How Outside Counsel Can Provide - And Add - Value

Tuesday, October 4, 2011 - 01:00

Recently, when the United States District Court for the District of New Jersey ruled in favor of the plaintiffs in a leasing dispute, the plaintiffs claimed they were entitled to attorneys' fees and costs from the defendants. The court agreed, granting the motion, but it reduced the requested amount. It determined that the fees charged by both the plaintiffs' main attorneys and their local counsel were too high.

The plaintiffs had, in their complaint, compared their attorneys' rates and work product to those of my own firm, Gibbons P.C. In its opinion, however, the court disagreed with that comparison:

Gibbons[one] of New Jersey's most prestigious firms, [is] routinely called upon to work on complex and novel legal issues and their billing rates reflect this. Plaintiffs have failed to establish that in this case they were "performing work of similar complexity." Certainly, requesting nearly $200 an hour more than an average Gibbons attorney to act as local counsel for a routine case with no novel legal issues is unreasonable.

The court highlighted one of the key ways a law firm can provide clients value: by relying on cost-effective, well-prepared local counsel, familiar with the laws, procedures and judiciary of the relevant jurisdiction, for any matter venued in a location the firm does not have a presence. The plaintiffs' firm in the above matter undertook an unnecessary amount of the New Jersey work itself, despite being based in Washington, DC. While the firm provided sound legal counsel - it did, after all, win the original case - it did not offer true "value."

Value has been a buzzword in the legal industry for several years. The Association of Corporate Counsel issued its "Value Challenge" in 2008, encouraging firms to move beyond the billable hour to innovative fee packaging, lean staffing and other efficiencies. "Value billing" is the new catchphrase for creative, client-friendly billing options better known as "alternative fee arrangements." And in 2010, Drinker Biddle & Reath, currently ranked #73 on the AmLaw 100, became the first major law firm to hire a chief value officer, someone charged with incorporating the value concept into the firm's philosophy and culture; analyzing engagements to determine whether and how they provide clients value; and strategizing long-term value solutions.

At this point, most law firms, including my own, are not hiring chief value officers. That does not mean, however, that your law firm's key personnel - executive and management committees, attorney teams who staff client matters, and facilities, technology, knowledge management, finance, and marketing professionals - cannot all be value officers themselves, working together to ensure your outside counsel maximizes the benefits you receive simply by being their clients, above and beyond exceptional legal service.

At Gibbons, we have institutionalized the concept of value in numerous ways, large and small, that are easily replicable for firms of all sizes, including your outside firms.

Knowing Our Niche: Law firms should not try to be all things to all clients. Haphazard expansion for the sake of calling themselves "full service" leads only to waste and inefficiency. Despite the ongoing law firm consolidation trend, Gibbons has developed a "middle market" business model, to maintain our core identity and grow smartly as a regional force while remaining efficient, responsive and in touch with clients' legal and business needs. Our model is focused on offering high-quality, cost-effective middle-market legal services to Fortune 500 clients and middle-market businesses, handling major matters for mid-market companies (with annual revenues of $100 million to $2.5 billion) and mid-market matters for major companies, notably in the Mid-Atlantic. This unique positioning is a win-win: we are large enough to offer economies of scale, firm-wide resources and various other efficiencies, but small enough to provide personal, hands-on service and maintain extremely competitive rate structures.

Passing Savings on to You: Numerous cost savings have resulted from this kind of positioning. For example, when we developed our Mid-Atlantic middle-market growth strategy and recommitted to a Newark base of operations, we moved into custom-designed, modern headquarters that also saved us millions of dollars over the course of our lease, which we passed on to clients by adjusting rate increases accordingly. We addressed many other client concerns in designing our space. We built a moot courtroom to prepare lawyers and clients as thoroughly as possible for litigation and facilitate the most advantageous outcomes. Our conference center's leading-edge video and audio technology helps us close major deals that involve Gibbons attorneys across firm offices and client representatives throughout their own locations, saving huge amounts in travel costs. Additional savings we pass on to clients include what we save on energy and materials as a result of our "Gibbons Goes Green" initiative, our platform for an environmentally conscious workplace - a prime example of doing well by doing good.

