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A merger, rapid growth of a small law department; and a questionable philosophy of work allocation (Clayton Holdings)

In 2005, a company bought Clayton Holdings, a company that trades and manages loans, and promptly merged it with another firm in the same line of business, thereby creating a $200 million combination. At the time, Clayton used a Chicago firm as its outside counsel and had one internal lawyer. By mid-2007, according to the Conn. Law Tribune, April 12, 2007, the legal department of Clayton will have grown to three attorneys, a paralegal and two administrative assistants.

Clayton’s general counsel throughout the period, Steven L. Cohen, believes in a philosophy as to how to allocate legal work: “[T]he optimal model is to do the redundant work in-house and the more high-end work out of house.” Days full of redundant work can hardly excite a legal staff, but Cohen believes that this allocation “allows in-house lawyers to become better integrated with the business by working with other departments.”

Many general counsel would quarrel with this distribution of plum work and plumb dumb work (See my post of Dec. 5, 2005 about the reverse pyramid of inside and outside work.). My further belief is that clients want their employee-lawyer colleagues deeply immersed in “high end” work that is by definition important and strategic.