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Recoveries should in part be applied to the law department’s external expenses

Panelist at a recent conference of general counsel compared practices on the disbursement of monies obtained by the law department’s actions. At one company, the law department can recoup from the settlement, judgment, royalties, or license fees recovered, the expenses it incurred in the effort (and sometimes even gets a premium). I like this idea, because it creates an incentive for the law department that never appears if monies brought in simply swell the corporate coffers.

Another panelist disapproved, and is happy simply to fill his client’s coffers, because of the downside risk of being charged for some portion of adverse decisions. (See my posts of May 30, 2005 on including settlements and judgments in total legal spending and July 16, 2005 on those payments in relation to outside counsel spending.)