Posted Jul 06, 2007 06:06 pm CDT
Major medical insurers have been leveraging their purchasing power for decades, negotiating fee discounts from medical providers by promising a large volume of business from insured individuals.
Now in-house counsel at major corporations are routinely applying similar tactics to legal providers, sending work to a smaller number of law firms in order to win bigger reductions in legal fees, reports Bloomberg. “The fewer firms you use, the more volume you can give them and consequently the bigger discounts you get. That’s what it’s all about,” says Peter Kreindler, general counsel at Honeywell International Inc., located in Morris Township, N.J.
Applying tactics pioneered by in-house counsel at Dupont Corp., in Wilmington, Del., in the 1990s, Kreindler has already cut the number of U.S. law firms his company uses for litigation, employment and intellectual property matters from 60 to 20. Now, he tells Bloomberg, he hopes use the same approach in Europe this year to win discounted legal fees there, too.
Although such discounting arrangements obviously can cut into law firm profits, they also provide a continuing supply of legal work that otherwise might go to competitors. Plus, proponents contend, they encourage efficient work by lawyers who are familiar with the company’s business, which benefits firms, too. In any event, major firms, including Chicago-based Jenner & Block, which handles litigation matters for Honeywell, and DLA Piper UK have agreed to participate, Bloomberg reports. Anton Valukas, a partner at Jenner, says bonuses the firm earns by winning cases offset discounted fees.