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It’s called the Legal Model, and it’s become a concoction so tempting that lawyers from 160 companies have made the pilgrimage to Wilmington, Del., to test its cost-cutting powers. Chemical-producing giant DuPont brewed the Model as a way to shrink its legal budget, and Thomas Sager, DuPont’s chief litigation counsel, sounds almost like a medicine-show pitchman as he extolls the virtues of the Model. It has cured polluted communications, poor-quality work, and most important, has saved DuPont $8.8 million in legal bills last year alone. “There’s a groundswell building and over time, you’re going to see a shakeout,” Sager says. “Until we impose more discipline and rigor on these firms, they’re going to continue to charge exorbitant rates to corporate counsel.” The magic behind the Model is simple: Send a portion of your legal work to someone other than attorneys at law firms. In DuPont’s case, lawyers from a temporary agency handled relatively simple tasks like initial witness interviews, exhibit collection, and document review. Any formula that slices legal budgets is likely to seduce in-house counsel � particularly when the higher-ups at a company are looking to trim the bottom line. And outsourcing � diverting legal work to companies other than law firms � is exploding in popularity among corporate counsel. Sager says he’d like to see other companies adopt the model to put pressure on firms to change their billing policies. The trend is twofold, with companies sending work to agencies in the United States that do discovery, document review, and due diligence and pulling in foreign outsourcing companies � particularly in India � to perform tasks like legal transcription and basic patent research. For law firms, there’s an obvious downside: losing billable hours and training opportunities for young lawyers on less-complicated legal tasks like document review. And all is not rosy for in-house counsel. They give up some control over work assigned to outsourcing agencies, and if an agency is located overseas, confidentiality, security, and cultural issues may arise. Take, for instance, the case of the UCSF Medical Center’s recent scare over patient medical records. A woman in Pakistan hired to transcribe patient records threatened to reveal patient information if she were not paid money a subcontractor owed her. “This is something that’s still very much in its formative stages,” says Sanjay Prasad, chief patent counsel at the Oracle Corp. The risks, however, aren’t posing much of an obstacle to outsourcing’s growth. DuPont isn’t the only company to see millions of dollars in savings. Cisco Systems Inc. estimates it has saved millions of dollars through outsourcing discovery work. And Sun Microsystems Inc. believes it can save up to $1.5 million by doling out patent work to lawyers who don’t punch the clock at a law firm. “It’s catching on,” Sager says. “A lot of people don’t like to talk about it.” He adds that law firm partners “are concerned about the quality issues, but the other issue is that law firms don’t want to have to admit they have to deal with this.” LOCAL LEGAL SERVICES One of the companies aggressively looking to expand its use of outsourcing is Redwood City, Calif.’s Oracle. It’s not clear, however, how quickly the company will export work to outsourcing agencies. Daniel Cooperman, Oracle’s general counsel, says he’d like to see more of the company’s legal work � especially on patents � done by lawyers located closer to facilities in places like Bangalore, India. For several years, India has been a hot spot for companies looking to find cheaper labor for tasks from fielding customer service calls to designing software. So why not take it one step further, asks Cooperman, and move some basic legal services there, too? Getting an outsourcing agency to do work in a foreign market is one of the chief ways the practice saves money, Cooperman says. “I would rather grow in India,” he says. Prasad, the Oracle patent counsel, began researching this summer whether to use lawyers in India to work on patent applications for technology the company develops in the United States or another country. He says he’s recommending to move some work on a trial basis to India. But he’s not sure if they will be able to handle the work or do it as well as the firms Oracle currently employs. “It would require a significant amount of training” of lawyers, Prasad says. “It’s not clear if you can get work done at the same quality for significantly less money.” Prasad says he favors a conservative approach to using outsourcing overseas. Protecting trade secrets is one issue, he says. He is wary of moving sensitive intellectual property from one part of the world to another, which could expose the company to additional breaches in security. “It’s something you have to watch carefully,” Prasad says. A few law firms have tried to capitalize on the trend toward internationalizing basic legal services. D.C.’s Howrey Simon Arnold & White, for example, is considering ways to take advantage of the increasing movement of legal work from firms to overseas operations, particularly those in India. And London’s Allen & Overy decided in September to open a document production facility in India. OUTSIDE COUNSEL SKEPTICAL But many firms see outsourcing as dangerous � and not just to their bottom line. “I will officially be a skeptic,” says Keith Wetmore, chairman of Morrison & Foerster. He says companies and their outside