A survey published in the ABA J., Vol. 95, Jan. 2009 at 12, drew responses from an astonishing 14,307 attorneys – “more than 1.3 percent of the nation’s 1.1 million lawyers.” The survey results about predictions for the economic future don’t matter for this blog, but always read the footnotes!

The methodology footnote explains that twelve percent of the respondents self-identified as “in-house counsel” and nine percent as “government lawyer.” I regard government lawyers, who work in law departments just as much as do lawyers who are employed by corporations (or for that matter partnerships or non-profits), as “in-house counsel.” If true, then about 21 percent of this massive slice of American lawyers are “in-house.” That statistics bolster previous estimates about the number or percentage of corporate lawyers employed in the United States (See my post of Sept. 25, 2005: ACC data; Dec. 3, 2006: Fortune 500 staff figures; and Dec. 11, 2006: estimate of 10% in-house.).

Addendum to inside-outside comparison of interdiction. The advantages of inside lawyers and outside lawyers differ in terms of identifying and stopping wrong-doing (See my post of Dec. 27, 2008: Ron Pol quadrants *1.). My point on one perspective was that “I give a strong edge to the partner, because putting your job as inside counsel on the line to blow the whistle on a powerful executive deters you much more than the risk a partner faces of losing part of her legal fees in the future.” Ron Pol wrote with a thoughtful point: “This edge is perhaps less than it once was. With large law firms especially, and modern compensation models based more on individual earnings than traditional lockstep, individual partners face greater pressures to be ‘team players’, narrowing the gap between inside and outside counsel’s willingness to interdict/prevent wrongdoing.” Ron also gave the email of the author of the original article. skim@swlaw.edu

US legal outsourcing projected to reach $2 billion by 2013. Based on a recent survey and “some conservative assumptions, five years from now Ron Friedman on Dec. 9 estimates that U.S. corporate law departments will spend about 3% of their budget on legal outsourcing. This translates to US legal process outsourcing (LPO) spending in 2013 of almost $2 billion.” Ron Friedman posted this on Dec. 9, 2008. I mention this item both for its estimate of the LPO market and its implication that US law departments will spend in 2013 about $60 billion on, presumably, outside expenses.

FASB proposes a controversial requirement to disclose forecasts of maximum exposures to individual lawsuits. The Financial Accounting Standards board has shaken general counsel around the country by its proposed changes to statements No. 5 and No. 141(R). “The new rules would require a company to provide its best forecast of the maximum possible exposure to loss from litigation or the impact of mergers.” An article in the ABA J., Vol. 95, Jan. 2009 at 12, describes the firestorm of opposition to the change. Without knowing much about this area, it certainly seems that the disclosures would be layered with disclaimers and would have to give inflated guesses (See my post of Nov. 9, 2009: FASB rule change regarding expensing legal fees.).

A professor and a researcher collected court orders for professional fees in 101 bankruptcy cases and performed a regression analysis that unraveled the factors that went into the bankruptcy judges’ awards of fees. The article about this study, in ABA J., Vol. 95, Jan. 2009 at 12, mentions such factors as the bankrupt’s assets, the duration of the case, the length of docket entries, and the number of professionals. The statistical tool determined which factors made the most difference in the fees awarded and their relative contributions.

Multiple regression has and could shed light on many aspects of law department management (See my post of Aug. 14, 2005: regression analysis; Feb. 4, 2008: regression analysis of customer arbitrations; Aug. 27, 2005: litigation application; Feb. 12, 2008: make-buy efficiency curve; May 11, 2008 #2: correlation squared and the F-statistic; and June 26, 2008: lawyer experience against staffing levels and spend.).

The research, co-authored by Joseph Doherty (UCLA Law School’s Empirical Research Group), also confirmed a scale effect in bankruptcy fee awards: fees paid out end up being a declining percentage of the assets of the reorganized company as the assets grow larger. Perhaps the decline occurs for reasons that are similar to those that explain the decline in total legal spending as a percentage of revenue as companies grow. Reasons for the percentage shrinkage appear in my article in Legal Times, Jan. 28, 2008 (See my post of Feb. 6, 2008: decline of TLS with increased size.). The similarity of assets to revenue and professional fees to outside counsel fees seems plausible.

Many posts have appeared on this blog about guidelines for outside counsel (See my post of July 11, 2008: guidelines for outside counsel with 16 references; and Aug. 5, 2008: reservation of rights to review bills.).

Those musings and my recent consulting projects led me to write about five problematic issues in the standards set for outside counsel. Download 08-12- Rees Morrison guideline hot buttons NYLJ I had previously written about two styles of guidelines. Hardline or softline on outside counsel guidelines (Can. Corp. Counsel Assoc. Fall 2007 at 10) and about guidelines compared to engagement letters. Click here for PDF. Download Rees Morrison Hard or Line on Outside Counsel Guidelines Download Rees Morrison Outside Counsel Guidelines vs Firm Engagement Letters

A dream I have is that every back reference on this blog (“See my post of Dec. 31, 2008: something.)” is a back reference)) were hyperlinked to the previous post and every post shows at the bottom the posts later on that cite it – forward references. This soup of ideas would be immediately navigable.

More than ease of movement, such linkages would allow me to ferret out genealogies of posts – what posts relate to each other and how closely. To get a feel for this mapping, I did a small one. I took the final three posts in my Productivity category of my first 3,000 posts. Two posts were on Feb. 7, 2008 and one was on Feb. 4. One post had four back references, which together had one back reference, as well as one forward reference. A second post had six back references, which had three of their own, and one forward reference. The third post (Feb. 4) had five back references, which in turn referred back to a total of four posts, and it had two forward references. (I noted only two instances where a second generation post referred to a first generation post.)

