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Circuit City Stores Inc. pays its legal invoices promptly if its law firms reduce their fees. Few people rush to pay their bills, and in-house lawyers aren’t any different. On average, corporate law departments take about two to three months to process invoices from their outside counsel. So when Circuit City announced last fall that it would pay all legal invoices within 20 days, its law firms took notice. But speed has a price. In return for early payment, Circuit City has come up with an innovative trade-off: The Richmond, Va.-based electronics retailer insists on a 3% discount on all legal fees. The reduction is on top of the already reduced billing rates Circuit City has with its regular roster of 50-plus outside firms. The company declined to say how much money it has saved so far. General Counsel Reginald Hedgebeth said his 16-lawyer department came up with the idea during a budget review session last fall. “We negotiate contracts all the time for our internal clients, and they include terms of payment with early payment discounts,” Hedgebeth said. “We thought, ‘Why not do the same for legal fees?’ “ Besides, Hedgebeth said that the company was already paying its bills within 20 to 30 days � here was a way to get something in exchange. “We ran it by a few firms, and, for the most part, the reaction was very positive,” Hedgebeth said. “Law firms are a cash-flow business, and they want cash as quickly as possible. There’s a benefit to the recipient to get paid early, even if it is discounted.” One of Circuit City’s longtime outside counsel is Richmond-based McGuireWoods. According to partner Howard Feller, the firm agreed to the discount plan because “we viewed this as fair and reasonable in view of our relationship and Circuit City’s very quick payment practices.” In fact, Hedgebeth said that every firm save one was willing to knock the 3% off its bill. The holdout, which he declined to name, told him, ” ‘We’d rather you pay us late.’ “ The discount doesn’t apply to law firm expenses; it covers only the legal fee portion of the bill, Hedgebeth added.

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