Posted Aug 12, 2006 12:30 am CDT
As with many law firms, ethical and risk-management questions tended to go to a couple of respected old hands at Chicago’s Neal, Gerber & Eisenberg—managing partner Jerry H. Biederman and longtime litigator Phil C. Neal.
But as the firm grew significantly in recent years, to nearly 200 lawyers, the two realized that it needed to act more like the businesses it was advising. After all, the firm itself faced problems not unlike those known to corporations. And, like other firms, it was aware of the general trend of rising malpractice claims and uncertainty about lawyer liability issues under the Sarbanes-Oxley Act of 2002.
“I realized that whenever someone came to me with an ethical question, that even while I was balancing our business, I’d better be on a straight legal basis with them,” Biederman says. “I was concerned that others might be concerned that in looking at those types of issues, I’d be thinking about other matters related to the firm at the same time.”
So earlier this year the firm tapped partner Miranda K. Mandel as its general counsel. “We just thought it better to put this in the hands of somebody who has no other connections to management, partner compensation, etc., and [could] just be focused on these issues and develop policies and procedures,” Biederman says.
While Mandel and others like her aren’t exactly fish out of water, there are new streams and habitats to navigate. “At this point, we’re going to have to develop it, and it’s probably a matter of what I make of it,” says Mandel, who has been with the firm since it was started 20 years ago by a group spinning off from another firm. “There weren’t identified or perceived exposures or areas of concern. It’s just a feeling that we have a lot of attorneys, in fact some of them came from elsewhere, and different policies and procedures, and we felt it would be better to have a single source for information.”
Law firms have been moving fast to create general counsel positions. According to the Law Firms Yellow Book, published by Leadership Directories Inc., only seven law firms in its pages listed a general counsel in the summer of 2002. A year later that number had grown to 66. By this spring, it was 128 and counting.
The listings comprise 807 law firms of 40 or more lawyers and include a corporate practice area, says Sue Healy, director of product marketing for Leadership Directories, which is based in New York City.
While many agree there are more law firms than that with general counsel or the equivalent, the numbers indicate a hot growth area, especially among lawyers who take on the position as a full-time commitment.
From the 1970s and early ’80s on, law firms started bringing in chief executive officers, chief operating officers, marketers, human resources officers. “So maybe it was with a twinge of irony that the last or latest role created was general counsel,” says Richard H. Goshorn, general counsel of Akin Gump Strauss Hauer & Feld. “Law firms are staffed with excellent lawyers, but for the most part they tend to be specialized. You need to be a generalist, and it’s a different skill set.”
Though he considers himself a generalist, Goshorn, in the firm’s Washington, D.C., office, came from something of a specialty area himself:
He had long worked as a general counsel inside corporations, most recently with Acterna Corp., a public communications test equipment company. Goshorn joined Akin Gump in 2004.
“They came to the conclusion that this is the natural evolution in running a law firm like a business, and more and more they are like large businesses with many parallels to the corporate model,” says Goshorn, one of a relatively small but growing number of full-time law firm general counsel who came over from the corporate world.
At the outset, firms must determine the role, functions, compensation and areas of involvement for the general counsel, says James W. Jones, formerly managing partner of Washington, D.C.’s Arnold & Porter and now a consultant to law firms with Hildebrandt International in its D.C. office.
The role was new enough, and the questions numerous enough, that Jones started a regular roundtable gathering four years ago for law firm general counsel. That group, made up of lawyers from firms with more than 400 lawyers, meets regularly three times a year, and its membership has more than doubled. Jones recently started another group for smaller firms that meets twice yearly. The smallest ones have from 50 to 70 lawyers, he says.
“Risks have gotten more and more severe, and firms are realizing it makes sense to bring issues of conflicts, ethics, risk management, loss prevention and others together in a more centralized way,” Jones says.
Legal malpractice insurers certainly like that idea. When the Chubb Group of Insurance Cos. noticed in the mid-1990s that some big law firms had general counsel, its underwriters began asking specifically about such duties as part of its analysis.
For a law firm, showing that its general counsel has responsibility and authority to implement risk-management policies and procedures throughout the firm is key, says James Rhyner, worldwide lawyers-professional-liability manager for the Chubb Group.
“That’s one of many characteristics we assess in a law firm’s exposure that goes into determining the final premium,” says Rhyner, who works in Chubb’s Warren, N.J., headquarters. At first, mostly big law firms created general counsel positions, but more recently firms of 50 or more lawyers have seen a lot of growth in this area, Rhyner says, and some 20- to 30-lawyer firms are adding them.
He adds that law firm general counsel are good for lawyers to go to when a problem is developing and they might fear going to their supervisor about it. And the general counsel can help prevent malpractice claims in the first place, saving deductibles as well as time and effort by lawyers and staff to defend against them. “So it’s much farther reaching,” Rhyner says. “At the end of the day, they become more profitable.”