necessarily mean it’s a qualitative difference in legal service,” says Rich Seleznov, managing director at Huron Legal.
InsideCounsel spoke with consultants, in-house counsel and regional firm lawyers about how companies can effectively source, hire and work with regional counsel. Following is a basic, four-step process that can help the in-house bar forge and maintain strong relationships with regional firms.
1: Find the right firms
In-house teams that want to start working with regional firms or expand their use of such firms should begin by thoroughly analyzing their legal departments’ portfolios of work.
“The starting place is a good understanding of your own facts,” Bellis says. “What are we actually doing over a multiyear period in terms of categories of work? Who are we using?”
Law departments also should map out where the majority of their matters take place. Mike Reilly, director of the Labor and Employment and Employee Benefits Practice Group at Lane Powell, a Pacific Northwest regional law firm, says one of his firm’s Fortune 250 clients first approached the firm because it was experiencing a high volume of cases in Washington, Oregon and Alaska. “They needed someone who has a regional perspective on how to manage the cases, how to develop relationships, and how to develop legal positions that the courts will accept in the variety of jurisdictions,” he says.
Finally, Seleznov recommends that legal departments also assess the risk profiles of the various types of work they handle. “If you have work that’s low-risk and not strategically advantageous, that might be a great way to test out some regional law firms,” he notes.
After in-house teams assess their array of work, they must find and contact the appropriate regional firms. One way of doing this is through a request for proposal (RFP).
“An RFP process can be done in various levels of effort and rigor, from a very informal process to an elaborate, complicated RFP,” says Bellis, who recommends that in-house counsel find the middle ground. “It should be more than a superficial call, but it doesn’t have to be a huge exercise.”
Seleznov suggests companies request information about a regional firm’s specialties and attorneys. “If you craft your request carefully, you can get some substantive information about the firm to see if it is worth your while to get to know it better,” he says.
One of Bellis’ clients made a major change in its outside counsel after assessing its portfolio and completing an RFP. “A West Coast client of mine did a major restructuring in-house and then turned its attention to outside counsel. Basically, 80 percent to 85 percent of its work was going to 12 firms—every one of the firms was a West Coast firm, and the one that did the largest share of the work was a well-known national L.A. firm,” he says. “This client did an RFP and ended up with a Midwest firm to do the vast majority of its work.”
However, many in-house counsel and regional firm partners say RFPs are the least efficient way to source regional firms. Mitchell Roth, president of the Chicago-based regional firm Much Shelist and a member of the firm’s management committee, says it is typically only banks that require RFPs. “When you get into Fortune 100, 500 or 1000 companies, it’s more word-of-mouth than it is RFP,” he says.
Consultants say word-of-mouth references can be the most valuable way to find regional firms. They recommend that in-house counsel talk with lawyers from companies in the same industry or in the same geographic area to find out what regional firms they’ve used and what their experiences have been. That strategy has proved to be successful for Liberman. “We usually work with firms that are recommended by somebody we trust,” he says.
Aside from word-of-mouth references, in-house lawyers can source regional law firms at regional conferences and seminars by networking with outside counsel in attendance. And some regional firm lawyers say clients have approached them after completing an online search of firms that have handled certain types of cases in their regions.
Denis Noah, managing partner of Henderson Franklin, a regional firm in southwest Florida, says many clients contact his firm after reading its employment law blog. His experience isn’t surprising, as the 2012 In-House Counsel New Media Engagement Survey—which communications firm Greentarget, InsideCounsel and the legal consulting firm Zeughauser Group conducted in late 2011—found that in-house lawyers are increasingly turning to blogs to find new outside counsel.
Seventy-six percent of survey respondents said they attribute some level of importance to a lawyer’s blog when deciding whether to retain a firm. Fifty-five percent of respondents said a law firm’s blog can influence hiring decisions, which is an increase from the 50 percent of respondents who agreed with the statement in 2010.
2: Give them appropriate work
Consultants say assigning the right work to regional counsel is essential, so in-house lawyers need to know what types of work they shouldn’t give to their regional counsel.
“You wouldn’t go to a regional firm for bet-the-company cases, hugely sensitive government investigations, megadeals or enormous product-liability litigation,” says Bellis, who suggests companies use big law firms for such work because of the politics, perception and exposure associated with such matters. “But everything else is fair game.”