What Have We Done for You Lately? An effective way for your outside counsel to provide value is to show you, regularly and clearly, exactly what you are getting from them. Request matter status reports via email at no cost. Ask that monthly billing reports include comprehensive detail on time spent on each matter, and specific activities undertaken during that time, by every matter attorney - but ensure that the client billing attorney has reviewed the report to confirm accuracy, work quality and timeliness, and the use of the most appropriate resources. If you prefer more frequent reports, request interim billing reports. Even better is if these reports are offered via electronic billing or individual, secure client extranets, either of which allows you to automatically analyze legal fees to ensure compliance with preset guidelines. And finally, you can request that your billing reports be customized to highlight specific fields and enable particular analyses, such as work by attorney level.

In turn, make sure you regularly offer your feedback. Your firm should solicit that feedback through casual but purposeful conversation, after-matter audits, or longer-term client surveys. A key component of the value proposition is giving clients what they want.

Sharing What We Know: Most states in the region have mandatory CLE requirements for all attorneys. Your outside counsel should offer your in-house counsel complimentary CLE programs and even custom, on-site CLE training, which, in addition to saving you professional development costs, result in greater productivity by maximizing in-house knowledge of emerging laws. All custom and general seminars and programs produced by our in-house training and educational platform, Gibbons Academy, are eligible for CLE credits. They also educate our attorneys on scores of relevant topics and up-to-the-minute legislative and judicial developments.

In addition, our automated, complimentary "kmAlerts System" actively monitors news, case law, business and legal issues, industries and docket events, delivered via custom reports to the appropriate attorneys and clients, immersing us in our clients' businesses to help us make significantly more informed, and therefore cost-effective, decisions. We also share knowledge, analysis, discussions and practical perspectives on developing legal and business news through our practice area blogs and newsletters, extranets and other resources available to interested clients.

Are They There for You? Would it make sense on some matters for your outside counsel to be on-site on your premises? Gibbons has participated in various secondment programs for clients, which have included providing lawyers and paralegals to numerous companies to work on the clients' premises for a variety of timeframes ranging from one month to several years.

More fundamentally, some of the most onerous expenditures law firms impose on clients occur when longtime matter attorneys leave and new matter attorneys need to be brought up to speed. If you hire the kind of law firm where employees want to be, you receive immediate value by enhancing productivity and profitability. Our firm's consistent ranking among the top 50 firms nationwide for working women by Working Mother magazine; the top 100 firms in the nation for diversity by MultiCultural Law magazine; and "Best Places to Work" - in America, New Jersey and Pennsylvania, by several noted publications and organizations - has led to an unusually low attorney turnover rate, a major benefit to clients.

Are They Looking for a Long-Term Relationship? Outside counsel can build economic incentives into your engagement to help ensure that it is ongoing and mutually beneficial. Year-over-year cost savings and productivity initiatives after the initial period of engagement might include, for example, the eventual implementation of appropriate alternative fee arrangements; packaging of certain services once everyone understands the typical scope of work; additional hourly rate discounts off annual billing for the extended period, or volume discounts off hourly rates, which are raised proportionately, with savings increasing along with the volume of work.

And About That "Value Billing" : There are several alternative fee options that can be implemented, even at the outset of a client engagement, to show good faith and encourage mutual trust and loyalty. These can include a "most favored client" rate , usually a pre-set, across-the-board discount off all attorney standard billing rates; task-based billing procedures , dependent on such factors as the size and nature of the matter, settlement prospects and other practical considerations; carefully considered fixed fees at which to perform all or select portions of the work associated with a matter; blended rates , usually involving one average partner and one average associate rate, or one single blended rate for all matter attorneys; and cost plus contingency billing or results-oriented billing , which might involve, for example, you paying a fixed fee or percentage of costs on a monthly basis, an agreed-upon interest accruing, and the balance due on verdict or settlement, with an agreed-upon successful result necessary with a results-oriented arrangement.

As a client, you view your relationships with law firms as investments in your business. Your outside counsel are partners in your business and, in a very real sense, co-investors. And as co-investors, they should recognize the value - of value. You can work with any of hundreds of high-quality law firms; it is the value they provide that makes you want to work with them.

Patrick C. Dunican Jr . is Chairman and Managing Director of Gibbons P.C., a 230-attorney firm with five offices throughout the Mid-Atlantic. He is a nationally recognized legal industry leader who was highlighted by Law360 in 2010 as one of the nation's most innovative law firm managing partners. He has also been named one of the 100 most powerful people in New Jersey business by NJBIZ and an "Entrepreneur of the Year" by Ernst & Young. He was elected Managing Director of Gibbons in 2004, at the age of 36.

Please email the author at pdunican@gibbonslaw.com with questions about this article.