In-house ACCess : In-house ACCess: Association of Corporate Counsel : ACC : The In-house Counsel Bar Association

By John DeGroote and Alan Dabdoub 

John DeGroote is the President and Chief Legal Officer at BearingPoint, Inc. and member of the ACC Dallas-Fort Worth chapter. Alan Dabdoub is Special Counsel at Lynn Tillotson Pinker and Cox, LLP in Dallas, Texas and former Chief Litigation Counsel of a large subsidiary of a Fortune 100 Company. 

As we all know, high-stakes litigation can be time consuming and disruptive, and one of outside counsel’s jobs is to make the process as predictable as possible. It’s easy to assume outside counsel will provide excellent service in every case, but it’s safer to articulate what you want from them early on so you can avoid surprises and communication breakdowns. While a great process can’t guarantee the desired result, it will make managing your stakeholders’ expectations much easier. The following five tips are sure to get you off to a great start.

1.     Avoid Fire Drills

Let outside counsel know as soon as possible how to minimize disruptions to the business. This may vary case by case, but in all scenarios, communicating a plan will enhance responsiveness and service. Tell your outside counsel:

• How often you’re required to update internal stakeholders during the litigation, the type of information you need, and the format in which you need it;
• The expected dates to report probabilities of a loss so the company can accrue for contingent liabilities in a timely manner;
• Protocol for contacting company witnesses and the times during the fiscal year to avoid scheduling important company depositions or undertaking large discovery projects that will consume company resources;
• The minimum amount of time needed (i.e., one month, two weeks, etc.) to respond to document requests, begin preparing for a deposition, or to review drafts of briefs.

Knowing these details allows outside counsel to better understand how to minimize business disruptions, while reducing internal stress and creating a tailored, professional service that surpasses clients’ expectations.

2. Get Rid of Bad Problems Quickly

Great problem solvers use early case assessments and alternative dispute resolution techniques, and motivate their adversaries to resolve the case. Exploring various alternative dispute resolution strategies demonstrates sophistication, not weakness. If possible, lead rather than manage the process. Suggest a call to opposing counsel to objectively present weaknesses in your adversary’s case, suggest that outside counsel send an offer of judgment early in a case to shift the risk, suggest a summary trial immediately after discovery, or suggest a non-binding arbitration.

The benefit of exploring creative dispute mechanisms is twofold: Earlier resolution allows you to focus on preventing litigation, and if the case isn’t resolved, you’ll be in a much stronger position to marshal support for a trial from your internal stakeholders. Exhausting creative problem-solving techniques will help prevent second-guessing in the event of an adverse verdict.

3.     Help Me Do More with Less

You’re charged with enabling the business in a legal and ethical way. The less time spent on outside counsel tasks, the more time spent on enabling the business. Outside counsel will increase productivity and value by doing the following: 

• Return all emails and calls within a few hours after they are received if possible.
• Conduct an early case assessment before filing suit if the company will be the plaintiff, and within 90 days of being served if the company is a defendant. This early case assessment will serve as the playbook during the litigation;

Outside counsel should also provide you with several things including:

• Electronic or hard copies of all substantive pleadings, emails and correspondence;
• Short and practical litigation reports;
• Briefs ready for filing.
• A liability and damages analysis every quarter;
• A scheduling order of the case allowing you to inform internal stakeholders of important events happening in the case; and
• A robust decision tree analysis of the value of the case, updated as appropriate, so you can recommend to stakeholders the best final resolution for the company.

This type of service will ensure that you’re updated often on the substantive, strategic and budgetary aspects of the case. You’ll be able to answer tough questions about the case anytime and will be free to take on other challenges within the company.

4. Help Me Pitch Your Value

The most overlooked attorney work product is the invoice. Outside counsel should not send invoices containing charges for an administrative service, associate training, or duplicate time entries. Each time entry should reflect an effort to drive the case toward a resolution. Ask outside counsel to set forth in their invoices: 1) what the fees are to date over the life of the case, and 2) a general description of how the activities on that invoice have moved the case closer to a resolution. This will help you better judge the value received in the case and allow you to communicate that value to internal stakeholders.

