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Over the past three years, Emory University’s general counsel, Kent B. Alexander, has accomplished a feat likely to make in-house counsel swoon and outside counsel shudder. He’s cut the university’s outside legal fees by more than 50 percent. And he’s done it, primarily, by bringing the work formerly assigned to outside counsel back in-house. That work includes employment, tax, estate planning, health care regulatory and some intellectual property and litigation matters. Outside lawyers still handle major litigation and high-stakes patent cases, because Alexander said he doesn’t have the staff or specialized expertise to do that work in-house. In addition to the obvious monetary benefits, Alexander said the move has increased job satisfaction for him and his 11-attorney team, and it hasn’t required much additional hiring. He’s added just one lawyer. “Sometimes you spend so much time overseeing matters, that you realize it would be just as efficient to do it yourself,” he said. Of course, Alexander hears from the university’s outside counsel when the rush of work slows. “I get calls, and we go out and have lunches, and they say, ‘How’s our service? Is anything wrong?’” he said. “But a lot of it is just that the attorneys on our staff are doing a good job.” With the economy continuing to slide, it’s not surprising that, like Emory University’s Alexander, many general counsel are looking for ways to trim their legal budgets. They’re looking for discounts, increased efficiency and the ability to be treated like co-counsel with their outside lawyers. And like Emory, more companies are bringing more work in-house. In-house attorneys, apparently, often can do the job for less — about $90 an hour less than outside attorneys, according to the most recent PricewaterhouseCoopers U.S. Law Department Spending Survey 2002. The survey found that corporations spend a median $178 per hour on in-house attorneys, compared with the $268 average hourly rate charged by survey participants’ three top-billing firms. In the Fulton County Daily Report‘s own Going Rate sampling of Georgia attorneys’ rates at 60 firms, the average hourly charge was $289. According to the Pricewaterhouse-Coopers report, outside counsel costs accounted for 59 percent of survey participants’ legal spending. The survey, which included the law departments of 207 companies in 16 industries, found that in-house legal spending increased 4.3 percent, while spending on outside counsel rose 9.2 percent. LITIGATION COSTS RISE Maureen M. Middleton, assistant general counsel and director of Primerica Financial Services Inc., said her company’s outside counsel budget has grown in recent years. “It’s a fact of life. As long as the economy is where it is, litigation costs will stay up. When times are good, people sue. When times are bad, they sue more.” That doesn’t mean that Primerica isn’t watching its legal bottom line. “Our in-house legal department is maybe more hands-on than some other legal departments,” she said. Being hands-on, according to Middleton, is one of the company’s most important methods of legal cost management. Middleton said Primerica’s 30 to 40 in-house lawyers respond to discovery, draft settlement agreements, prepare company witnesses and maintain a brief bank for repetitive legal issues. They also handle compliance work in the securities, insurance and advertising arenas, do some litigation, and work on sales force and contract issues. When outside counsel are used, Primerica, a member of Citigroup, controls costs by working with its parent company’s preferred counsel list. “Any lawyer who does business with a Citigroup entity signs a retention agreement and the agreement outlines what we will pay, what we won’t pay,” she said. DISCOUNTS REQUESTED Another way to cut costs is to ask for discounts, a method that both Middleton and Emory’s Alexander have found effective. Middleton asks firms to offer discounts to Primerica, based on the volume of work they get from other Citigroup subsidiaries. The average discount: 10 to 15 percent. Alexander requires outside law firms to give him a minimum 10 percent discount off their standard hourly rates on every matter. “Unlike some companies, we have the advantage of being a nonprofit and an educational health care institution,” he said. When outside counsel complain that Emory is a well-funded nonprofit, he reminds them, “Have you seen Coca-Cola stock lately?” He also negotiates fees on a case-by-case basis, asks that some work be handled by flat fee and increasingly puts matters up for bid or holds beauty pageants where law firms compete for the university’s business. In addition to bringing work in-house and asking for discounts, general counsel are focusing attention on tracking work