The Relationship Between In-House and Outside Counsel

THE RELATIONSHIP BETWEEN
IN-HOUSE & OUTSIDE COUNSEL
Presented to
Southeastern Admiralty Law Institute
Annual Seminar
June 20-21, 2008
Presented by
Marc G. Marling
Vice President and General Counsel
CMA CGM (America) LLC

June 20-21, 2008 The Relationship
Between In-House
Page 2
(at this time)
DO NOT READ THE ACCOMPANYING PAPER!
Pay attention to learn:
How in-house counsel really pick lawyers
How in-house counsel want to receive
communications
What makes in-house counsel call you first

Between In-House
Page 3
Not just Marc Marling!
Katharine Newman, Senior Counsel, ConocoPhillips
Counsel for a Fortune 500 "Big Box" retailer
Cynthia Stewart, General Counsel, Terranova
(a commercial real estate company)
General Counsel for a large restaurant chain
David Akers, General Counsel, Grand Crowne Vacation
Resorts
Kathleen Mahoney, SVP, General Counsel and Secretary,
Nash Finch
Steven Jackman, VP and Corporate Counsel, Sanmina-
SCI
Anthony Filiato, VP and General Counsel,
Signal Administration

Between In-House
Page 4
In-house attorneys wear two hats
Understand the pressure
Learn to work with in-house counsel as a
partner
Realize that in-house counsel are not just
lawyers (we make business decisions too)

Between In-House
Page 5
What is your biggest pet peeve when working
with outside counsel?
Cynthia Stewart
Not keeping to the billing agreements, or charging
things like secretarial time. Also with some, it is
hard to get them to respond to status requests.
Kathleen Mahoney
They often don’t listen, assuming “outside counsel
knows best.”

Between In-House
Page 6
Pet Peeves (continued)
Katharine Newman
They do not follow the instructions they are given – they think
and do too much on their own. On the litigation side, it results in
charges I cannot justify or pay for, which sours the relationship.
On the transactional side, it means they are not aligned with my
company’s business needs.
They act too much as advocate – sometimes there is an element
of showing off behind it, thinking that I will be impressed by what
they would like to bring to the table. As a result, they do not
evaluate a case fairly from both sides to get to an effective risk
analysis. On the transactional side, it means they do not
incorporate an appropriate understanding of my company’s
business needs and wants, resulting in technically sound, but not
always effective documents. In dispute resolution, it means they
don’t put down the litigator’s sword, and a mediation is less
effective. A more realistic view is essential to providing usable
advice on all fronts.

Between In-House
Page 7
Selecting Outside Counsel
Pre-existing relationship ≠ work
Less likely to use a one-size fits all type firm
Firms continue to market as a one-stop shop – not a
good idea.

Between In-House
Page 8
What criteria do you consider when
engaging a new firm or when deciding to
send work to a particular firm or lawyer?
Anthony Filiato:
New firms are usually recommended by Members
They must have an established practice in the area of law
in question with strong “word of mouth”
Counsel must understand our Members’ businesses
We utilize specific expertise and will assign cases outside
of geographic region where warranted.

Between In-House
Page 9
Criteria continued . . .
Big Box Store Counsel:
Reputation and expertise
To some extent geographic location
And always cost
Restaurant Chain Counsel:
Primarily experience in the area of law
I must get the right feeling about the lawyer/firm
I utilize major firms on most important matters
But match cost (regional firms) on smaller matters

Between In-House
Page 10
Selecting outside counsel
(continued)
Relationship with counsel as important as
relationship with a particular business person
Can business units engage outside counsel
directly or must it be “blessed” by the in-
house legal department?

Between In-House
Page 11
Blessing the choice of counsel
Big Box Store Counsel
We try to manage the outside counsel usage through the
legal department.
Kathleen Mahoney
Business units cannot engage outside counsel directly.
Cynthia Stewart
Needs to be blessed by in-house counsel, and our
Chairman (who is also a lawyer). He often uses attorney
selection for political advantage in the area.

Between In-House
Page 12
Establishing the Relationship
Comprehensive Engagement Letters
require outside counsel to budget for specific matters
contain objectives and measurements so that in-house
counsel can regularly “grade” performance
outside counsel should encourage such performance
reviews to help solidify the relationship
clearly define the roles of the in-house counsel as well
as the outside counsel.

Between In-House
Page 13
Fees and Billing
The concept of the billable hour is confusing to the
budgeting process (read business people)
Can cause great anxiety
Steven Jackman
The fact that they don’t know how to provide cost effective service – the
combination of rates and hours …
The fact that they will try a $1 million case the same way as they would
a $20 million case (e.g., turn over every stone…take every depo).
Their use of associates (particularly 1st
-2nd
year)…the fact that they can’t
understand that I would rather spend $400 on one hour of a “partner’s”
time rather than on 1 hour and 20 minutes of an associate’s (who bills
at $300 per hour) time.
Big Box Retailer Counsel
being billed for associates to get “up to speed” on issues. If associates
are going to be used, they need to offer a discount or write off the work
to make the amount comparable with having a few hours of an
experienced attorney.

