'Convergence' Can Benefit Law Firms as Well as Corporate Clients
After the apparent success of Tyco International’s grand experiment in legal cost-cutting in Europe, which is now in its second year, further innovation is expected both from Tyco and other major corporations.
The “convergence” model applied by Tyco, which DuPont is credited with initially adopting more than a decade ago, calls for a corporation to use a small number of outside law firms to keep legal costs under control. But the partnership, which required Eversheds, Tyco’s primary European law firm, to take on a lot of work under unusual fee arrangements and initially got off to a rocky start as Eversheds was deluged with new matters, has some potential long-term benefits for both law firms, writes Legal Week.
“The two-way partnership ties the firm to the client but, just as crucially, ties the client to the firm. Through the first 18 months of the deal, Eversheds has built up detailed inside knowledge of Tyco and the specific risks it faces. Changing outside counsel now would mean that Tyco has to go through the arduous process of educating a new firm. Breaking up has suddenly become a lot harder to do,” the legal publication writes.
The lengthy article discusses in detail fee agreements in the Tyco-Eversheds partnership.
One expectation is that the arrangement covers relatively routine legal work, rather than bet-the-farm matters that may call for specialized expertise and for which representation would presumably be separately negotiated. Eversheds is welcome to seek to pursue such matters, Legal Week writes, but might not necessarily get the nod: General counsel still expect to turn to elite magic circle firms in London or top-of-the-line Wall Street firms when the future of the company may rest on the result in a single case.
As Jomati legal consultant and former ICI general counsel Michael Herlihy puts it: “When it comes to major strategic matters, a general counsel still wants to pick the best horse for the course.”
Other companies that are also trying a Tyco-like arrangement for outside legal services in Europe include U.S.-based Honeywell International and Brady Corporation; the Linde Group, in Germany; and Nestle, the Swiss chocolate maker.
Related coverage:
ABAJournal.com: “Outside Law Firms Still Don’t Get It, In-House Counsel Say in Survey”