legal teams should develop a rapport to avoid misunderstandings and to keep quality high. Moving basic work to low-paid temp workers in a far-off outpost seems to invite trouble, he says. “Potentially, what kind of caliber of person do you get [who's] willing to do that kind of work for their whole career?” Wetmore asks. “It has a nasty colonial taste to it.” Paul DeMuro, a Latham & Watkins partner who regularly represents health care facilities, says poor-quality work by an outsourcing agency could cost companies in litigation. They will take the hit for botched work. “The company that sent the work there . . . is going to be looked to as responsible by the plaintiffs bar,” DeMuro says. A few firms, however, are starting to accept the idea. Reed Smith partner James Wood balked at first when a major client ordered him to use research prepared by Los Angeles-based legal research company LRN, the Legal Knowledge Co., in a major products liability case. He was leery of having to base parts of his case on a stranger’s research. He and his partners also worried about losing billable hours for younger associates if the firm wasn’t permitted to perform certain research projects. “My initial reaction was skepticism,” Wood says. “I thought, ‘Nobody could do research better than we can,’ and the first reaction among many of my partners was, ‘Hey, that’s taking work away from us.’ “ Grudgingly, he sat down with LRN and the client, Cardinal Health Inc., and discussed how the system would work. “In a heartbeat,” he says, “I was persuaded.” Wood says the research he got back was solid, and it gave his associates a place to start when preparing trial documents tailored for the case. He says preparing case documents was the most valuable experience for his associates, not performing the raw research. “Associates coming out of law school know how to research,” Wood says. “The real training is taking what they’ve learned in the books and turning it into a persuasive piece of writing, and LRN couldn’t replace that.” Winthrop Rockwell, a partner at Minneapolis’ Faegre & Benson, which is one of DuPont’s 40 preferred provider law firms, says that the money DuPont saves in using outsourcing companies means less revenue for firms like his. But Rockwell says a willingness to work with a client to shrink the cost of litigation helps his relationship with the client, which translates into more billables down the line. Gordon Davidson, Fenwick & West’s chairman, says his firm’s budgets don’t rely on document work on big cases to produce revenue. Fenwick is primary outside counsel for Cisco Systems, which has begun using an outsourcing company for some discovery work. Davidson says the money saved by clients doesn’t translate into an equal amount of lost billables. “Frankly, when you use your own associates, you have to discount,” he notes. WORKING FOR DUPONT At DuPont, where the Legal Model has been in place for 11 years, a group of nine outside providers is used for a variety of services. The companies range from LRN to Kelly Law Registry, which provides a team of temp lawyers. Those two companies are part of the growing niche of nonfirm legal providers. John Mullenholz of D.C.-based Staffwise says his company employs a team of lawyers to do document production, review, and coding. The attorneys, he says, are generally part-timers who have decided they want flexible schedules to raise families or pursue other careers. Axiom Legal Solutions Inc., a New York-based network of free-lance lawyers, started three years ago with “a handful of big-firm associates,” according to Mark Harris, the company’s chief executive officer. Business has increased by 300 percent since then, he says, and the company has 50 lawyers on assignment. Outsourcing, Harris says, “is becoming more mainstream.” Relying on outsourcing has allowed DuPont’s Sager to cut his lawyer head count from 175 to 127. Sager has been systematically shuffling work to what he calls “the lowest, most appropriate level.” The biggest concern for DuPont’s in-house team was convincing the outside law firms that quality wouldn’t suffer with the use of outsourcing companies, Sager says. “The biggest paradigm shift we’ve had to overcome is the notion of quality, that quality suffers when you use temps,” Sager says. “But, in fact, the quality improves.” Sager says the temporary agency he works with uses many of the same lawyers repeatedly, so they have come to know and understand DuPont’s methods. Plus, attitude seems to play a role in quality, he says. Lawyers working as temporary employees are usually doing the document work by choice, whereas law firm associates are not, he says. “This is the lowest form of work that a new associate or young partner would choose to do,” he says. “This is the furthest thing, in their mind, as to what practicing law is.” John Croll, Sun’s general counsel, is sending one of his lawyers to study DuPont’s legal operations. His depart-ment is looking to trim $1.5 million, and he’s hoping the Legal Model will be the tonic he needs to make that happen. “When you’re in a high-tech company, as I am, there is a client expectation that over time, things become more efficient and cost-effective,” Croll says. “This is something that legal departments try to do all the time, but in lean times, you have to do it.” Renee Deger is a senior writer at The Recorder, the American Lawyer Media daily newspaper in San Francisco, where this article first appeared.

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