Advice from a long-time in-house counsel on arranging for external legal support.

Working with outside counsel can be frustrating, time-consuming, and expensive. But when done right, the advice and services outside counsel provide are invaluable. Through 20 years of trial and error, and after spending millions of dollars on outside counsel fees, I have learned how to identify, hire, work alongside, and sometimes terminate outside counsel in the best and most cost-efficient manner possible. However, doing so well takes time, patience, and an understanding of how outside counsel operate.

1. Pick the Right Lawyer

I often think of finding the right lawyer as like finding the right spouse. It is a decision many people rush into, only to regret later. And breaking up can be just as painful. As such, even though finding the right lawyer can be a time consuming, labor-intensive process, I always make it a priority, no matter how urgent the circumstances. To make it simple and speed up the process, I weigh eight factors:

• Specialization. I start by identifying the legal issue and then look for a specialist in that issue. Most lawyers have a depth of knowledge in one or two practice areas, which means that hiring a lawyer outside of their practice areas results in the lawyer 1) doing a less-than-perfect job, 2) learning on the job, usually at the client’s expense, or 3) relying on another lawyer to do the actual work.
• Length of Experience. Once I have identified the type of specialist, I then look for an attorney with the right amount of experience. A lawyer with 30 years litigation experience is overkill for a small dispute but is needed for a bet-the-company lawsuit. Properly leveling the assignment with the experience of outside counsel is also an effective way to manage costs.
• Problem-solving Ability. I look for problem solvers. I do not want a lawyer to give me a black-and-white reading of the law. I want a lawyer who understands the law and my issues, and is able to provide real-world solutions. However, this is not always easy. For cultural or historical reasons, some lawyers are only willing to advise on the current state of the law and leave the problem solving to the client. In those situations, I will usually opt to hire a more expensive attorney who has enough overseas education or work experience to be able to break out of their comfort zone.
• Large vs. Small Law Firm. When deciding between a large or small law firm, first consider the subject matter, since there are pros and cons for both. A large law firm is helpful for complicated matters involving multiple jurisdictions. But if a direct and personal relationship with your lawyer is needed, it may be hard to achieve with a large law firm. At the same time, a small firm may not have the available resources to take on a complicated case. Large firms often have bigger case- loads than small firms. Your case may get more personal attention at a smaller firm, which is able to spend more dedicated time working on your case. In a small firm, you are more likely to deal directly with the attorney you hire, while in a larger firm you may have several attorneys working on different aspects of your case.
• Ability to Get to the Point. Surprisingly, not all attorneys are good communicators. I look for outside counsel who get to the point quickly. Many lawyers over-communicate without communicating well, either because they want to increase their billable hours, are insecure about their ability to cover a subject, or just like to hear their own voice. Whatever the reason, the result is a waste of time and money. Usually these types of lawyers are easy to spot from the first engagement, since their response to your inquiry will be long-winded, off-point, or lacking in substance.
• Effective Communicator. Outside counsel should communicate in a way that is effective for the given audience. Doing so requires active listening, which is a skill that requires patience and humility, two things that some lawyers lack. But without it, communications break down quickly. When engaging with outside counsel, I look for attorneys who take the time to listen to what I have to say and absorb and remember it.
• Responsiveness. I expect outside counsel to respond to me within 24 hours, regardless of work hours. The response does not have to be substantive, but I want an acknowledgement of my message, information on the steps the attorney will be taking, and a timeframe for when I will receive the substantive response.

Usually an attorney’s level of responsiveness becomes apparent from the outset. If the attorney does not respond in a timely manner to my initial inquiry, I assume that is the attorney’s standard approach and will consider moving on to another attorney. If that is not a viable option, I will set out my requirements for responsiveness at the beginning of the engagement (see below) and require the attorney to adhere to them throughout the engagement.

• Style. Outside counsel should project the right image for your objectives. Attorneys have many different styles, personalities, and approaches to representing clients, and they should be able to adapt to your company. If you work at a manufacturing company with tight margins, you may not want an attorney representing you in a three-piece suit. On the other hand, you may want the attorney to exude success so as to intimidate others. Good attorneys judge the conditions and adjust their style and approach as needed.

