To what degree should a law department get credit for releasing reserves?

The law department weighs in when the decision is whether to create a loss reserve and for how much. No company should give its law department an incentive to inflate reserves, even though auditors would check such a manipulation.

Certainly, reserves could be one part of total legal spending. But whether law departments should be able to take credit for a reduction in reserves is problematic, as is true with whether they should get credit for recoveries (See my posts March 12, 2005 on a law department that funded its matter management system in return for reductions in reserves; of Nov. 25, 2005 about whether law departments should manage settlement funds and recovered amounts; Feb. 8, 2006 on DuPont’s collection efforts; Nov. 28, 2005 and Feb. 16, 2006 on IP recoveries; March 15, 2006 on litigation recoveries; March 28, 2006 on profit centers and EMC; March 17, 2006 about Autodesk’s; March 15, 2006 on insurance reimbursements; but May 19, 2006 on the problematic side of crediting recoveries.).

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