Micro-managing outside counsel by capping hours?

Ellen Metzger, the general counsel of MacKay Shields, a registered investment advisor for institutional investors, makes a provocative remark in top of mind, Vol. 5, 2006 by Kirkpatrick & Lockhart Nicholson Graham at 12. Metzger says: “Don’t insult the professionalism of the lawyer’s firm by referring them a project and then telling them to spend no more than a certain number of hours addressing it.” Such an overbearing oversight, she argues, subverts the outside lawyers’ professionalism.

I disagree with this view. It is completely proper for an in-house lawyer, instructing external counsel, to give them a clear direction on how much money (which means hours) to devote to an issue. Few legal questions justify “leave no stone unturned.” And the inside lawyer can best assess the costs that deservedly should be incurred compared to the likely benefits of the legal services.

A compromise approach makes sense. Once some agreed-to number of hours has been worked or fees incurred, the law firm should deliver a status report or some feedback and get the go-ahead to do more. Why should outside counsel have carte blanche? Once the hours have been put in by the firm, it is much harder to redress (See my post of May 1, 2006 about casual review of bills.). A primary responsibility of in-house counsel is to manage outside fees – so tell firms your cost expectations!