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A proposal by a group of large law firms to give law departments of “sophisticated clients” more regulatory freedom

A group of large law firms in the U.S. has proposed that “sophisticated” clients be permitted more flexibility when they retain law firms. Recognizing large companies know what they are doing and can assume more risks, they would have more room to maneuver in such areas as potential conflicts of interest, limitations on liability they can agree to, and acceptance of counsel from lawyers not be admitted in states where the department wants legal advice. The group calls itself the Law Firm General Counsel Roundtable and it has tackled economically disadvantageous regulations on lawyers that have historically been aimed at protecting ignorant and intimidated individuals, regulations which hobble capable law departments who know enough to protect themselves (See my post of April 15, 2007: companies with in-house lawyers are sophisticated enough to enter into a hold-harmless agreement with its employee lawyers.).

The looser restrictions would apply to clients “based on such criteria as whether a firm is publicly traded, the size of its balance sheet, the number of jurisdictions in which it operates, and how much it uses legal services.” Such a safe-harbor for knowledgeable clients, and I presume one test would be an internal legal function, would help large business and modify some musty restrictions designed to protect less-informed clients. Years ago I proposed a similar flexibility (See my post of Sept. 21, 2008: “what if companies with revenue of more than $1 billion and a legal department of more than four lawyers were permitted to obtain legal services from anyone, even if they were not admitted to the bar of any state and regardless of their educational credentials.”). For more on this proposal, see the ABA J., June 2011 at 58.