Law Department Management Successfully Managing Relationships Between In-House And Outside Counsel

Saturday, May 1, 2004 - 01:00

The Editor interviews Lawrence F. Shay, General Counsel, InterDigital Communications Corporation; Theodore M. Weitz, Vice President and General Counsel, ITXC Corp.; and Daniel A. Winkler, Director Claims Legal Support Services, Westfield Insurance.

Editor: What is the nature of your company's business, and how is your legal team organized to support it?

Shay: Founded more than 30 years ago, InterDigital has been involved in some of the earliest wireless technology. Continuing in the vanguard, we have been involved in the development of the current generation of wireless technologies, 2G and 2.5G technologies, as well in the emerging 3G technologies. We have relationships with household-name companies, such as Nokia, Ericsson, Sony-Ericsson and the like.

Our team of eleven lawyers is divided between two distinct areas. One group handles patent licensing, which is headed by Bill Merritt, our General Patent Counsel. All the other legal issues that you would anticipate arising on a day-to-day basis in the typical setting of a publicly traded company, as well as the technology development agreements, are handled through my group.

We are all located at our corporate headquarters in King of Prussia, Pennsylvania, and serve the company's facilities in Melville, NY, Melbourne, FL, and Montreal, Quebec.

Weitz:Headquartered in Princeton, NJ, ITXC is in the vanguard of telecommunications industry, having grown from a startup a few years ago to the point where we complete a substantial portion of all international calls, using the public Internet as our transmission medium, with technology commonly called Voice over Internet Protocol or VoIP. Our customers are carriers, rather than end users.

We are in the process of merging with Teleglobe, a larger traditional telecommunications company originally based in Canada.

Like Larry's legal team, we address the wide range of routine sales and procurement contracts, employment, securities and other legal issues that typically arise in any publicly traded company. We also handle the government relations and compliance issues related to the complex regulatory environment overlaying the telecommunications industry, and issues like mergers and acquisitions.

Winkler: Westfield Insurance is a regional insurance company conducting business in 17 states and headquartered in Westfield Center, Ohio. We were founded in 1848 and have been doing business for more than 155 years.Our claims department includes not only claims representatives in the various territories in which we do business, but also various support units including the claims legal support unit which is the area that I am responsible for. My responsibilities include the facilitation and oversight of our outside counsel roster and our litigation management approach to ensure that we are providing an effective and efficient product for our policyholders.

Editor: Do you often interface with outside counsel?

Winkler: Yes. We have approximately 160 firms on our approved counsel roster for representation in both areas that we directly write business in as well as other territories where we are involved in litigation. Our approved firms consist of accomplished lawyers with whom we partner to achieve the best results possible in servicing our policyholdersneeds. The firms' sizes range from large to small, but I believe that it is fair to say that most firms fall within the range of five to twenty-five attorneys.

Shay: Yes. For many years, we have worked with Pepper Hamilton LLP in Philadelphia on general corporate matters. On employment matters, I have worked with Jonathan Segal of WolfBlock, also in Philadelphia. His employment law practice focuses on preventive counseling, training and policy development as well as resolving adversarial proceedings.

We use other high-profile firms throughout the country, particularly in the patent arena, to complement our internal team. We look for the best lawyers with strong technical, as well as legal, expertise to help us not only in the legal proceedings, but also in licensing, development and other agreements to protect and maximize the value of our portfolio of leading-edge intellectual property assets.

Weitz: We work with outside counsel very often and on some issues almost continuously.Philosophically, I view the role of in-house and outside counsel as complementary. Typically, the in-house counsel has much more familiarity with the company's history and business objectives. Because of day-to-day interactions with the business team, the in-house counsel knows the issues and the context in which they arose. The in-house counsel also has a long-term stake in their resolution. The outside counsel, by and large, has the subject matter expertise on particular issues which it does not pay for a company to develop in-house, particularly in a small legal department.

Editor: What contributes to a successful relationship between in-house counsel and their law firms?

Shay: Being a high-technology company, we look for outside counsel with a thorough understanding of our industry and technologies. This knowledge requirement provides a solid foundation for good communications. It helps our outside counsel communicate with our engineers who do not have law degrees, as well as with the attorneys in our patent licensing group, many of whom have engineering degrees.

