While law firms drink by far the largest draught of law department spending, many other vendors draw from the same well (See my post of April 18, 2005 on the cottage industry and April 2, 2005 on unbundling.). What is the legal ecosystem’s revenue?

If US law departments pay vendors on the order of $100 billion a year, approximately 10 percent of that covers law firm disbursements and the costs of non-law firm vendors. Very loosely, that amounts to $10 billion a year. Most of that expense, we all recognize, is travel and lodging. Perhaps 10 percent would be other vendors who provide products and services to law firms.

Another tier consists of vendors who sell not through law firms but directly to law departments. Examples include stationers, CLE providers, expert witnesses, software companies, publishers, consultants, and many others who operate symbiotically with law departments.

More accurately, we should consider the law department cottage industry as those vendors who focus on the legal market as a recognizable segment. For that reason, I would not include coffee makers, airlines, hotels, taxis, or bottled water dispensers. The largest cottages, in terms of dollars spent by law departments, are inhabited by litigation support services, expert witnesses, and software providers. Legal research commands a chunk of spending as do CLE providers.

"Culture always expresses itself in specific values and observable, measurable behaviors." Willie Pieterson, Reinventing Strategy: Using Strategic Learning to Create & Sustain Breakthrough Performance (John Wiley 2002) at 65.

Pieterson explains his onion model of culture in which the inner core includes “underlying assumptions,” the next level out the “values” -- "beliefs as to what is important and what is not, what is right and what is wrong, what makes for good life, success, and so on.” The outer layer of the onion has “behaviors and artifacts,” the only manifestations of culture visible to the naked eye (id at 149)(See my post of Nov. 16, 2005 that expresses misgivings about the term “culture.”).

What are some ways to identify and describe your law department’s culture? You can measure your law department's cultural values and behaviors through periodic surveys. Consultants -- especially those with an ethnographers bent -- can observe what goes on and can discern deeper values. Some 360-degree feedback surveys delve into components of culture. A fourth tool is your performance appraisal processe. Mission and vision statements, as well as the welter of your operating policies, likewise give insights into the onion. The stories told about the law department’s past, whether real or apocryphal, crystallize its culture. Finally, psychometric instruments, such as Graves, delve into this murky area (See my post of Feb. 7, 2006 about values.).

(1) Some severance agreements contain broad non-competes. Many courts refuse to enforce unreasonable limitations on employment.

(2) Some severance agreements contain broad non-competes, but many courts refuse to enforce unreasonable limitations on employment.

(3) Some severance agreements contain broad non-competes; many courts refuse to enforce unreasonable limitations on employment.

(4) Some severance agreements contain broad non-competes. But many courts refuse to enforce unreasonable limitations on employment.

Variation (2) uses a familiar comma and coordinator before what has now become a clause. In (3) the more formal semicolon serves as the coordinator, while (4), more unusual and stylish, commands attention to the second sentence by starting it with a conjunction.

Do any readers know of in-house counsel who teach at either a business or law school? If you teach, you learn, so to carry one’s practice to academia should be something that some corporate lawyers relish. But I have not heard about any instances of corporate lawyers who moonlight in the classroom. Please let me know by e-mail .

"We tend to assume that old thinking is somehow bad and new thinking is axiomatically good." This quote comes from Willie Pieterson, Reinventing Strategy: Using Strategic Learning to Create & Sustain Breakthrough Performance (John Wiley 2002) at 7. This predilection blocks us from identifying what's important, as compared to what is trendy and new. Much of what we take as new thinking merely dresses up old ideas as new or is simply faddish.

Best practices for law departments crop up like fads, and appear to be something novel and different – knowledge management, e-billing, convergence, outsourcing, offshoring – but old and tested thinking, if well executed over time, may well cross the finish line first.

My beef with billing-rate discounts is that law departments cannot know whether they are getting steak or mad cow disease. With discounts, if they be smaller plates, will some people just go back to the buffet more? Why should such a blunderbuss technique be esteemed so highly? If billing rates accurately reflect the abilities and experience of the lawyer (See my post of March 12, 2006 on differential billing rates.), what justification is there -- other than volume of work -- for a law department to request a cheaper price?

