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When Ford Motor Co. spun off its components division in 2000, one of the first tasks for the new company’s general counsel, Stacy Fox, was to find outside law firms to do a range of legal work — defend the company in lawsuits, file patents and handle regulatory filings. Visteon Corp., a $17.7 billion Van Buren, Mich.-based business, has only 11 in-house lawyers on its payroll. A former corporate counsel at rival parts manufacturer Johnson Controls Inc., Fox turned to lawyers she already knew. She contacted a handful of firms she had worked closely with at the Milwaukee-based company. After six months of meetings and phone calls, Visteon had its primary counsel: Dickinson Wright and Mintz, Levin, Cohn, Ferris, Glovsky and Popeo for litigation; Foley & Lardner for litigation, corporate transactions, corporate governance, and labor and employment; and Brinks Hofer Gilson & Lione for intellectual property work. Four years later, those firms are still working for Visteon. Staying with the outside counsel you know is the theme of Corporate Counsel‘s third annual Who Represents America’s Biggest Companies survey. While some in-house lawyers say they are eager to break long-standing ties with firms in exchange for outside counsel with more attractive fee arrangements, most GCs stick with the large firms they know and trust. “It’s like the old Joe Isuzu ads,” says Newport Beach, Calif., legal consultant Peter Zeughauser. “General counsel may say one thing, but they often do the opposite.” In our annual survey, we ask the Fortune 250 law departments which law firms they rely on the most. The same Am Law 200 firms have turned up at the head of the list, with little variation, in the three years that we’ve compiled the survey. “There’s a certain degree of comfort in the big names,” says Rees Morrison, a principal at the Somerset, N.J.�based legal consultant firm Hildebrandt International Inc. “And companies feel they’re burnishing their reputation by associating with a Skadden or a Kirkland Ellis,” he adds. We ask which firms businesses use as their “primary” counsel in a few practice areas: litigation, corporate transactions, labor and employment, and intellectual property. This year we added a new area, corporate governance, to get a sense of the post Sarbanes-Oxley law firm market. The 133 companies that supplied law firm data named 397 firms overall. (In previous years some corporations gave us more than a dozen firms in some practice areas — so this year we asked respondents to limit themselves to seven law firms per practice area [see "Methodology"]. Skadden, Arps, Slate, Meagher & Flom was deposed as the “most mentioned” firm across all categories. It slipped to second place — with the caveat that fewer companies participated in our survey this year. And Sidley Austin Brown & Wood, last year’s No. 2, slid to No. 7. But the other 2003 leaders were among the most mentioned firms this year: Davis Polk & Wardwell was the new leader; Jones Day, Morgan, Lewis & Bockius, and Kirkland & Ellis retained top spots. Even though in-house lawyers are under pressure from senior management to shave costs, they don’t shop around for the cheapest law firm, especially when it comes to big lawsuits and acquisitions. “Law is not a price-sensitive kind of buy. Companies are buying the brand name and the experience behind it,” says Andrew Razeghi, of the Chicago-based consulting firm Strategic Lab. A couple of cultural forces are at play, too. Many businesses have traditional (and sometimes, familial) links to law firms, like Microsoft Corp. and Preston Gates & Ellis. And many general counsel come from or have worked closely with their favorite firms for years. That explains the close relationship between Jones Day and Albertson’s Inc. “‘Partner’ means ‘partner,’” says Jerome Okarma, vice president and deputy general counsel of Johnson Controls, which made no changes to its most mentioned firms this year. (Johnson Controls’ roster is, unsurprisingly, similar to Visteon’s.) “Our partners understand what’s important to us, and what isn’t. And we don’t bid out work,” says Okarma. And while talking about reordering vendor relationships may be fashionable, switching from an established connection with a megafirm can be costly, even if the new firm charges less. “We’d need to get a new firm up on the learning curve on how we handle cases,” says Jonathan Ferrando, vice president and general counsel of AutoNation Inc., a Fort Lauderdale, Fla.�based auto parts retailer that uses the same firms it did last year. “And that’s expensive and takes time.” While the same pre-eminent firms dominated the charts, this year’s survey turned up a few wrinkles. For the first time, we asked respondents to tell us which firms they use for corporate governance. Both Sarbanes-Oxley and new stock exchange rules have increased the workload for corporate legal departments. But even with a new category, many of the same law firms pop up. Davis Polk and Gibson Dunn led the most mentions list, with Skadden taking a bronze. Another firm comes to the fore for litigation. Kirkland & Ellis widened the slim lead it had over Skadden, with additional mentions this year (for a total of 16) from Time Warner Inc., McDonald’s Corp. and Tenet Healthcare Corp. Skadden fell to a seventh-place tie in this category. McDonald’s legal administrator Megan Willis says the fast-food chain added Kirkland to its roster this year because it faced a securities class action suit alleging that officers inflated McDonald’s share price. Willis says, “We go to [Kirkland] for high-profile, specialized litigation.” It’s not all bad news for the ex-front-runner; Skadden tied with Davis Polk for first place in corporate transactions. Last year’s No. 2, Sidley Austin, slipped to fourth place; Costco Wholesale Corp. removed Sidley from its primary counsel ranks this year. Costco, which did not return phone calls for comment, did keep Foster Pepper & Shefelman, Heller Ehrman White & McAuliffe, and Perkins Coie on for corporate work. Last year’s labor and employment winners also retained their top spots. The three industry leaders — Littler Mendelson, Seyfarth Shaw, and Morgan Lewis — held steady, although Littler led the category by four mentions. Intellectual property firms had some movement, with Howrey moving up from fourth place to tie for most-mentioned with Kirkland & Ellis. Last year Kirkland and Finnegan, Henderson, Farabow, Garrett & Dunner tied for first place. This year Finnegan drops to third. What happened? Six companies that took our survey last year either declined to participate or didn’t disclose their primary IP firms. However, The Goodyear Tire & Rubber Co. cut Finnegan from its list of top IP firms. The Akron, Ohio-based company kept the other IP firms it named last year: Brouse McDowell and Wood, Herron & Evans. General counsel C. Thomas Harvie says that Finnegan did “a lot of litigation claims in the past for us, and we didn’t need that kind of work this year.” But these are all minor ripples on a generally placid sea. Perhaps AutoNation’s Ferrando sums up the attitude of Fortune 250 CLOs best: “We’re getting high-quality work from our firms. There’s no need to make a change. If we didn’t get high value, we’d make a change. But we don’t need to.”

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