Being a quant jock, I assigned five points to each first generation back reference or forward reference, and three points to each second generation reference (where a first generation reference post cites another post). On that basis, the first productivity post scored 28 (4*5 for 1st generation back references, plus 1*3 for second generation, plus 1*5 for first forward reference). The second productivity post scored 44 and the third scored 27. Now I have a handle on how to describe my “postal community” and to compare one post to another on number and relatedness of predecessors and successors.

General counsel have squeezed to wring out law firm expenses, but new data suggests the sponge will keep expanding. The American Lawyer obtained survey responses from managing partners and firm leaders at 112 US law firms, Am. Law., Vol. 30, Dec. 2008 at 93. “Ninety-eight percent of respondents to our survey said that their rates will be higher next year, though 63 percent said the rise will be 5 percent or less." Who knows if the ravages of the economy will temper those higher charges.

One managing partner defended the rate increases on the basis of service and value: "The raw rate issue is lower on the scale than what kind of service and value the firm is providing." Translated: “Our clients may wring their hands, but not us.”

A final note. "Seventy-five percent who responded to the survey said that their clients are requesting discounts.” That flaccid statement helps very little. I wish there were data on the level of discounts sought, the percentage of fees that might be subject to the discounts, and the percentage of fees actually subject to discounts at different levels. Am I greedy for data or what?

Here is a double handful of questions that ought to be covered during a demonstration or presentation on software (See my post of Nov. 5, 2007: get more from software demos; Jan. 19, 2008: scripts for presentations by law firms; and April 27, 2006: five ways to improve demonstrations.).

1. What is the user base and how has the number changed in the past few years?
2. What can a user configure as compared to what requires customized code or pre-installation modifications?
3. How will you convert our existing data into your system?
4. What reports come with the system (“canned reports”)?
5. What will it cost for us to license the software, all in, and what modules come with that fee?
6. How many full-time equivalent people provide support and training for the package?
7. Is there a user group, and who leads it?
8. What is a plausible implementation schedule for our law department?
9. What improvements do you anticipate providing in your next release, and when is it due?
10. How can you assure us about the financial stability of your company?

As part of a strategic planning process or an effort to make headway on a problem, many general counsel try brainstorming (See my post of Nov. 28, 2005: mind-map software helps brainstorm; Dec. 9, 2005: Delphi technique; Oct. 30, 2006: have rules and push participants to prepare ahead of time; Nov. 25, 2006: more techniques to improve brainstorming; and July 21, 2008: brainstorming in groups and with individuals who join them.).

What general counsel may not know, however is “that classic tool introduced by Alex Osborn in 1948 has been proved in a number of studies over the last 20 years to be far less effective than generally believed,” NY Times, Dec. 7, 2008 at BU3. Part of the criticism stems from findings that “have shown repeatedly that individuals working alone generate more ideas than groups acting in concert.” Tossing out an idea for public consideration generates fear of failure, perhaps more acutely among cautious lawyers (See my post of Aug. 24, 2008: lawyers and risk averse behavior with 11 references.). Also, lawyers who want to advance their own agenda may keep their best ideas to themselves until a more opportune time (See my post of Oct. 2, 2008: competitiveness with 29 references.).

In place of benchmarking, the article recommends that general counsel break down processes into separate components, then study and improve those components to find other potential uses. The method is called “systematic inventive thinking.” Imagine analyzing the current process in a law department for selecting law firms, isolating its steps and decisions, and refining or changing them. Innovation is, after all, a continuous process of small and constant change.

A recent piece by David Hechler, Corp. Counsel, Dec. 22, 2008, offers some details about the nascent – more like adolescent – industry of legal process offshoring (LPO). He spotlights UnitedLex and its CEO, Daniel Reed, and co-founder, Ajay Agrawal.

UnitedLex employs about 240 Indian lawyers. Those lawyers have earned their degrees either by completing a three-year program after college (as US lawyers do) or a five-year program after secondary school (like a joint BA-JD degree). What differs from the US is that Indian lawyers do not have to pass a bar exam.

Hechler’s piece stresses the careful hiring practices of UnitedLex and its emphasis on both training and supervision, including supervision by two U.S. patent attorneys. The article says that the sweet spot of LPOs are “repetitive tasks that can be taught on the front end, and measured for accuracy on the back. Not all companies have it, or have it in sufficient volume to justify offshoring.” Some of the examples in the article include proof reading patents, checking trademarks for renewal dates, reviewing warranty agreements, prior art searches, invalidity analyses of patent infringement claims filed against a company, and patent landscape analyses.

“Firm partners are commonly consulted when a company is considering shipping tasks overseas because, whether it’s patent research or litigation support, they have to work with the product that offshore shops like UnitedLex Corp. or Pangea3 LLC deliver.” The quote comes from an article of Corp. Counsel, Dec. 22, 2008 (David Hechler)

I have not heard that law department lawyers “consult” with partners at firms if the in-house group decides to use legal research firms, consultants, litigation support vendors, legal writing specialists, forensic experts, or other services. Ultimately, an in-house lawyer has to vouch for the quality of the work done by the unbundled service provider, including offshore legal-service providers. Outside counsel may have views about any of those resources, but I certainly hope they do not feel they must routinely and duplicatively review their work for quality.