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With the number and stakes of legal malpractice cases on the rise along with the size of lawyer headcounts and geographic expanse, more law firms are asking partners to serve as in-house general counsel. According to a recent Altman Weil survey, the percentage of Am Law 200 firms that have designated a general counsel has increased from 63 percent in 2004 to 69 percent in 2005, with 92 percent being partners and none from outside the firm. The survey also says that 32 percent were serving full time in the position, compared to 26 percent last year. Those who are part time spend 36 percent of their total hours on the general counsel function, averaging 753 hours per year, down from 43 percent and 775 hours the year before. Average total cash compensation for law firm GCs ranged from $250,000 to $1.3 million, averaging $493,292. That figure is up dramatically from an average of $386,875 in 2004. As for areas in which general counsel serve or advise their firms, 96 percent consult on firm management, 88 percent on engaging outside counsel, 86 percent on professional liability issues, 84 percent on representing the firm in disputes, 82 percent on professional responsibility issues such as conflicts and client privilege, 65 percent on partnership issues and employment matters such as discrimination, and 63 percent conduct in-house ethics education. Ward Bower, the Altman Weil principal who conducted the survey, said firms traditionally have asked their management committees to deal with such issues. He first noticed a significant number of firms creating the position in 2000. Three years later, a few firms came to him and asked if they should create the position. So Altman Weil decided it needed to get a feel for the marketplace before offering such advice and conducted the first version of the survey in 2004. Bower said the most interesting statistic was the 6 percent increase in the number of firms that have general counsel, which he believes can be credited to the increasing size of law firms and the tremendous scope of malpractice cases. But he added that the whopping increase in compensation can be attributed to an increased sampling this year and some higher-paid individuals taking on the role. Several Pennsylvania firms have created an in-house general counsel position in recent years. Fox Rothschild named partner Thomas Paradise to the position this month, in the process asking him to give up his litigation practice and take on the firm as his full-time client. Being that he has focused his practice on defense of professional malpractice cases. Paradise would appear to be a logical choice for the role. It also probably doesn’t hurt that he worked closely over the years on many of those cases with firm co-chairman Abraham Reich and Philadelphia office managing partner Scott Vernick. “As we’ve become larger, we have moved into more jurisdictions and seen an increase in potential conflicts and other issues,” Reich said. “We just felt we needed someone concentrating on it full time. We need someone who can take the time to understand the nuances of each jurisdiction and help us catch problems early.” Because Paradise is giving up his practice, Reich said he will be compensated for the work he would have produced as a regular partner. He said it’s no different than tax partner Mark Silow leaving his practice behind to concentrate full time on being the firm’s new administrative partner. Paradise started at the firm directly out of Temple University Law School in 1988 and became chairman of the firm’s professional liability practice group in 1996. He said when Fox Rothschild had 120 lawyers, it took up about 20 percent of his time. But as the firm has expanded to about 300 lawyers in 10 offices in five different states, it took up about 75 percent of his time in 2004. He said he will deal with conflict issues, making sure the firm’s attorneys have kept up on CLE requirements, educating lawyers and staff on changes to the Model Rules of Professional Conduct, and interfacing with the firm’s insurance carriers. Patent litigator Henrik Parker was appointed general counsel at Woodcock Washburn in April. Unlike Paradise, he is not serving full time in the position and does not have a background with professional liability or legal ethics. “I think the firm had the notion that it would be best to have someone spending time on client conflicts and other ethical issues rather than have the individuals involved do it,” Parker said. “They wanted someone who had the interests of the firm as a whole in mind.” Parker estimated that he spends 20 percent of his time on such matters but that if the duties were expanded, he could easily make it a full-time position but no one at the firm wants him to do that. For instance, partner John Donohue interfaces with the firm’s insurance carrier. Arthur Newbold, a litigation partner at Dechert, was asked to serve as the firm’s first full-time general counsel in November. He said he had already been informally serving in that capacity so it has not been too much of an adjustment. He said he enjoys trying cases too much to give up his practice. “[The firm's policy committee] felt it was time to give someone the title and force an individual to think about risk management in new ways,” Newbold said. “I am trying to mainly work in a preventative way but there are times when I have to put out brush fires.” Litigation partner John Summers has been handling the general counsel role at Hangley Aronchick Segal & Pudlin since the firm’s inception in 1994. He said he spends from 10 to 20 percent of his time working in that capacity and has a practice that includes professional liability cases. He said his role focuses on consulting with his colleagues about ethical issues. Like Parker, he does not interface with insurance carriers. Summers said he believes there are two main reasons for the increase in general counsel positions. First, when a law firm becomes a larger entity, the internal pressure to create such a service becomes larger. And as larger firms move toward a corporate business model, specialization becomes more prominent. If firms have chief marketing, finance and operating officers, why not have a chief legal officer? Pepper Hamilton was hit in March with the second in a pair of potentially massive legal malpractice suits over its representation of Student Finance Corp., which crashed amid allegations of widespread fraud. In the more recent lawsuit, filed in the U.S. District Court for Delaware, Royal Indemnity Co., SFC’s business liability insurer, claims that Pepper Hamilton became an “insider” with the loan company and helped to “ensure the success” of an alleged corporate practice to disguise nonperforming loans. Firm management has said the claims in the suit are baseless. The firm has used Alfred “Chub” Wilcox as general counsel since 1996. He retired from the partnership two years ago but still remains active as of counsel. He said he believes it is wise for law firm general counsel to steer clear of serving in other management roles such as the compensation committee. “You want people to come to you sooner rather than later with potential problems,” Wilcox said. “And you don’t want to create an impediment such as the possibility that you might rat the lawyer out to the compensation committee.” Bower said he sees the role of law firm general counsel expanding in the future as firms continue to grow and legal issues become more complex. “Firms are being sued more and more, and claims are getting bigger,” Bower said. “There are just more ways that a firm can get in trouble, and they need someone on site to deal with those things.”

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