In-House Counsel, Law Firms Diverge Over Costs

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By Yin Wilczek

Aug. 14 — There appear to be many points of disconnect between corporate counsel and external law firms when it comes to outsourcing legal work, according to a recent survey.

The biggest disparity occurs in the management of costs and expenses, the survey by the International Association of Defense Counsel found.

According to the survey, corporate attorneys' biggest challenge in working with law firms is the “unpredictability or improper management of costs and expenses.” On the other hand, law firm respondents cited the delay in bill processing, unreasonable rate levels and staffing limitations as the biggest challenges in working with in-house lawyers.

The survey, released in late July, polled 689 attorneys between March 25 and April 18. Of the total, 386 were corporate lawyers, while 303 worked for law firms or were in private practice. The IADC said the survey was conducted to get a better picture of the trends in the outsourcing of legal work.

Recent Interviews 

The survey's findings on costs and expenses are borne out by Bloomberg BNA's recent interviews with general counsel.

For example, Abercrombie & Fitch senior vice president and GC Bob Bostrom told BBNA that law firms—to be “true partners” of their corporate clients—must be willing to come up “with acceptable fee arrangements”.

“There has to be a relationship that works for both sides, one that reduces costs for the client, but also provides a fair return to the firm for the value of their services,” Bostrom said. “That's always the challenge, and I don't think there's any magical elixir.”

More recently, Edward Paulis III, assistant GC for Zurich North America, told BBNA that he didn't appreciate “when outside counsel's aggregate billing is high relative to the exposure that the company faces”.

Amount of Work 

Meanwhile, the IADC survey found that another area of disconnect is in-house counsel and law firms' estimation of the amount of legal work being outsourced. According to the survey, over half—53 percent—of corporate respondents said the amount of legal work directed to outside counsel increased in the past 12 months. In contrast, only 27 percent of outside counsel said the amount of work sent to their firms has increased over the last year.

Moreover, while 47 percent of corporate attorneys said they expect an increase in the amount of work to be outsourced over the next 12 months, only 28 percent of external attorneys expect an increase.

However, in-house and law firm respondents do agree on one issue—that specialized expertise is the main reason to hire external counsel.

Separately, a recent Robert Half Legal survey found that law firms are facing an increasing need for specialized knowledge as clients continue to beef up demand for experts in particular practice areas. The Robert Half Legal report predicted that demand for experts will increase in areas such as:

  •  insurance defense;
  •  health care;
  •  intellectual property; and
  •  advanced technologies, including robotics laws.

 

To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bna.com

To contact the editor responsible for this story: Seth Stern at sstern@bna.com

The survey findings are available at http://www.iadclaw.org/assets/1/7/IADC_Survey_Release.pdf.