Should a general counsel be concerned about “capture” of its primary firm?

No, I say, although a purist would say yes.

In the 2011 supplement to Bob Haig’s Successful Partnering Between Inside and Outside Counsel, the Section 1:2 addition (at 4) mentions that “Enron’s principal outside counsel [Vinson & Elkins] in the year 2000 reported that seven percent of the firm’s revenue was derived from Enron.” The authors extend the point to note the issue “at what percentage of the firm’s revenue is the firm truly independent.”

When fees paid by a major client reach a sizable-enough level, firm management ought to be concerned, if only for the financial stability of the firm. Whether the general counsel of that client should worry, I doubt. I haven’t heard of a general counsel who frets that a primary firm paid millions of dollars might have lost some edge of objectivity because it is beholden (“tethered by tender”). That the firm is so reliant on the flow of fees it loses some at-a-distance professionalism and toughness – this doesn’t come up. Indeed, capture helps the capturer.

Two other points deserve mention. The same question can be asked even more tellingly about individual partners who service a major client of a firm. If their compensation and clout in a firm depends crucially on fees from that client, are they “truly independent”? This is not to say that partners bend to please, or turn a blind eye to wrongdoing, one hopes not. But if your major client, your compensation- and career-decider puts pressure on you, spines have been known to slump, lips to quiver, and eyes to blink.

Second, the notion of “partnering” clouds, when you think about it, with issues of objectivity and independence. The more intimate and familiar the law firm, the more its interests are inter-twined with the fortunes of its client, the less it might stand strong against pressure and deliver the tough messages honestly and persistently.

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