2. Document the Relationship

No matter how small the project, get the terms of representation with outside counsel in writing. Legal matters can escalate quickly, and having to switch legal counsel mid-project because of a misunderstanding about terms of representation can cause significant damage both to the project and to the client’s reputation. The following are elements to consider including in the contents of an engagement letter:

• A description of the nature of the legal matter, and if possible, specification of the goals of the engagement (e.g. recovery of stolen funds, settlement of dispute);
• The hourly rate and minimum billable increment. Most lawyers bill in six-minute increments, but some bill in 15-minute increments, which can result in significantly higher legal fees;
• If possible, an estimate of the number of hours the case will take and any external factors which may increase or decrease the estimated amount;
• The expenses you will be responsible for, such as filing fees and phone or fax expenses;
• The amount of any retainer, how and when the retainer will be applied, and what happens if the retainer is depleted. The majority of bar associations prohibit attorneys from charging a retainer that represents more hours than a case is likely to require.
• Identification of preferred forms of communication. Failures in communication are one of the most common sources of friction between lawyers and clients. Phone calls are still popular, but some companies these days prefer e-mail or instant messaging for everyday communications.
• Mention of the client’s right to terminate the attorney, and detail the attorney’s obligations after termination. These obligations may include retaining the file for a number of years, and offering to copy the file (at the client’s expense) for the client and/or incoming counsel.

Note: Never agree to waive your rights to go to court (see Section 4 on ending the relationship). Most arbitration panels are made up of local attorneys who will favor outside counsel.

3. Working with Outside Counsel

Once outside counsel has been engaged, many people think their job is done. However, there are several aspects that require on-going attention, so make sure you receive quality legal services and at a reasonable cost.

• Open-ended Questions. Always avoid asking outside counsel open-ended questions. Some lawyers will respond to open-ended questions with a request for clarification, but other lawyers will default to the most comprehensive, and therefore expensive, option possible.
• Type of Work Product. Tell outside counsel the type of work product you want. As with open-ended questions, failing to indicate the type of work product you want can result in outside counsel opting for the most expensive option. For example, a question about whether a newly enacted law applies to the client could result in hours of research, phone calls to local authorities, internal discussions with other experts within the firm, and a long, detailed memo. In fact, many questions can be handled with a short email response.
• Do Not Hold Back Information. Sometimes clients are embarrassed about mistakes, or perhaps feel the best way to curtail legal fees is by holding back information from outside counsel. However, more often than not, this results in poorer legal services, and can result in increased legal fees, since outside counsel may be forced to later revise their opinion or work in a different direction.
• Do Some of the Ground Work. A good way to keep outside counsel focused as well as to curtail legal fees is to do some of the groundwork yourself. For example, by creating a timeline of events and collecting key documents, you can help outside counsel get up to speed faster and more efficiently.
• Take Time to Review the Bills. Frequently I find items in invoices from outside counsel that I feel are unclear or reflect potential over-billing. For example, it is not uncommon to find that two attorneys attended the same meeting, but recorded very different time increments. Such issues are easy to identify with just a quick review of the firm’s invoice and can alert you to potential over-billing.

4. Ending the Attorney-Client Relationship

The decision to cease using an outside counsel can arise for a variety of reasons, from resolution of the legal issue to dissatisfaction with the services being provided. In all cases, I advise keeping the termination as amicable as possible, even if the reason for terminating outside counsel is poor legal services.

If the reason for ending an attorney-client relationship is a poor fit, then the process should be simple and straightforward. Assuming there is an engagement letter, the question of how client files will be handled should already be covered. In any event, I always require a copy of the files, even if the matter is closed, simply so that I am sure I have a complete record. After that, all that is left is to pay the last invoice.

On the other hand, if the relationship has turned hostile, many clients in that situation make the mistake of using the same approach they would use for any other vendor and refuse to pay. However, if you owe outside counsel money, depending on local law, they may be able to require payment before returning your files to you. Or more drastically, they may choose to sue for the outstanding fees. If the firm takes the step of suing for fees, you will probably lose. As a general rule, judges regard people who decline to pay their legal fees with disfavor. In addition, law firms often have the manpower required to litigate without too much difficulty.

A better approach is to seek a reduction in fees if you feel you’ve been overcharged. Many firms will quickly offer a reasonable adjustment, especially if you can show the areas in which the lawyers charging you failed to provide reasonable services or overcharged for their services.

As a last recourse, non-binding mediation or arbitration are possible approaches, but still be prepared to go to court. Mediation and arbitration panels are dominated by the local bar, and will be predisposed to awarding in favor of their colleagues. Judges may have a similar disposition, but are supposed to be impartial, so you are more likely to get a better result.