Biglaw, In-House Counsel, Partner Issues

How Corporations Actually Choose Outside Counsel

What questions should clients ask during beauty contests to choose counsel wisely?

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How do you think we pick lawyers to defend us in litigation?

Judging from some of the emails I get, this is the picture in your mind’s eye:

“Hey, boss, we just got sued in New York. We’ll have to defend ourselves.”

“Shoot! New York City! Do they have any lawyers there?”

“Damned if I know. Lemme grab the New York City phone directory and take a look.”

An hour later:

“Good news, boss. There’re a whole gaggle of lawyers in New York. I think we should hire Bigg & Mediocre.”

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“Why’s that?”

“They have an 800 number, so we’ll save some money. And they have a whole bunch of lawyers; one of ’em probably knows what this ‘RICO’ thing stands for. And their website is really fancy; you wouldn’t believe it.”

“Great! Call that 800 number and ask them to connect you to a litigator.”

If that’s what corporations are doing, then at least you know how to develop business . . . .

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What really happens?

We’ve been using lawyers who we like and trust for many years now. Long ago, we weeded out the incompetents, the ones who unnecessarily ran up bills, and the ones we couldn’t trust. All that’s left is the A team. (And the B team, for our less significant cases. And the C team, for stuff that’s really insignificant, but, after all, we do have to defend ourselves.)

So, when we get hit with a new lawsuit, who are we going to hire?

Some random stranger from the phone book?

Or maybe you, because you sent us a brochure about a new case, and then you followed up with an email telling us that you just hired some more lateral partners?

Or you, because you met one of us at the State Bar Convention and then treated us to lunch?

Or maybe we’ll stick with the folks we’ve been working with for years, who know our business, and who we know with 100 percent certainty will give us great work for a fair price?

That makes this a hard question: How can you ever land our business?

If our primary lawyers are conflicted out of a case, we may have to shop around.

If we’re sued in an unusual location, or in an unusual and specialized field of law (an escheat case in Kansas), then our incumbent counsel might not be right for the job. We’ll have to explore.

Or we might have to shop around if we’re repeat litigants in some fields, but we get sued off the beaten track. An insurance company, for example, might know exactly who to retain to defend a complex coverage case. But when that same company gets hit with a 10b-5 or RICO case, the company may not have incumbent counsel who are right for the job. The company will have to search for new counsel.

What does searching for new counsel mean?

It means hiring someone who I — or one of my in-house colleagues — worked with closely when we were in private practice, and we know to be a great (and efficient) 10b-5 defense lawyer. That may be one of our former partners, or it may be someone from another firm who worked as co-counsel with us, or it could be someone else who, for some other reason, we’ve seen up close and personal.

If neither I nor my in-house colleagues personally know a great lawyer for the job, then we’ll ask other people who we know and trust, and we’ll follow their recommendations. In that situation, we may have several competing candidates to consider, and we might be forced to conduct interviews.

It’s true that we can ask the usual questions at interviews. And we can even ask some novel and hard questions. But it’s not true that interviews will reveal which outside counsel are good, which are bad, and which are inefficient.

I know that you, my dear readers, think otherwise, and you’ve even proposed questions that I should ask to ferret out the truth. I’ve received by email, for example, these suggestions for lines of inquiry that I should pursue with potential counsel:

“Stop picking law firms that use their branding to overstaff cases or design their staffing to serve internal needs (like giving them bargaining leverage with their firms) as opposed to your needs.”

“Hire lawyers whom you trust to be working for your benefit and not just their own billings.”

These are great suggestions! I really appreciate them! In fact, I put them to use in the last beauty contest I ran. Here’s how it went:

Me: “Do you run cases as efficiently and effectively as possible? Or are you a blubberbutt who overstaffs cases and bilks your clients?”

Him: “Shoot, Mark, you’ve got me there! I typically overstaff things and pad my hours, because that’s what my firm rewards.”

Look: If interviews worked — if people gave honest answers to direct questions — then you might tease out the truth at a beauty contest. But that’s not what happens. Every lawyer at every firm “staffs cases leanly,” “sends in the Special Forces, not the Fifth Fleet,” and otherwise looks out for clients’ interests. So the penetrating questions that you propose really won’t ferret out the truth.

If your questions won’t work, what’s a poor in-house lawyer to do?

It’s back to relying on reputation. I’ll ask people who’ve worked with you, or maybe your former clients, how you’ve handled their cases. If those folks swear by you, then that’s all the comfort I’m going to get.

That’s not much comfort when you’re hiring new counsel for a new case or set of cases. If the person you choose isn’t reputable (and you don’t monitor effectively), then you’ll see a year from now that you’ve had 250 timekeepers assigned to your case, and you owe about $50 million in fees. That’s great for the lawyer (and his firm), I suppose — so long as the lawyer and firm are considering only short-term gain. But if anyone wants repeat business from clients (or to receive referrals and glowing recommendations from them), then they’ll think long and hard before gouging.My sense, however, from the horror stories that I hear, is that firms don’t think sufficiently long and hard about this.

So clients must remain on guard. That’s why I appreciate your suggestions about the questions I should ask during beauty contests to choose counsel wisely. Just post more suggestions in the comments; I’ll use them during my next set of interviews and let you know how things go.

Mark Herrmann is the Chief Counsel – Litigation and Global Chief Compliance Officer at Aon, the world’s leading provider of risk management services, insurance and reinsurance brokerage, and human capital and management consulting. He is the author of The Curmudgeon’s Guide to Practicing Law and Inside Straight: Advice About Lawyering, In-House And Out, That Only The Internet Could Provide (affiliate links). You can reach him by email at inhouse@abovethelaw.com.

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