Seleznov agrees. “If you have something that’s a very large, complex type of matter where you’re going to need to scale up with a lot of people very quickly, that’s not going to be suitable for a small regional firm that doesn’t have that spare capacity,” he says.
Regional firms are best suited to handle local matters, such as environmental work and labor and employment litigation. Additionally, companies can assign repetitive or pattern types of matters, such as leasing, real estate, contract and transactional work, to regional firms.
Roth says he frequently handles transactional work that has a local component, and that his firm facilitates its clients by helping them navigate the Chicago area and its politics. “It’s a pretty big city, but it’s a small town,” he says. “A lot of business gets done by getting in front of the right people. It’s nice to have local counsel who know their way around the court system, as well as know the judges in the system.”
Both Noah and Reilly say their firms’ lawyers know the local judges on a first-name basis. “Our prior partners are on the federal bench,” Reilly says. “National [firms] typically would not have the deep roots of a relationship that can help. If the judge sees a familiar face and trusts your legal briefing because he’s seen it day in, day out, it helps. If you don’t have a prior relationship, the judge may be more skeptical.”
Regional counsel also say they are more able to relate to local businesses and personalities than large international firms. “If a Fortune 500 company is buying a regional family business for, let’s say, $100 million, the mega international firm may not know how best to deal with the seller, who is selling the biggest asset of his life,” Roth says. “We’re in the buy-and-sell side every day of that deal. I am better versed at helping the Fortune 500 navigate that second- or third-generation business that’s being sold. I know what that guy’s thinking. I’m with him every day. I am that guy.”
3: Create partnerships
Communication is the key to a successful relationship with any outside counsel. Consultants say in-house teams should prioritize establishing a face-to-face relationship with the lawyers at their regional firms. “The personal connection has to be made—no question about it,” says Bellis, who suggests that both sides also schedule periodic check-ins and visits.
Many regional counsel say they take pride in their communication skills.
“If you call my office, I’ll answer the phone. You’re not going to go through the switchboard,” Noah says. “We have very personal relationships with our clients.”
Roth says his firm’s lawyers demonstrate their communication skills right off the bat. “If I get an opportunity to work for XYZ Co., and it’s a Fortune 500, I have to be faster and more responsive, equally as talented, and I’ve got to put my A Team on [matters] every single time. They’re going to get top service because the risk of not getting a phone call again is much greater [than it is for a big law firm].”
Once a company forms a partnership with a regional firm, it’s important for in-house counsel to communicate the expectations of the relationship and hold firms to those expectations.
“The most important thing for a client is to have operating rules, and you very clearly say, ‘This is our philosophy, these are our expectations on communication.’ State what you want upfront,” Reilly says. He adds that good regional firms will ask in-house teams who the appropriate people are to contact, what the deadlines are and how the work should be completed.
Overall, Reilly says in-house lawyers he has worked with tend to fall into two camps. “Some companies will say, ‘I want everything done in-house, and I don’t want you to incur anything until you ask.’ That’s perfect; just tell us what you want. Then you’ve got others who say, ‘Look, I’m so buried, I’m going to trust that you’ll handle it, but I need you to make sure you’re keeping me apprised of significant developments and ask for my approval of specific steps.’”
Liberman says his own policy is to stay very engaged with regional counsel, especially when he is working with a firm for the first time. “You want them to understand you’re involved, you want to be involved, you care about costs and you care about the outcome,” he says. “That’s how I approach every relationship with outside counsel, whether it’s a regional firm or a national firm.”
Many regional firm lawyers and inside counsel say communication is most effective when one contact from each side is the designated point person. “The more people I get involved with my corporate client, the stickier the relationship,” Roth says.
Marcy Hingst, associate general counsel at Bank of America (BofA), agrees that the point-person method works well. “At BofA, we pair our primary firm and regional/local counsel with a specific in-house counsel as a primary point of contact,” she says. This one-to-one relationship is efficient, avoids duplication in efforts and keeps cost down because there are clear instructions regarding work assignments” (see Q&A with Hingst).
Consultants say that though a lot of work is completed over the phone or via email, videoconferencing and matter management software also have improved communications between in-house counsel and regional firms.
“One of the benefits of all the technology advances in recent years is that communication and coordination has become so simplified, not only with email and the way we can leverage the Internet for shared repositories and collaboration workspaces,” Seleznov says. “It doesn’t matter if your law firm is across the street or five states away because you can leverage all these tools.”
