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Editor’s note: In this online roundtable discussion, conducted by Texas Lawyer reporter Pamela Manson, four general counsel talk about their methods for selecting outside attorneys and how they are dealing with increased billing rates. Pamela Manson, reporter, Texas Lawyer: How do you go about choosing which outside counsel to use?

P. Sandra Landau, general counsel, ACE Cash Express: Ideally, it is someone we’ve used before, we’re satisfied with and call on again. If that individual is not the right lawyer for the new matter, or is outside the jurisdiction, then we look to a referral. If neither option is available, I will conduct a rather involved study of the Martindale-Hubbell directory. Next, I will interview the most suitable candidates found in the directory. Finally, I will make a selection. I might add, I have found some outstanding outside counsel through this latter method.

Robert H. Stone, vice president, general counsel and secretary, Avatex Corp.: We usually choose outside counsel based on my prior personal experience with a particular attorney or firm. Recently, though, we needed an attorney with expertise in an extremely narrow area of securities law. Even the large New York firm we typically use couldn’t help us. I turned to the Internet and found that an attorney in a Washington, D.C., firm had written extensively on the subject, and we ultimately hired him. This was a perfect example of how the Internet is changing the way we practice law because without it we never would have found him or his firm.

John F. Schmutz, senior vice president, general counsel and secretary, La Quinta Inns: We have developed a network of outside counsel, both geographically and by types of transaction. For example, we have defense attorneys identified for premises liability cases in each state (and in some cases, regions of a state) where we operate. The same is true to some extent for real estate transactions. Certain law firms are relied upon for specific types of transactional work such as securities, franchising, employment law or IT matters. In all cases, this outside counsel network was developed through interaction with other general counsel, outside counsel, through seminars, general research and experience gained from trial and error. Generally, we find better results by utilizing firms that know the company and do not have to educate themselves prior to undertaking a particular assignment.

Susan S. Lanigan, senior vice president and general counsel, Zale Corp.: For our core areas of use of outside counsel, corporate, intellectual property, labor and employment, we have long-standing relationships with law firms. In those situations, we have one, maybe two, partners at each firm that we rely on. I know when I call them, they will call me back promptly, and will do whatever it takes to get the job done. I consider those lawyers an extension of my department and part of my team. It is critical that they know and understand our business and our strategic philosophies. However, because we operate in every state, we often have issues arise in jurisdictions where we don’t have an existing relationship or we have an occasional issue that requires expertise in a certain area that we have not needed before. In those situations, we look first to other lawyers for referrals, then to my “attorney resource” drawer for materials on lawyers and law firms in various states that I have collected over time, and, if neither of the above are successful, I go to Martindale-Hubbell. My preference, of course, is to get a referral from someone I know and trust, although I have several times retained a lawyer I heard at a seminar if I think he or she has an expertise I need. RATE CAPS Manson: Are law firms raising billing rates and if they are, are you fighting them and are you successful? Stone: Law firms, like any other businesses, are always trying to raise their revenue. They do this by trying to increase their billing rates or by charging for expenses that used to be considered part of overhead. I did object to an attempt to increase hourly rates by one of our principal outside counsel, and we reached an understanding, which included hourly rate caps, that was acceptable to all concerned. Schmutz: Billing rates are going to increase over time along with all other products and services. I have not found any intensified attempts by law firms toward raising rates coincident with the current economic situation. If a firm has not raised their rates in several years, we generally understand the need for a modest increase. Conversely, more frequent or substantial increases will be resisted. Lanigan: So far (crossing my fingers) I have not seen any dramatic increases in rates in the Dallas area. While beginning lawyer salaries have shot up, I think law firms are slightly hesitant to pass all of that additional cost on to clients. Dallas remains a very competitive market, and I don’t believe most Dallas clients are willing to accept significant billing rate increases. Landau: I agree with John’s perception there has been no patent effort by outside counsel to increase fees in concert with the recent economic climate. If I see a substantial invoice increase, it is a direct result of an excess number of hours billed. In these instances, I do not hesitate to point this out to the “offender” and request an appropriate downward adjustment.

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