Between In-House
Page 14
Alternative Fee Arrangements
Steven Jackman
I handled a couple of matters with a reduced hourly rate and a
cap on fees PLUS a bonus depending on result.
Cynthia Stewart
We use flat fee rates for eviction and collection matters. for
some iffy collection, we use a firm that works on contingency.
Kathleen Mahoney
I don’t as I am not a fan.
Restaurant Chain Counsel
I am always open to alternative arrangements but it seems like
we always resort to hourly or fixed fee (mostly hourly).
Katharine Newman
We have used contingency fee arrangements for claims that
we raise, or if we participate in a class action.

Between In-House
Page 15
Understanding the Client
Outside counsel should expect in-house
attorneys to provide the best possible
explanation of the inner workings of the
company – but they don’t always have time
Big complaint is lack of understanding of
corporate culture
Find ways to be educated
Understand client’s business and its corporate
culture
These are NOT the same thing

Between In-House
Page 16
We expect them to understand after we have explained
things to them, but our culture isn’t readily apparent
without having “lived” there. We spend some time
explaining things to them.
Do you expect your outside counsel to
understand your corporate culture and the inner
workings of your business?
If so, how do you educate them?
I feel like it is my job to educate them. The more I can
educate them, the more effective they will be on behalf
of the company.
Steven Jackman
I expect them to spend time on their own understanding
my business…I don’t have a lot of time to train them…

Between In-House
Page 17
Kathleen Mahoney
I take the time to explain it as we go through decisions and
frankly like to use key counsel so the education process isn’t
repeated each time a new matter comes in the door.
Cynthia Stewart
We let them know that we are aggressive once we are in
litigation, and that we will most likely not compromise to settle,
unless there is some unusual circumstance. For transactions,
in-house counsel stays involved to provide input on corporate
culture issues.
Katharine Newman
I tell them specifically what the contours of the iceberg are that
they do not see above the water.

Between In-House
Page 18
Anthony Filiato:
It is imperative that counsel understand the mutual
concept
the business of the Member
the protocols established by the Managers of the
Mutual, and how all the pieces fit together
The Managers put on regular conferences/
seminars for Members, adjusters, and counsel to
explain policy and procedure

Between In-House
Page 19
Communications between Counsel
Building and maintaining trust
Keeping in-house counsel well informed at
all times during representation
Inside counsel should never be placed in a
position of not knowing the actions of outside
counsel
The business will look in-house counsel for
all current information on any matter whether
handled internally or by outside counsel

Between In-House
Page 20
In-House Counsel strolling through life with feet
propped up and the daily newspaper on their lap -
NOT
Time is a precious commodity to in-house counsel
Imagine if your “client” resided in the office next door
Short, sweet and to the point
Maximum lead time to obtain a response

Between In-House
Page 21
How do you like to receive communications from
outside counsel (e.g., email, telephone, long form
memo) and on what frequency?
Steven Jackman:
Email is generally best, unless there is something to
discuss (where the phone is better).
Memos are only necessary when I request them (and are
often a waste of money).
Cynthia Stewart:
I prefer email. We have a lot of matters pending at any
one time, so I would love to have weekly updates.
I think it is a waste of time and money to prepare status
memos and send them via fax or mail – unless
requested.

Between In-House
Page 22
Kathleen Mahoney:
I prefer email as it is more immediate and typically
shorter and more direct.
I appreciate communications alerting me to a
development in a matter.
Receiving communications from outside
counsel (continued)
Katharine Newman:
Email is preferred, but, if they need immediate attention,
they should of course call me on the telephone.
I disfavor long form memos unless that was my specific
instruction.
David Akers:
Email is probably my preferred mode, but we generally
only want communication that relates something new.
Sometimes it seems the communication is for purposes
of racking up time.

Between In-House
Page 23
What lead time do you need to respond to outside
counsel for a discovery request or to obtain any typical
client response (beyond your own decision making)?
And, how much notice do you like to receive
when time permits?
I find that counsel will sometimes send discovery two
weeks or so after they have received it and then want
the responses back in a matter of days so that they can
then formalize the responses.
I want to see the discovery as soon as possible and to
have as long as possible to respond.
I may have days at a time where I am traveling or
otherwise in one meeting after another and cannot
respond as quickly as counsel would hope.