and costs with an overall goal of looking for value and efficiency. Greg Riggs, vice president-deputy general counsel and assistant secretary at Delta Air Lines, said he’s focused on controlling costs because the airline industry is under greater economic pressure than most other businesses right now. “This is a major issue for us, in how do we optimize our providing legal services to Delta?” Riggs said. Riggs has answered that question by focusing not only on a firm’s hourly rates, but also on the efficiency and value it offers. For Riggs, communication with outside counsel is a major component of getting good service and value. Riggs said he looks for firms that offer a partnership approach to case management. “We want the firms to take the initiative, and we want to see their initiative,” he said. “We can see it most clearly in … the willingness of the firm to discuss and analyze with us the amount of time that tasks should take to accomplish.” The company uses a case-planning format that considers who’ll be doing the work and how long it’s likely to take. “Those two variables are where we find the optimal level of efficiency,” he said. “We have always tried to do as much work in-house as possible and we strive to maintain that approach because it is so efficient.” Delta uses a detailed internal cost-tracking system, Riggs said. The company breaks down costs by practice area and matter type, and generates monthly reports on where fees are being spent and why. Then the legal department looks for trends and analyzes the root causes of spending. “We are inclined to give repeat business to firms that provide us with the highest value and efficiency,” he said. EFFICIENCY PUSH HEARD OFTEN Armin G. Brecher, managing partner of Powell, Goldstein, Frazer & Murphy, said he’s heard a lot about efficiency from his firm’s clients of late. “Clients have expressed, in general, a desire to have more experienced rather than less-experienced people,” he said. “They want true efficiency, which is not just based on rate. They want work done in a shorter period of time.” As a result of that, Powell Goldstein discusses rate increases with clients before the firm puts them into place. Though the firm does negotiate with clients on flat fees, blended rates and contingent or reverse contingent fees, Brecher said the hourly rate discussions aren’t negotiations. They’re just a way of his firm’s gauging what the client thinks and wants, and a way for the firm to assess the market value of its lawyers. Powell Goldstein raises its rates every October, and for the past two years, Brecher said he’s heard more and more clients say how tough times have been for their companies. As a result, the firm has raised rates less in the last two years than in boom times. Still, Brecher said he thinks many sophisticated clients realize that what really counts isn’t the hourly rate; it’s the overall fee. “And if they can get people who are most efficient, it really [shows] results in the fee,” he said. ‘BEST BANG FOR THE DOLLAR’ James A. Hatcher, senior vice president of legal and regulatory affairs at Cox Communications, is an in-house lawyer who’s focused more on efficiency and value than on overall fees. “You never know if you’re going to be hit with a major lawsuit,” he said. “You never know if a deal too good to refuse is going to come up, a major merger. Rather than flat trying to cut fees, we are always trying to get the best bang for the dollar.” That doesn’t mean he doesn’t want to control legal costs. He said one of the best ways is to work closely with outside counsel on individual cases and matters. He said Cox’s 16 in-house lawyers will sit down with outside counsel before launching into a project to divide the work based on who can do it most efficiently. “The buzzword of the day is partnering,” he said. The down economy has, in some ways, improved that efficiency and partnership, according to Hatcher. Though it hasn’t necessarily resulted in lower fees, it has meant outside counsel are more receptive to Cox Communications’ needs. “I see a lot more willingness of outside law firms to work with us to provide efficient service,” he said. “The client gets more of what it wants.” Primerica’s Middleton also is an advocate of partnering. She said one of her company’s most effective cost-control methods has been staying involved, knowing what outside counsel are doing and how the case is progressing. Another indispensable factor, according to Middleton, is outside counsel who communicate well. She has little patience for those who don’t. “If we don’t like the way we’re being treated, we fire them,” she said. “We are pretty up-front about what we expect and what we expect is to be kept in the loop as if we are co-counsel.”

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