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It wasn’t hard for Charles James to target litigation expenses for trimming when he became GC at ChevronTexaco Corp. a year ago. What wasn’t so easy was figuring out where to make the cuts. So last year James initiated a wide-ranging review of the oil giant’s litigation caseload. The review was due to be completed in December, after press time. But the goal was clear: bring more litigation work in-house. Chevron’s immense size � it posted revenues of $92 billion in 2002 � means that it is constantly faced with a range of disputes over everything from taxes to royalties, severance pay, and complex environmental matters. Litigation consumes the biggest chunk of the company’s annual spending on outside counsel. Chevron, based in San Ramon, California, shells out more than $60 million a year to law firms to handle the thousands of active matters it has at any one time. “For a company like Chevron, we have to be very good at litigation management because it’s in the nature of our business to have disputes,” James says. However, litigation management “is not a skill that’s taught in law school.” James took over Chevron’s 187-attorney law department last winter, after a stint as antitrust chief at the U.S. Department of Justice. He started retooling Chevron’s litigation efforts by consolidating its procedures for dealing with outside counsel. Previously, each of the company’s four divisions had its own guidelines. Then last August, James charged a committee of eight in-house lawyers with drafting a better plan for handling litigation from start to finish. “I’m not suggesting [our process] is broken,” he says, “but we want a uniform best practice on…how to get alignment between the businesspeople and the lawyers who handle it.” A month later, James invited a panel of eight outside litigators to talk about how the company could improve its litigation practices. “The people who have litigated for us, or are litigating for us on a regular basis, will tell us what we’re doing right or wrong,” the GC explains. Jones Day partner Robert Mittelstaedt, who has worked with Chevron since 1975 and spoke on the panel, says he told the company it could benefit by more clearly identifying the roles of in-house and outside lawyers. “The most interesting thing was the effort to work out who does what and who adds value,” Mittelstaedt says. “The opportunity here is to really isolate and identify the tasks that the outside lawyer can do more efficiently.” Ernest Getto, a Latham & Watkins partner who also participated in the panel, says he encouraged Chevron’s in-house lawyers to explain how a particular matter his firm is handling affects other parts of the company. “When you’re dealing with a large company with far-flung operations and a substantial legal department,” Getto says, “the more standardization or best practices from them that you can get, the better off communications are.” How is helping a client to ultimately pay less in the best interest of outside counsel? Mittelstaedt says that having in-house lawyers pick up more mundane matters allows firms like his to focus on premium work. Chevron’s in-house litigation review committee was scheduled to unveil its plan by the new year, according to senior counsel Mark Cervenka. It will include a new in-house job description of litigation management specialist. The plan will also detail what kind of Chevron employees and lawyers should comprise a litigation team; how tasks should be divided; and how team members should communicate. The plan will also outline what Chevron considers a “win” for various kinds of litigation. But the company’s litigation review won’t end with the committee’s plan, Cervenka says. The first quarter of 2004 will be devoted to implementing its recommendations. “We’re going to ensure that people in-house who manage litigation are trained and qualified,” Cervenka says. “That’s where the paradigm shift is going to come from.”

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