Both the regional firm and the in-house client should make efforts to maintain communications if a long-term relationship is on the horizon. “It’s really important that, even when you don’t have an ongoing matter, we’re giving the corporate counsel updates on our firm,” Noah says. “It would be great if the corporate counsel could do the same with their company. If those lines of communication stay open and the client is in our mind and we’re in the client’s mind, good things can happen.”
4: Evaluate the relationship
In-house counsel should periodically thoroughly assess the quality of work their regional firms deliver, as well as the relationship itself.
“You need to really step back and look at how things are going,” Bellis says. “That should happen annually with some degree of rigor, and then there should be a quarterly check-in, even if it’s a call. That should be a two-way street.”
Seleznov says there are several standard ways of examining how a regional firm is delivering legal services. Companies can evaluate a firm’s rates by lawyers’ titles, blended rates and by type of work that’s being done. Seleznov says Huron Legal also helps in-house counsel evaluate their regional firms by using metrics that calculate efficiency. “It seeks to measure the level of fragmentation of how the work is being delivered,” he says. “We believe that fewer people working on a matter is the most productive and efficient way to deliver services.”
Liberman says his legal team evaluates its regional firms on an ongoing basis, all while keeping in mind the main goal of the relationships. “What we’re looking for are lawyers and firms that are every bit as good as the larger firms,” he says. “You’re trying to find situations where you get a lower cost and more attention.”
Q&A: Marcy Hingst, associate general counsel, Bank of America
Q: Describe Bank of America’s (BofA’s) relationships with regional law firms.
A:In 2011, BofA engaged in a convergence effort to reduce the number of firms retained to handle its new defensive litigation matters. We retain regional or local law firms in two capacities: first, as primary counsel to represent BofA in its new defensive litigation matters nationwide, and second, we use regional counsel as local counsel. As part of our approved local counsel, we also retain a number of regional minority- and women-owned firms that represent BofA.
By way of example, Liebler, Gonzalez & Portuondo is a regional firm based in Florida that represents BofA in a number of mortgage and consumer-related litigation matters. Other examples include regional firms in Alabama, California, New York and Oklahoma. Each of these firms represents BofA on various types of litigation matters within their region.
Q: What are some traits regional firms have that global firms may not have?
A: As you would expect, regional firms have the benefit of having specific knowledge of the jurisdiction and venue, potential prior experience with opposing counsel and knowledge of specific local rules. Regional firms also are competitive in pricing and are willing to negotiate alternative fee arrangements or fixed fees.
Q: How did BofA select and hire regional firms?
A: Decisions concerning the use of regional counsel were made based upon quantitative and qualitative criteria, including the firm’s prior experience, outcomes achieved and cost-effectiveness. Specifically, we considered historical data such as the firms’ rates, geographical location, resolution cycle times and total historical cost per case.
In addition, we considered whether the firm was willing to use fixed fees or whether their hourly rates were competitive for the region. If the firm was being retained as local counsel, we considered their prior experience and the work performed for the BofA. We also considered recommendations from primary counsel or in-house counsel.
As part of the selection process, we did engage in a robust request for information. Firms were chosen based upon how well they fit with our short- and long-term objectives for providing high-quality legal services in a cost-effective manner. We explored each firm’s willingness to work on flat fees and looked for opportunities for consolidating high volumes of work with fewer firms to find win-win solutions for the bank and for our partnering firms.
Q: Are regional firms amenable to alternative fee arrangements?
A: Yes, we are finding that all of our law firms are recognizing the need to move to value-based billing and away from hourly billing arrangements. Fixed fee arrangements achieve predictability for both the firm and BofA. Firms manage and staff their matters in a smart and cost-effective manner. The matters on fixed fee arrangements more frequently are resolved within or under budget. Currently, more than 80 percent of all BofA litigation matters are handled on a fixed fee basis.
Q: How can corporate legal departments communicate effectively with a regional firm?
A: Communication is an essential component to a successful partnership with outside counsel. Since we made an effort to reduce the total number of law firms we use in litigation, our communication levels and efficiencies have increased because we are using the same firms for similar matters, and as such, there is past experience and some level of repetition in work. If the regional firm performed well, was efficient and cost-effective, we will continue to use the firm for future litigation matters.