Winkler: We believe that trust is the fundamental starting point of any professional relationship. If that element is not nurtured appropriately, then problems are guaranteed to arise.To assist in that effort, both the carrier/client and outside counsel need to have a willingness to understand each other's business and to engage in open, honest dialogue.Once that takes place, the relationship truly becomes a strategic partnership with a focus on outcome oriented results.

Weitz: The biggest factor is setting expectations. I make clear to outside counsel how much effort I anticipate needs to go into a project in what time frame. For matters that need to be done quickly, I understand that the law firm will not deliver as much polish as under different circumstances.

I have enjoyed an excellent relationship over a long period of time with the lawyers at Lowenstein Sandler PC. They are very good at matching the delivery of their services to my expectations. They do an exemplary job.

Editor: What techniques do you find most useful in managing your relationships with your outside counsel?

Weitz: Success in setting expectations begins with understanding what I expect myself. Oddly enough, many corporate counsel fall down in this area. Without clearly thinking through what they want, they (not surprisingly) find outside counsel unable to discern what is expected.

The next step is to discuss with outside counsel what is expected and not simply to say, "Take care of this issue." Ultimately, the responsibility for all legal matters within the company is my responsibility. I know that and so do outside counsel because I make the expectation clear of what needs to be reviewed and at what depth.

I believe in hiring an individual within the context of the firm. Both are important to me. I want a person to be responsible; I never want to be just a firm client for which a young associate says, "I'm not sure what I did today. Where do I bill my time?" I want the outside counsel to feel a personal connection to my company.

Hiring an individual who charges a low rate but does not have the support of a first-class law firm can result in false economy. When an issue is addressed with the resources of a law firm like Lowenstein Sandler, the attorney handling our matters can talk with any of the many experts in the firm with the depth of experience to render advice much more cost effectively than an attorney who has not seen the issue before and does not have experienced colleagues readily at hand to add their quick advice.

Shay: Open, constant dialogue is critical. It is important to us that our outside counsel is available to us at any time during the business day. E-mail, Blackberry devices and wireless communications all help facilitate our communications.

Winkler: We try to keep our lines of communication open, as well. We, of course, discuss factual and legal developments related to the specific matter at issue through various reporting channels. We also provide updates to our law firms when internal company procedures take place that may impact our approach.

In addition, we evaluate our firms using a performance management assessment approach. One piece of the assessment includes the completion of a counsel report card which is completed by our claims representatives in which the firm/attorney is graded on a variety of areas. The overall assessment also incorporates other data from the matter at hand including results achieved and general observations. We provide the assessment report to our law firms and invite feedback.

Additionally, we host an annual event for our firms at our home office that recognizes our "top 30" performers. It is our hope that by having a formal recognition program we are able to thank our counsel for a job well done and to continue to enhance the relationship that we enjoy with them. Examples of our law firms that are consistently recognized as outstanding performers include the Davis & Young law firm in Cleveland, Ohio and the Cardelli, Hebert & Lanfear law firm in Royal Oak, Michigan.

Editor: How does technology help you manage your relationships with law firms?

Winkler: We have been using a matter management system from TyMetrix for about two years.We customized its off-the-shelf product to meet our needs and have been very pleased.

In the past, a tension between carriers and their law firms pervaded the industry. We have been working with our law firms to sustain the trust that has long characterized our relationships. As we embrace best practices for the benefit of all involved, we have been seeing a positive impact of the TyMetrix system in not only enhancing our communications with our law firms regarding invoicing issues but providing a technologically advanced approach for file reporting information as well.

The TyMetrix system also includes reporting capabilities that enable us to generate pretty much any report that we would like. Our focus at a high level has been on trying to measure those items that aid our value-added analysis. Rather than gathering knowledge based only on volume, we are focusing on the drivers of legal costs and outcomes and striving to identify best practices in order to achieve repetitive success.

As we talk with our law firms about their performance, we use the data from the TyMetrix system to allow us to move from anecdotal examples to more genuine coaching opportunities based on specific detail.From there, our measure of success is in establishing an approach in which our claims personnel and our counsel are truly aligned in order to maximize the benefits of the relationship and continually provide outstanding results.