Groundhog Day: “In-House Counsel Concerned They Are Spending Too Much on Outside Counsel”

THE POINT

As former general counsel and legal innovator Jeff Carr tweeted the day after the above headline:

“OMG!… Wait, didn’t this story run in 1998, and 2001 and 2008 and 2014 and, well every year there’s a survey? Oh well, might be a slow news day.”

DISCUSSION

This is old news. Really old news. Though I guess it doesn’t hurt to run a survey for current, empirical confirmation.

According to a corporate general counsel group called “In the House” and LegalBillReview.com, 73% of in-house counsel believe their legal department are spending too much on their outside counsel.

Chris Colvin, head of “In the House”, offered some context:

“He noted that the survey was sent to in-house counsel before the pandemic caused by the new coronavirus began. He said he expects the number of in-house counsel who think they are spending too much on outside counsel would increase if the survey were done today.”

…

Between 2002 and 2013 Jeff Carr was General Counsel of FMC Technologies, then a Fortune 500 corporation, where he cut legal spending by one-third as his company grew four-fold. In 2018, as general counsel of another Fortune 500 corporation, Univar Solutions, Carr launched a new effort targeting a 50% cost reduction in a reported $10.5 million legal budget.

For Carr, two factors drive companies to pay too much for outside counsel:

1. Lack of serious, systematic preventive efforts, and

2. Hourly billing.

On the first, he counsels (and at FMC Technologies and Univar Solutions he implemented) management protocols aimed at avoiding liability and regulatory jeopardy — for instance, after-action reviews among frontline employees and managers after a legal problem flares up.

On the second, Carr is relentless in advising engaging outside lawyers through alternative fees — “budgets with consequences” as he calls them — to replace the wasteful consequences of paying attorneys by the hour. For instance, at FMC Technologies, when he began in 2002, 80% of outside counsel fees were based on hourly billing — when he ended his service there in 2013 — that number was 20%.

…

In the years Jeff Carr recited in his tweet — 1998 and “every year there’s a survey” — most company legal risk functions have failed to adopt his twin go-to moves running a legal risk management function.

Until that happens, headlines like the one featured above are likely to continue.