Knowing As In-House Counsel When To Call In The Biglaw Guns

If you are unfamiliar with the in-house world, there is a pretty tried and true negotiation formula that takes place between opposing in-house counsels.

Once an issue has been referred to legal, we generally attempt to sniff out our opponent. After the standard Linkedin stalking, we break the ice with a phone call. Nothing too adversarial at this point. Generally, a quick, “what can we do to make this right” type of conversation.

If that fails to resolve the matter, a battle of the legal letters generally follows.

Each in-house team spends hours parsing every word of a well-crafted letter that attempts to prove to the other side they learned more Latin in law school. These will remain professional at all times, but will generally start to grow more terse with each round until finally an impasse is reached.

During the impasse, the party with the better case generally tires of this ritual dance and taps in their Biglaw partner to fire of the next series of letters. Most of the time this act is enough to get the other party to budge. It will either scare them into a settlement or force them to call in their own Biglaw reinforcements, and then it’s off to the races we go.

Given the effectiveness of using the nuclear Biglaw option, I have faced off against some opposing in-house counsels who prefer to skip the ritual altogether and opt to go Biglaw from the start.

While this has admittedly caused me to push for a settlement quicker on my end in the past, be warned, when I think I have the stronger case, I will gladly take advantage of the new pressure point you unknowingly just gave me: the billable hour.

If you are a small- or medium-sized business that went straight for the Biglaw knock-out punch, you can bet I will do everything I can to slow walk negotiations.

Nothing gives me greater pleasure than to call your new Biglaw representation on a weekly basis to check for updates. I will happily send trivial letters that ask for a reply — all the while knowing your CFO is likely growing increasingly uncomfortable signing yet another check for an inflated Biglaw invoice.

We recently had a dispute with a comparatively small vendor of ours. They claimed their interpretation of the contract entitled them to an automatic annual rate increase while our interpretation, the correct one mind you, was that the increases were subject to a performance review that would have yielded them substantially less.

All told, we had a little more than a half-million dollars in dispute — for their company, a gargantuan sum they desperately wanted. Before our internal contract manager could refer the dispute my way, I received a letter from one of the largest firms in the city demanding we honor the new rates.

Having dealt with this firm in the past, I was confident the vendor did not fully appreciate how much their new representation would cost them, and I felt it was my duty to help them realize how quickly billable hours can add up.

After several months of letters, meetings, and phone calls with their Biglaw representation, we received an unprompted acceptance of our performance-based rates. Their in-house counsel called me and explained they had reached a business decision that it was in their best interest to accept our proposal and end this legal back and forth.

Or as I roughly interpreted it, “Holy smokes, things got expensive fast, and we need to take whatever you are offering before this thing completely swallows our profit margin.”

Dropping Biglaw into an in-house negotiation can be an invaluable card, but think carefully before you play it — and be sure your CFO has the stomach for it.  Otherwise, it can be an expensive proposition that can leave you in the same position as before, albeit a little — or a lot — poorer.

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Stephen R. Williams is in-house counsel with a multi-facility hospital network in the Midwest. His column focuses on a little talked about area of the in-house life, management. You can reach Stephen at [email protected].