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Michael Samway had been at White & Case in Miami for almost four years doing corporate and securities work when the Internet bug bit him. He was tempted because “every kid in jeans could raise money from venture capitalists.” So when Yahoo came knocking in July 2000, he accepted the offer. “The timing was good,” says Samway in an understatement. He’s now legal director for Yahoo in Latin America and Canada. But the party is over for many other lawyers who dreamed of moving to in-house jobs at dot-coms and other high-flying companies and earning lucrative stock options, big bonuses and exotic perks. The extravagant compensation for in-house attorneys during the boom years has been replaced by more down-to-earth salaries and benefits. While salaries for in-house counsel aren’t declining, they aren’t soaring like they were in the mid- to late-1990s, according to a 2002 salary guide from the Affiliates/Robert Half International. For lawyers with four to nine years of experience, corporate legal departments pay $90,250, at the low end of the scale, while salaries for those with one to three years of experience range from $59,750 to $91,000, the survey found. Of even greater concern than stagnant salaries, corporations are reducing the size of their in-house legal staffs and increasing the use of outside counsel. And they are keeping closer tabs on their outside legal costs. “In South Florida, it’s a tight market,” says Jim Patton, president of the South Florida chapter of the American Corporate Counsel Association. For example, The Sports Authority, the Lauderdale Lakes, Fla.-based sporting goods chain, once had five in-house lawyers. Now there are three, says Lazarus Rothstein, senior corporate counsel for the company, which operates nearly 200 stores in 32 states. The Sports Authority eliminated 42 corporate positions last year as part of an effort to turn the then-troubled company around. It’s since begun expanding again, opening new stores and remodeling existing ones. While that creates additional legal work, the company doesn’t expect to add more in-house lawyers. “The legal department is not the first place you add people,” Rothstein says. “Ultimately, you rely on outside counsel for the spill-over work.” It’s easier and cheaper to send overflow work to outside counsel than to hire another lawyer in house, agrees Victoria Kincke, vice president and general counsel of Interval International, a time-share and travel services company headquartered in South Miami. “Even if I had a desire to recruit additional attorneys, I could not financially do that to get the qualified people I want,” Kincke says. She notes that her company relies on Miami-based Greenberg Traurig for its outside work. TOUGHER OVERSIGHT The trend in South Florida toward using outside counsel is consistent with what’s happening nationally. According to an October 2001 survey of chief legal officers by corporate counsel association and legal consultant Altman Weil Inc., 86 percent of respondents said they planned to increase their use of outside counsel, up from 35 percent the year before. In contrast, only 18 percent of the respondents said they planned to hire additional in-house lawyers, compared with 47 percent the previous year. Corporate bean counters are paying closer attention to legal budgets and strictly defining the ways they do business with outside law firms, says Robert Thomas, vice president of strategic development for Serengeti Inc., an Issaquah, Wash.-based company that provides Internet-based services to corporate law departments. Value is key. “They are setting terms they expect the law firms to agree to in order to have a relationship,” Thomas notes. “They are monitoring performance.” In a recent survey it sponsored, Serengeti found that 74 percent of in-house counsel require outside law firms to accept specific terms to be retained. The terms generally include spending restrictions and a requirement that in-house counsel sign off on strategy decisions. “The scrutiny has gotten much tighter. Everyone is looking for ways to cut costs,” says Lisa Gefen, vice president of legal affairs for Clewiston, Fla.-based U.S. Sugar Corp., which has an in-house team of three lawyers. “We try to bring in as much work as possible and go to outside counsel for specific expertise in various areas.” NO SURPRISES Some companies also are asking outside counsel to come up with creative billing arrangements, says James Gale, a partner at Feldman Gale & Weber in Miami. One such arrangement is for the outside firm to charge a flat fee per project, rather than billing by the hour. “That encourages the law firm to be more efficient so they are not spending 20 hours on something they are billing for 12,” says Patton of the corporate counsel group. More than anything, in-house lawyers don’t want to be surprised when they get a legal bill from an outside firm, says Hilarie Bass, chair of the litigation department at Greenberg Traurig in Miami. “It’s rare these days where any general counsel will not insist on some type of upfront budget and quarterly updates,” she says. “They won’t tolerate ending up with a huge bill that hasn’t been budgeted.” The key for outside law firms is to establish a good relationship with one or two partners who become “filters” for managing relations between the outside law firm and the company, advises Yahoo’s Samway. Adele Stone, a partner at Atkinson Diner Stone Mankuta & Ploucha in Hollywood, Fla., agrees that it’s critical for in-house and outside lawyers to be comfortable with one another. “If they feel comfortable that your billing practices are good and that you are responsive,” she says, “they will tend to give you more work because they are busy doing in-house work.” Alan Axelrod, head of the corporate securities group at Bilzin Sumberg Dunn Baena Price & Axelrod in Miami, says his firm is not willing to move away from hourly billing. But it tries to accommodate cost-conscious corporate clients by occasionally not billing for all of the time spent on a project. “When you do a major transaction and have a $100,000 or $200,000 legal fee, it’s difficult for [the client] to micromanage every hour,” Axelrod says. “Our clients look at us as part of their team. When there are bad times, you want to have the client feel you are working with them.”

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