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It’s the ultimate way to reduce your law department expenses � don’t have one. At the 257 biggest private companies in America as ranked by Forbes, at least 42 don’t have an in-house general counsel, according to research by Legal Times affiliate Corporate Counsel. That doesn’t mean they’re bereft, however. A good number use an outside lawyer, either officially or unofficially, as their general counsel. This arrangement can take several forms. While some outside GCs bill by the hour, others are paid a set salary. Some have the authority to hire other outside counsel for specialized work; others leave that task to management. But the one quality common at all companies that have outsourced the GC function is a long and close relationship between client and lawyer. Diane Hendricks, co-owner of the American Builders & Contractors Supply Co. in Beloit, Wis., says that she and general counsel Karl Leo “talk on the phone all the time.” In addition to holding the GC post at ABC, Leo is a partner with Leo & Brooks in Huntsville, Ala. “He creates all of our paperwork,” Hendricks says. “He knows the ins and outs of everything. It just works great. There’s no need for him to be here five days a week.” However, the outside GC arrangement isn’t always the best move for a company’s bottom line. Rees Morrison, a legal department consultant at Hildebrandt International, says that businesses with a heavy legal workload will find that in-house lawyers actually save money. He adds that internal law departments often serve as a talent pool from which people move into other areas of the company. Karl Leo first worked for ABC in the mid-’80s, when he was an associate at Foster, Conner, Robson & Gumbinger in Greensboro, N.C. He hit it off with Diane Hendricks and her husband, Ken, the company’s co-owners. When Leo moved to Huntsville in 1987, he says, the ABC duo gave him a business card bearing the GC title and told him, “You’ll need this.” Describing his relationship with ABC as “symbiotic,” Leo says that he spends 80 percent of his time on the construction supply company and its affiliates. He works on transactions, financing agreements, labor and employment matters, policy and procedures, and litigation. Herbert Frerichs Jr. has also benefited from a long relationship with his client, Perdue Farms Inc. Frerichs first began working for the poultry giant in 1996 when he was an associate with the law firm now known as Piper Rudnick. Frerichs made partner at the firm in 1999, and the following year became GC at Perdue. Frerichs, who works out of Piper Rudnick’s Baltimore office, is paid a set salary by Perdue, which is based in Salisbury, Md. He declined to say what it is, but Perdue pays the firm directly. Other Piper Rudnick lawyers who work on Perdue matters bill by the hour. The company’s business takes up 75 percent to 90 percent of Frerichs’ time, he says; a few additional clients round out his workload. When Sierra Pacific Industries had to look for a new GC in 1986, the Anderson, Calif.-based lumber company hired David Dun’s firm to handle their legal work in the interim. It was a natural choice, since Dun, located in Eureka, Calif., previously served as Sierra Pacific’s in-house GC for about a year. Ultimately, the company just decided to rehire Dun � albeit as outside general counsel this time. Though he isn’t a Sierra Pacific officer, Dun says he still has plenty of access to senior executives. “I spend a lot of time talking and interacting with managers,” he explains. “They will tell me if the lawyers are taking too long, or spending too much money. It’s a lean organization.” All of these outside GC relationships are long-distance ones, and in each case the lawyer shoulders the logistical strain. Frerichs and Dun are both about a three-hour drive from their clients. Frerichs stays in a hotel two or three nights a week when he has to work at Perdue’s offices; Dun takes advantage of a company-owned apartment near Sierra Pacific’s headquarters. Leo flies to ABC’s offices in Wisconsin about 10 times a year. But their arrangements are worth the extra effort, these lawyers say. Dun explains that he’s able to live in a rural community and earn a steady income without struggling as a solo practitioner. Leo also cites the benefits of being able to run his own firm and live where he chooses. Besides, not all of the traveling is one-way. Leo notes that his clients come to see him on special occasions � such as his 40th birthday party six years ago. Helen Coster is an assistant editor at Corporate Counsel, an American Lawyer Media magazine, where this article first appeared in the February 2004 issue.

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