5. Explain the Settlement Value

A decision tree can help in-house counsel quantify the settlement value of a case depending on the likelihood of certain outcomes at different stages in the litigation (i.e., whether summary judgment will be granted, whether important evidence will be excluded, whether punitive damages will be awarded, etc.). You’ll then be able to better determine optimal settlement, pre-trial, trial and appeal strategies.

To create a decision tree,  ask outside counsel for the odds of winning a summary judgment, winning at trial, and of obtaining a low, medium and high verdict. Then, ask what the low, medium and high range of a verdict can be. You can then create the decision tree based on these percentages. While a decision tree is based to a certain extent on subjective data, your internal stakeholders will understand the settlement value much better as you walk them through it. This reduces the chances of the company overpaying on a case or foregoing a propitious settlement opportunity. And your stakeholders will be grateful for that analysis.       

For in-house counsel with many internal stakeholders, the litigation process should be just as important as the case result. Create a list of service expectations in every case and communicate that to outside counsel. This will maximize the value of the legal services received, strengthen your working relationship with outside counsel and enable you to most effectively manage internal expectations from start to finish.

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Post 6

Alternative Fees and Quality of Work

Week 6. Each week via the In-house ACCess blog, follow the promise and pitfalls of forming a new value-based client-firm relationship. This blog pairing explores how to improve the value returned using a different approach to managing litigation work.  As General Counsel of Kayak, Karen Klein provides legal counsel to senior management and oversight of all legal matters. Karen’s co-blogger is Nicole Nehama Auerbach, a co-founder the Valorem Law Group, The voice, views and stories expressed by the authors below are their own and not ACC’s. To catch up on the story so far, click here.

The client view 

From Karen:

In our previous posts, we have written about my transition to using alternative fee arrangements for certain matters. We have also written in depth about the various issues that come up in the context of pricing. From an in-house perspective, there are a number of other issues that I grappled with (or continue to grapple with), most of which are not worthy of a full post on their own. 

Collectively, though, I think the issues bear mentioning. Nicole will respond to them from the firm's perspective in her post, but I will set them out here:

1. How do I ensure that with a fixed fee, the firm I am using won't come to the end of a busy month and cease doing work? This was particularly worrisome for me because the matters being handled on an alternative fee basis are litigation matters. That means that large influxes of work may occur within the same month, and there is little flexibility to push it off.

2. Along the same lines, how do I ensure that my matter isn't being pushed down to the most inexperienced attorney at the firm since that person is the least expensive in terms of time expended? Again, because litigation, even routine litigation, carries risk, it is important to know that matters are being staffed appropriately.

3. Because I know a firm working on an alternative fee basis must be more efficient to have a higher profit margin, how do I know that it won't employ a litigation strategy that is so lean that it hurts us in the end?

These are related questions that all go to the fundamental issue of whether using alternative fee arrangements can result in a difference in the work product you have come to expect.

I will leave it to Nicole to respond to the issues directly. Suffice it to say that my experience has allowed me to become comfortable with both the issues and the solutions to avoid the issues. All in all, while I do not like to resort to clichés to make a point, in this instance it may be warranted -- sometimes you have to simply try it for yourself to see.

The firm view

From Nicole:

Many of the issues that Karen has raised are ones that my partners and I hear repeatedly from clients or prospects. In 2007, before we started the firm, I spoke with a number of in-house lawyers to get a sense of their previous experiences with alternative fees. Then, the number of in-house lawyers who had seriously considered an alternative fee arrangement, let alone had used one, was small. Still, for those who had or those who contended that they would consider it, the biggest issue was ensuring the quality of work did not diminish. 

For us, that was why it was so important that we include a value adjustment line on all of our bills and why we almost always propose that a portion of our fee be held back until the end of the engagement. We wanted to let clients know that they have the ultimate control over the bill even if we are setting that bill based on an agreed upon fee arrangement. For us, these measures always seem to satisfy the concern. 