Between In-House
Page 24
Lead time for responses and requests
(Continued)
Kathleen Mahoney
To obtain discovery information, I like to receive the
request when it is served, and the draft response one to
two weeks before it is due.
We have, unfortunately, had the experience that the
knowledgeable people no longer work for the company,
so it takes longer to dig for answers.
Cynthia Stewart
It is good to have about three weeks at least for
discovery requests if documents need to be gthered or if
we need to speak with several employees.
Steven Jackman
I hate last minute requests.

Between In-House
Page 25
What is the single most memorable (positive) thing
that an outside counsel did representing your
company (other than winning a case)?
Steven Jackman
listen…understand my issues and what is important
learn the 90-10 rule (that sometimes, I just need them to
spend 10 minutes on something and give me their
answer with 90% confidence than spend 20 hours doing
research and get me an answer with 95-99% confidence
(no attorney is ever 100%)
tell me when they are NOT the appropriate choice to
handle a matter
use the term “bill no charge” on an invoice
Cynthia Stewart
I always appreciate it when they answer something or
offer to assist on a matter at no charge

Between In-House
Page 26
Single most memorable thing (continued)
Kathleen Mahoney
They dealt effectively with the business people,
making them feel valued, respected and in the
hands of a zealous advocate who was committed
to solve their problem.
Katharine Newman
They get me quality work efficiently, and in a
timely manner, following instructions. In doing this,
they take the time to think through an assignment
from a 360° perspective. If they have questions,
they ask them and we nail down a path forward
together.

Between In-House
Page 27
Single most memorable thing (continued)
David Akers
You know, you could really handle this matter in-house by doing ____.
Often times, especially with a big firm, they seem to see a cash cow if
they are being hired by an in-house counsel because obviously they
think the company must be loaded.
Picking me up from the hotel and taking me to the emergency room
when my back went out. I have engaged this attorney on numerous
matters because he genuinely cares for me and for my company.
Anthony Filiato
Graciously helping to update the knowledge base of our claims
department through giving all day lectures on specific rather than
esoteric areas of their expertise without charging a fee.
Their rationale being the key point of interest: “if your people
understand the latest developments on this issue, then it makes all our
jobs easier.”

Between In-House
Page 28
How would you describe your legal department’s
relationship with outside counsel (generally)?
Anthony Filiato
We believe in long-term relationships and view these relationships with
our vendors as partnerships.
I choose counsel with whom I feel comfortable immediately. As a
result, we build a friendship and a camaraderie. If I am in the city of
outside counsel on other business, I might call them to meet for a drink
or dinner.
Katharine Newman
It has to be a cooperative relationship, but, unfortunately, my company
does have very strick guidelines. I don’t always have power to allow
deviations. I check in to make sure everything is working from the
lawyers’ end.
Cynthia Stewart
For the most part, we have good outside counsel that work well with us.
We currently have one firm that has not been responsive to our
complaints about churning and padding their bills, and once our matter
concludes, we will not use them anymore.

Between In-House
Page 29
CONCLUSION . . .
What is the one thing you wish outside counsel
would understand when working with you and your
company?
Steven Jackman
That my mission is to provide excellent COST EFFECTIVE legal
services … I don’t have time to focus on esoteric issues which
might (if the sun, moon, and stars all align in a certain way on the
3rd
Tuesday of the month) cause damage. I have to quickly and
concisely identify the key risks, and take steps to minimize them.
Cynthia Stewart
That we want to have a good result quickly and with efficiency.
Kathleen Mahoney
That responsiveness is important and that when a mistake is
made (and we’re human – there will be) step up, take ownership
and develop a plan for a fix in the matter and a plan to ensure it
will not happen in the future.

Between In-House
Page 30
CONCLUSION . . .
company?
Katharine Newman
They need to follow my instructions – they aren’t suggestions.
We aren’t the same as any other client off the street. Our culture and
corporate personality help inform decisions about how we interact with our
customers, our shareholders, our communities, etc. They also need to
have very good communication skills because at the end of the day, it
needs to be a process that encapsulates all aspects and needs of the
business as a total, not just the ‘right’ legal answer.
David Akers
They need to remember that they were hired due to a special need and
expertise. If they are fair and direct in their communication as well as
ethical in billing, we will, in all likelihood, use them again in the future.

Between In-House
Page 31
CONCLUSION . . .
company?
Our corporate culture and my specific objectives or strategy in
hiring counsel (i.e., knowing that winning is not always possible
but there may be other goals to be accomplished). I want counsel
to know and respect my integrity and ideas and those of the
company.
Anthony Filiato
Sometimes, decisions are impacted by non-legal factors and counsel
should not assume that we found their advice any less valuable in the
decision-making process.

The Relationship Between In-House and Outside Counsel

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