Twice a year, I serve as a faculty member for a two-day program designed to help inside and outside lawyers use Value Fees.
Each of these programs begins with a “present state/future state” exercise. The inside counsel and outside counsel adjourn to separate rooms, and each group identifies what is working well in the inside-outside counsel relationship, what needs improvement and what a great future would look like. The sides then reconvene and hear what each other had to say. It’s a great ice-breaker exercise.
The comments from each side are recorded and posted. It’s interesting to observe the overlap in each group.
Here are some of the notes on the ideal future state from the inside counsel group:
- “Detailed, succinct quality communications.
- “Never having to review a bill/agreed fee and terms”
- “Managing to a number”
- “Value billing”
- “Both sides have skin in the game”
- “Outside lawyers understand what risks the client is willing to accept”
- “Understand the culture of the client”
- “Agreed metrics”
- “Syncing legal approach with business perspective”
- “Quarterly business reviews”
I suspect this sampling of comments represents many inside counsel; it follows comments of past participants in the program. Obviously, the group is self-selected, and so the lack of scientific reliability is obvious. That doesn’t mean that lessons can’t be learned.
What should this mean to outside counsel representing businesses with law departments? There is an old saying along the lines of: “That which interests my boss fascinates me.” I have always adapted that to: “That which interests my clients fascinates me.” There are lessons from both specific comments and from the overall nature of the comments.
One of the interesting issues is the issue of risk. Here, more than one inside counsel wanted outside lawyers to understand what risks the client was willing to accept. In the session across the hall, one of the interesting comments from the law firm discussion of future state was that firms wanted clients to “communicate risk tolerance.” So we have clients wanting their lawyers to understand what risks the client is willing to accept and lawyers wanting their clients to tell them what risks the client is willing to accept.
It is as if both sides have voluntarily embraced a “don’t ask, don’t tell” policy and now are complaining about it. Obviously, there is no “don’t ask, don’t tell” policy. There is no reason this issue isn’t raised by both sides, or at least one. Unlike some other points that may require core business model changes, this one doesn’t. That it would ever appear on anyone’s list reflects only that person’s fundamental unwillingness to push his or her own agenda.
Let’s try to put this into a framework. If you’re a multibillion dollar company, and you are acquiring a smaller company to fit a niche need, perhaps the powers that be are willing to limit due diligence and rely on representations of people whose futures lie with the success of the acquisition. Or in a lawsuit involving a $500,000 property where all the key communications were by email, a company may forgo depositions and rely on the documents at trial if the case doesn’t settle. Both of these are classic cost/benefit, risk/reward decisions. The client has every right to decide which approach to pursue.
From the standpoint of an outside lawyer, it is prudent to have these kinds of discussions with your client. The outcomes can be uncomfortable. If you’ve ever tried a case without having deposed the other side’s witnesses (happens all the time in criminal cases), you know that depositions can be like a glass of warm milk before bed. The lack of depositions makes you feel less prepared, and you will be concerned about your relationship with the client if you lose. But if you’ve ever tried cases without having deposed the other side’s witnesses, you know if does not materially alter the outcome of your examination, at least most of the time. And just as important, clients that are savvy enough to have the discussion and accept the risk are smart enough not to hold the outcome against you.
So find out if the client wants to invest in the depositions. Find out what other steps can be excised from the standard approach. Some clients have a higher tolerance of the risk associated with not doing so, and that’s their choice.
For inside lawyers, the message is equally clear. If you want to make sure your lawyer doesn’t over-lawyer the case, tell them you do or don’t need, and do or don’t want moral certainty, that you’re comfortable or not comfortable with certain tasks being performed. Provide direction. Initiate the discussion. It’s your money—decide how to invest it (the defense of a case is an investment).
The other comments reflect the importance of communication—an ongoing issue—and the cost of service and the surprises associated with it. Lots of good food for thought.
Patrick Lamb is a founding member of Valorem Law Group, a litigation firm representing business interests. Valorem helps clients solve their business disputes and coping with pressures to reduce legal spend using nontraditional approaches, including use of nonhourly fee structures, coordination with LPOs or contract lawyers, joint-venturing with other firms and implementation of project management tools to handle lawsuits or portfolios of litigation.
Pat is the author of the the book Alternative Fee Arrangements: Value Fees and the Changing Legal Market. He also blogs at In Search Of Perfect Client Service.