Having a fee arrangement that includes some "skin in the game" as we like to call it, provides the safeguards the client needs. In most of our arrangements, we have some element (usually a large element) of a bonus or contingency based on the results we achieve. In other words, if we have done more work than we expected in any given month or two because that's how litigation goes, that bonus, holdback bucket or success contingency is a powerful incentive to do that which is necessary to achieve the client's goals. For the same reason, firms using this approach do not have an incentive to push the work down to the most inexperienced member of the team. With inexperience comes inefficiencies - something that firms doing alternative fees should abhor. In fact, we find that our best results occur when the senior partners sit and discuss a client's case. Collaboration at the highest level brings the highest rewards.

Karen's last concern about running a case so leanly that it might hurt the client's position if the case goes to trial is also one we have grappled with. It is important for clients to know that with a fixed fee, it is impossible for the firm to do all the same things that a different firm would do if billing by the hour—isn’t that precisely the point though? Any firm that does that will likely go out of business quickly -- unless their fixed fee arrangements are so high that they are merely surrogates for what the firm would have been paid had it billed by the hour. My partner Pat Lamb refers to this as the “wolf in sheep’s clothing syndrome.” But the items being cutout of the usual arrangement are not key strategic items that runaway high risk of dooming the client at trial. To do that would be akin to cutting off your nose to spite your face. Instead, the trim should be of non-essential items that are routinely done in the billable world but have no great relation to achieving the end result the client wants. For example, filing motion to dismiss after motion dismiss when there is no chance that the entire case can or will be ultimately dismissed with prejudice may not be a reasonable expenditure of time or effort. Same with taking the deposition of every witness who may have some remote knowledge of the case simply to box him or her out on the likely cumulative evidence that already has been established by key witnesses. 

Lawyers who try cases tend to prepare cases differently than those who don’t. The prism of “will this make a difference at trial” tends to create a greater focus help differentiate the needed and essential from the fluff that so much of litigation seems to be. Alternative fee arrangements use that same prism. And we know from looking at scores of great plaintiff lawyers that one does not need an army to secure great results.

Do some of these decisions bear risk? Every decision carries risk. Sometimes the risk is simply that the fee will be unacceptably high (which is why clients railed against the billable hour to begin with), but most business executives operate in a world where risk is a routine factor to evaluate. Having as much as 60 or 70% certainty is a rare thing for them, and something they are comfortable with. It is typically the lawyers who are risk-adverse and who think that engaging in tactics to minimize the risk is an economically reasonable thing to do. With an alternative fee arrangement, the 98% most lawyers strive to achieve certainty must fall by the wayside so that only that which is truly necessary to achieve the outcome is left. In the end, it is the client's call as to what gets left out and whether it is worth the risk. Most clients savvy enough to be using alternative fees appreciate that this risk evaluation is part of their job.

Kayak pick of the week: Chicago to New Orleans.  Just love the beignets!

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(ACC Docket — May)

A quick straw poll at a recent ACC MiniMBA showed that all the former litigators in the room eventually moved out of this area of their profession for one reason: they got tired of always arguing. If all the good litigators leave, who will represent you in court? Is there a way that in-house counsel can protect the company and reduce the amount of arguing the litigators must do?

This month’s ACC Docket features a variety of articles on areas that can impact your litigation efforts, including: ediscovery, internal investigations, personal injury claims, patent infringement, the Consumer Legal Remedies Act and Six Sigma.

In addition, you will find an interview tailored just for you in this month’s “Tips & Insights” section — one of the top-read departments in the magazine according to ACC Docket’s 2008 Readership Survey. Editor Maggy Baccinelli interviews Amar Sarwal from the National Chamber Litigation Center on hot button litigation issues and current cases affecting business. As general litigation counsel, Sarwal provides insights on how to improve your litigation game, stressing the importance of cost benefit analysis prior to pursuing litigation, a pointed brief that tells a story, and careful management of outside counsel. 

Maybe not all lawyers like to argue, but I bet you like to win. This issue of ACC Docket helps you get just that much closer to victory.

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