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Alternative fee arrangements and an overall curb on spending are things corporate law departments have been talking about implementing for awhile now, but according to an survey of law department spending, it’s all talk. The Altman Weil and LexisNexis Martindale-Hubbell survey found an overall increase in law department spending of 7.9 percent to an average spending of $914,000 per lawyer for fiscal year 2005. The two main drivers for that growth, Altman Weil consultant James Wilber said, were an increase in outside legal expenses and an increase in internal hiring by law departments. Outside legal costs rose by 5.5 percent to an average of about $602,000 per lawyer. The survey also found a 19 percent increase in internal hiring with lawyers per billion of revenue rising from 2.93 lawyers per billion in revenue to 3.49 lawyers per billion in revenue. There are some factors out of the control of general counsel when it comes to cost that may have had an impact in 2005, according to Dennis L. Schoff, senior vice president and general counsel of Lincoln Financial Group and president of the Delaware Valley Association of Corporate Counsel. He said he was a bit surprised by the increase in overall expenditures. “I would think people would be able to control it more than that,” he said. There are a few factors, however, that are important to look at when reviewing the survey results, he said. The beginning of 2005 included the tail end of companies’ efforts to comply with Sarbanes-Oxley regulations, Schoff said. For companies in heavily regulated industries, that added up to a lot of extra outside counsel expenses, he said. The survey results found that industries such as computer and electrical manufacturing or chemical manufacturing had the highest outside counsel expenses for 2005 while the insurance industry had the lowest. In terms of the size of a law department, Schoff said that many of the increases are due to an increase in size of the company as a whole. His company is in the midst of completing a merger and will now have a law department of 54 attorneys, he said.

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