Trials and Tabulations

Want to advocate for lower legal fees? A number of new options deserve a hearing.

Jeffrey Stone, a partner at McDermott Will & Emery, an international firm with more than 1,100 lawyers, agrees that finance executives should evaluate their legal needs before choosing a firm. “For routine work, where the risk is relatively low, you should go to a lower-cost provider,” he says. “You’re balancing risk and cost.”

Who Gets What?

At ModusLink, Crane says the company has successfully done just that, working with one large law firm and one smaller firm. The company’s general counsel determines which provider is best suited to each legal matter as it arises. On issues of board-level importance, “I guarantee you it goes to the larger firm,” Crane says. “We do take name brand into account, on the grounds that you feel they’re more established, they’ve been through more, and there’s a marquee name there that you’re willing to pay for in some situations.”

Within McDermott Will & Emery, Stone says the firm has tried to increase the pricing flexibility for its clients by developing a new category of lawyers called “staff attorneys.” These are in-house lawyers who are not on a partner track; they work fewer hours and are paid less than traditional associates.

The firm introduced the concept a year ago, in part as a response to the increasing amount of work competitors were sending off shore. Stone says neither the firm nor many of its clients were comfortable with that practice, because of concerns about security and quality assurance.

Although Stone is skeptical about offshoring legal work, “We do recognize that there are different components to every case,” he says. For example, even high-stakes litigation involves tedious document review in addition to advanced legal strategizing. While he says clients rarely complain to him about his own hourly rate, “What really galls them is a lawyer who is fresh out of law school charging $500 an hour to do really routine work.”

The firm can now perform such work in-house at a much lower price. Other large law practices, such as Dechert and Paul, Weiss, Rifkind, Wharton & Garrison, have also adopted the staff-attorney model.

Before exploring these new options, however, a simple first step for CFOs eager to trim legal costs is to subject legal bills to greater scrutiny. Vaguely categorized charges “for services rendered” will no longer pass muster in most finance departments. ModusLink’s Crane says he will examine not only the number of hours billed and the hourly rates more closely, but also the experience (read: cost) of each lawyer working on a project. While Crane says he has no plans to switch law firms any time soon, he admits that, “we’ll be squeezing them on fees, as we will be doing with everybody else. There will be more detailed review of the bills, and more upfront discussion about what things are going to cost.”

In other words, make your case.

Kate O’Sullivan is a senior writer at CFO.

The rise in outside legal fees has outpaced expectations.

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