In-house making gains over outside counsel

In news that’s good for me, ensconced in my Dilbert-land cubicle in the legal department of corporate America, general counsels are reporting that the costs of litigation balanced against tough economic times is pushing them to expand their in-house legal departments at the expense of outside counsel.

From the ABA Journal:

Given the higher regulatory risks (and the velocity of those risks, thanks to the Internet), companies can’t afford to react to crises in reasoned, drawn-out time frames, said Janet G. Kelley, senior vice president and general counsel of Meijer Inc. Kelley was among those participating in a discussion last week that was part of Foley’s National Directors Institute Web Conference Series.

The article goes on to say that corporations are finding that when a legal question arises, it’s easier, faster, and cheaper, to have informed legal counsel already at the table, rather than wait for a well drafted memo on the issue from outside help.  When a reputation is on the line, companies don’t always have time to wait.

“Executive committees realize the value of having a GC at the table and the value of being able to protect a company’s interests early on,” said Deborah Dorman-Rodriguez, senior vice president and chief legal officer of Health Care Service Corp. She added that getting a legal perspective early on saves money.

The strengthening of in-house counsel is not just due to efficiency, either.  Cost plays a large part in the equation, as well.

The pressure to reduce costs has also pushed general counsel to become more assertive when voicing billing and staffing concerns to their outside lawyers.

“The hourly rate may be an outdated approach for us and not sustainable,” said Dorman-Rodriguez, who cut HCSC’s outside counsel from 120 to 25 firms more than a year ago. “We’re also actively engaged on how legal matters are staffed, and if one is a little too top-heavy, we’ll say we have a problem with the budget.”

Whether or not the changes are here to stay is up for debate.  I suspect, though, that a decrease in legal costs and an increase in access to legal counsel will always be valued, regardless of the state of the economy.  When the economy does start to turn, I can foresee the increases in in-house legal departments remaining.


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