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Applied Materials Inc.’s legal department was in a bit of a bind. One of its corporate attorneys was scheduled to go on maternity leave during an unusually hectic time for the department. So Applied called its outside counsel, Orrick, Herrington & Sutcliffe, and asked if the firm could spare a lawyer. Gary Weiss, managing partner of Orrick’s Menlo Park, Calif., office, asked sixth-year associate Hsinya Shen if she’d like to go in-house for four months. She jumped at the chance. During her stint, which ran through February, she helped Applied put together its proxy statement and finalize its annual report and 10-K filing. “It was a fantastic experience,” Shen said. “I’ve gained an appreciation for the pressure they work under.” Many large firms routinely loan associates, and sometimes partners, to their clients. The practice — dubbed secondment, after a British military term for temporarily transferring someone from one regiment to another — has been going on at many large firms for years. But it’s attracted little public attention since firms don’t publicize the practice. Law firms, in-house counsel and the lawyers who get loaned out all say it’s an invaluable way for firms to better understand their clients and bolster their relationships. “A person on the inside gets to know the company in a more substantive way,” said Mark Brazeal, deputy general counsel at Broadcom Corp., which has twice borrowed attorneys from outside counsel. “When they return to the firm, they tend to be more efficient and to give better advice.” Loaning out lawyers can also have another benefit — bringing in new business. Orrick recently snagged Mervyn’s as a client when it offered to lend out partner William Sawyers to serve as the company’s interim general counsel. Mervyn’s became an independent company a few months ago when Target Corp. sold it to a group of investors. The Hayward, Calif.-based department store had relied on Target’s legal department, but after the sale, it needed lawyers to fill in the gap. The company held a beauty contest with a few San Francisco Bay Area law firms to choose an outside counsel. Orrick offered to send Sawyers, who had been general counsel of Del Monte Foods Co. before joining Orrick, in-house until Mervyn’s got its bearings. “We agreed on a flat fee deal for my time and additional services,” said Sawyers, who took on the temporary post in September. Offering to go in-house, he said, “probably made the difference in Mervyn’s picking our firm.” OVERSEAS CUSTOM Consultant Rees Morrison, of Hildebrandt International Inc., said the practice of temporarily embedding associates inside corporate law departments has been routine in the United Kingdom for decades but occurs much less frequently in the United States. However, many large U.S. firms, particularly those in New York, have been lending out their lawyers for as long as their British counterparts. Jose Murillo Jr., associate general counsel of Philip Morris USA Inc., said his previous firm, New York’s Chadbourne & Parke, lent out lawyers as far back as the 1970s. Murillo said it’s a recent phenomenon for corporations to have large legal departments. Historically, he said, it wasn’t uncommon for companies to have one in-house attorney and to borrow five or six lawyers from their outside counsel. Among local law firms, Wilson Sonsini Goodrich & Rosati began loaning its lawyers to clients around 1988. It has sent associates to clients such as Hewlett-Packard Co., Apple Computer Inc., Google Inc. and Sun Microsystems Inc. Donna Petkanics, Wilson Sonsini’s managing director of operations, said the firm currently has about five associates on loan. Orrick also has been lending out lawyers since the 1980s and has one lawyer on assignment with a client nearly all the time. Fenwick & West has been lending out at least one lawyer annually for several years. And Morrison & Foerster has an exchange program with several Japanese companies, including Itochu Corp., sending associates for stints in-house and also hosting Japanese lawyers. MoFo also has one or two associates in-house with U.S. clients at any given time. “We were a little more aggressive in creating these opportunities during the recession,” said MoFo Chairman Keith Wetmore, who had his own in-house stint when the firm lent him to Crocker Bank in 1983. “The firm wasn’t engaging in across-the-board layoffs” and had associates to spare. For other local firms, lending out their lawyers is a fairly new practice. Heller Ehrman White & McAuliffe first lent out a lawyer several years ago but managing partner Robert Hubbell said it has only been in the last two years that the firm has done so on a regular basis. While firms and clients extol the virtues of secondment, it also has some potential drawbacks. Firms lend out their best lawyers and have to do without them for other matters. They also face the risk that the lawyer will choose to stay with the client. For their part, companies may pay more to borrow a lawyer than they would if the attorney was on their payroll. “Law firms are more and more reticent to do it,” said Lauri Shanahan, Gap Inc.’s general counsel. “They are under-resourced and see us as having the potential” to hire away their lawyers. Shanahan said about 75 percent of the time Gap hires contract attorneys to fill in for employees taking a leave of absence. She said the employment group is now looking to bring in two lawyers to fill in temporarily for in-house counsel going on maternity and paternity leaves. Financial arrangements vary depending on the situation. Firms usually negotiate a discounted rate. Wetmore said MoFo usually charges a flat fee per day or week for the lawyer’s services. In some cases, he said, the fee doesn’t cover a lawyer’s salary. Clients may look for the best deal. When Broadcom wanted to borrow a securities associate for a six-month stint, it solicited proposals from three of its primary outside counsel. The company considered a range of factors, including cost and other matters the lawyer might be handling, and ultimately chose Latham & Watkins. Lawyers who’ve had an in-house stint say it’s an eye-opening experience. John Wunderli had just become a partner at Heller when he went on assignment to Philip Morris. The most surprising discovery, he said, was the range of challenges in-house counsel face. “They have to define legal issues, how to get them solved and communicate with the business in a way that’s helpful,” Wunderli said. By comparison, outside lawyers are generally retained “to solve a specific problem that’s often been defined.” Wunderli decided to stay with Philip Morris and is now senior assistant general counsel at Altria Corporate Services Inc., part of the parent company of Philip Morris. Shen said she, too, came to understand the responsibility that in-house attorneys shoulder when she was handling the final version of Applied Materials’ proxy statement. “No one else is going to double-check it,” she said. If there’s a mistake, it’s the in-house attorney’s responsibility “and that’s really big.” Shen was able to offer some extra help when the legal team was getting ready to do a mass printing of the proxy statement. She and two other attorneys needed a secure place to proofread the document, and since Shen lives close to the printer, they trooped over to her apartment. Charmaine Mesina, Applied Materials’ managing director of corporate legal services, said this was the first time her group had brought in one of its outside counsel. “A lot of the reason it went so well was Hsinya,” Mesina said. Her personality was a good match for Applied, and she already was familiar with the work. “I would definitely do it again,” Mesina said.

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