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NEW YORK � Just two years after some 200 law firms endured the ultimate test of strength and patience for a shot at one of the 140 coveted preferred provider positions at General Electric Co., the largest legal department in the world announced yet another outside counsel shake-up Thursday. The Fairfield, Conn.-based company’s in-house lawyers slashed 44 firms from its previous roster and added a dozen new names to this slimmed-down list. As a result, GE’s club of outside firms is even more exclusive, with just 108 firms making the final cut for what the department calls “Gen Two.” Who made the list? GE lawyers dropped 15 litigation outfits following nine months of intense in-house deliberation, and booted 13 other firms specializing in regional matters from the list. New firms added to GE’s roster include London-based Clifford Chance and Toronto’s McCarthy Tetrault. And domestically, firms such as the New York office of London-based Allen & Overy were rewarded with a significant amount of new work after a successful run in Gen One. But two Am Law 100 firms, Paul, Hastings, Janofsky & Walker and Shearman & Sterling, are coming out of the Gen Two process with less work. GE General Counsel Brackett Denniston first debuted the program in 2004 with the aim of hiring outside firms more systematically. But last June, with the original two-year contracts due to expire in six months, managing counsel Janine Dascenzo simplified the original Gen One approach with input from GE alumnus Suzanne Hawkins of the Huron Consulting Group. They reduced Gen One’s 20-page request for proposal to four online-only pages, and dropped the infamous (and much detested) online auctions, which had firms openly bidding against each other for some GE work. Dascenzo and her team then sent the RFPs to about 15 percent fewer firms, cutting out those that in-house lawyers gave the lowest ratings. At the same time, GE upped the firms’ required time commitment under Gen Two to four years. “The process was a little bit simpler, and that allowed us to offer more focused solutions,” says Allen & Overy partner Eric Shube. His firm was originally named a preferred provider for mergers and acquisitions in Gen One. But Dascenzo said that the firm proved itself in just two years, and so GE added Allen & Overy to its aviation and energy project finance rosters this time around, too. Other returning firms include Sidley Austin (former GC Benjamin Heineman Jr.’s old firm) and Weil, Gotshal & Manges. (New litigation chief Alexander Dimitrief’s old firm, Kirkland & Ellis, also became a GE partner for Gen Two.) Smaller firms such as Miami-based Astigarraga Davis and Covington, La.-based Daigle Fisse & Kessenich were also rewarded with a bigger presence in Gen Two. Just as notable are the firms that GE either demoted to a smaller role or didn’t invite back. Paul, Hastings saw a decrease in its GE work after not faring as well as other contestants on in-house reviews. Dascenzo attributes the change to the sheer quality of the competition: “It’s a matter of excelling amid a group of great lawyers and law firms.” Under Gen One, Paul, Hastings was a preferred provider in 12 different practice areas, including several regional ones. But in Gen Two, it appears on GE’s roster in just two categories. Even so, Paul, Hastings litigation department partner Kurt Hansson says he is happy with the outcome. “I would disagree that we’re actually in fewer” areas, he says. “[In Gen One] we were in the Connecticut and Los Angeles litigation [areas]; now we’re in the national litigation” area. Another Am Law 100 firm, Shearman & Sterling, was among GE’s top M&A firms in Gen One, but the firm was dropped from that practice group, However, Shearman maintains its spot on GE’s litigation roster. Partner John Marzulli Jr., declined to comment. Signaling a shift in emphasis toward global legal work, GE cut more than a dozen firms that worked exclusively on regional matters, such as St. Louis-based Armstrong Teasdale, which specialized in loan work for the Midwest, and Philadelphia-based Fox Rothschild, which focused on bankruptcy issues in the Northeast. Fifteen litigation firms, including Pertnoy, Solowsky, Allen & Haber, and Schnader Harrison Segal & Lewis, didn’t make the Gen Two cut either. Why? Dascenzo says some were hired in anticipation of work that never came, or their particular expertise wasn’t actually needed. In addition to the changing lineup, GE also restructured the actual terms of the working arrangements. Under Gen Two, the firms must now propose alternative fee arrangements for every matter and offer a binding core team of attorneys to work on GE cases. The two-year contracts of Gen One were stretched to four years, and firms must renegotiate discounted rates halfway through the agreement. Rees Morrison, a consultant at the Somerset, N.J.-based legal consultancy Hildebrandt International, calls the long-term contracts overkill. But, he adds, some firms actually prefer the longer lifespan of Gen Two. After the battering they got during the review process, he quips, few firms are in a hurry to repeat the experience. Jill Nawrocki is a reporter with Corporate Counsel magazine, a Recorder affiliate based in New York City.

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