Fundamentally, to chisel a few hours off of the billing rate is to leave intact the essential cost-plus basis for law firm billing, with all of its perverse incentives.

John A. Lassey, a partner in Wadleigh, Starr & Peters, of Manchester, NH added a thoughtful comment to my post of March 12, 2006 about variable billing rates for the same lawyer, according to the usefulness of the lawyer’s task to the client.

Perhaps assignment of different rates based upon the Uniform Task-Based Litigation Support Code Set. Not perfect, but a step in the right direction. Another (lesser) approach might be to negotiate different rate schedules for different levels of difficulty for the matter as a whole. I.e., charge lower rates for matters for which the pool of competent counsel available is larger (e.g., "nail and board" or intersection collision cases) and higher rates for matters for which the pool of talent is smaller and/or the stakes higher (e.g., products liability or "bet the ranch" anti-trust litigation).

Ken Khoury, the new general counsel of Weyerhauser, speaking to the Corporate Counsel Section of the State Bar of Georgia in December 2005, recommends "outside law firms implementing gradations of billing rates, adjusted for seniority and expertise."

The law department industry may see in the coming years various elaborations and experiments on nuanced billing rates.

Inside lawyers have very little individual incentive to reduce the amount paid to the law firms with which they work. It is a principal-agent clash (See my post of Jan. 16, 2006 on this concept; but see my post of Aug. 27, 2005 on Waste Management and its lawyers hewing to their budgets.). The threat to lose their job just isn’t credible. Let me overdo some metaphors to drive home the point that general counsel may need to hit budget, but the underlings care little or not at all:

Lawyers at the coal face dislike digging at bills, questioning time and levels, challenging disbursements -- ore otherwise. That effort is the seamier side of managing outside counsel; it’s the pits.

Lawyers in the trenches don’t want to fight with the law firms they rely on, especially hand-to-hand about costs. That is going over the top, to put it trenchantly.

Lawyers on the firing line don’t want to shoot the lawyers they like, respect and need. Nit picking guidelines trigger a bad reaction and is no ones targeted task. Tell them to aim elsewhere and they will say “bulls-eye!”

Lawyers who tote that bale hate heavy-duty responsibilities to lighten fees and like to be able to offload to law firms. While the sun shines, make hay not budgets.

Figuratively speaking, if you expect Chris Counsel to be galvanized into cost-cutting effectiveness, that
spark won’t arc the gap.

Under the model rules of conduct, it is normally inappropriate for a law firm to allow its timekeepers to charge clients for time they put into preparing bills (See John W. Toothman and William G. Ross, Legal Fees: Law and Management 44 (2003) and its citation to Restatement (Third) The Law Governing Lawyers, Sec. 38(3)(a)). Billing is an administrative necessity of a firm, a cost of business covered by billing rates, not a valued service to the client, and may not be charged. As Toothman and Ross put it, “The distinction should be made between efforts to manage or run the law firm and those that are professional services rendered to the client.”

My question arises where the billing demands are extraordinary and spill over into analysis. Say if the law department demands that lawyers complete detailed, customized task codes, provide fulsome descriptions of what they did, sort the bills by two or three different criteria, break out all disbursements in detail, match current spending to budget, gussy it up with graphs and trend lines and statistics, and project spending in the coming months, would that abuse this proscription?

Bottomline Technologies, a vendor of a matter management plus e-billing system, takes a clear position on who should bear the cost of turnover within a law firm. According to the ACC Docket, May 2006 at 70, "If a lawyer leaves the firm, the firm must absorb the time incurred in bringing the replacement lawyer up to speed on the file. This time is nonbillable."

Although I am a staunch supporter of law departments, this fiat seems harsh. Associates leave law firms for many reasons that are beyond the control of the law firm; to saddle the firm with the full cost of replacing the departed associate is unfair. This situation is unlike churn, where a law firm uses a series of associates, or drive by billing where people plop in only an hour or two on a file.

Dare we wonder whether the client’s own boorish behavior might have precipitated the associates departure?