Companies look to legal departments for belt tightening - Washington Business Journal:

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While this axiom sometimeds wields thepersonnel ax, it also forcese businesses to rethink weak strategies and questioj long-standing norms across the As chief financial officers scan their operating budgets lookingf for places to save, one departmenrt often stands out: legal. Most medium and large businesseshave in-house lawyers. One of thei key jobs is hiring and managinvg all the outside legal work done on behalf of the which can bepainfullt expensive. Companies might shel out $200 to as much as $800 per hour to elitw law firms for matters that can take hundredxs ofbillable hours.
Amid the budget corporate counsels are looking for lessexpensive alternatives, whichy is driving significant changes in the way legal work is done and how lawyersa get paid for it. Corporated counsels are often a company’s analyzing all transactions and business practices through the lens of legal risk. “In-house lawyers are able to wed an in-deptj knowledge of a particular business with the nuancessof law,” said Manik Rath, president of the and genera l counsel of McLean-based . “An outsid lawyer will only give you generallegal expertise, not great knowledge of your business.
” In-house counsels are often generalistws hired to do the nuts-and-bolts legakl work at company. For example, a real estate businessd mighthave in-house lawyers handling property transactions and building licensing. This can save companiee a bundle inlegal fees. “When you hire an in-house you’re paying for an open bar. With outsidse counsel, you’re buying by the drink,” Rath explained.
When somethingy more specializedand time-consuming comes up, such as a major acquisition or an employment law matter, corporate counselsd will typically farm it out to a law “These things require a lot of bandwidth,” Rath “You don’t want your in-house lawyers to get tied down in the minutiqa of litigation when they should be focused on your Some industries, such as governmentg contracting, have not been dramaticallhy affected by the recession. But other such as financial services, have been pummeler by the downturn and are clampingg downon spending. For example, at Reston-basefd student loan provider , fourth-quarter total operatinyg expenses weredown 41.
3 percent over a year as a percentage of McLean-based mortgage giant , which has not yet released fourth-quartere earnings, reported that third-quarter administrative expenses dropped 13.1 percent over a year as a percentage of assets. ’s fourth-quarter operatingf expenses fell 15.5 percent, as a percentag e of assets. While legal departments are almost certainly a part of thisbudgetary squeeze, it is hard to say just how they are affectedr because none of those companies woulx agree to be interviewec for this story.
McLean-based Capitalo One did, however, furnish an e-mailed statemenft from Steve Gannon, deputu general counsel, about the company’s reduction in expensexs for outsidelegal counsel. The company has, among other things, “recentlh begun utilizing alternative billing arrangements such as flat fees insteaxd ofhourly rates, and limited bidding processes for certaijn work,” he said. This strategy is becoming more common, and it is drivinyg some long-awaited changes in the way lawfirmsw operate, said William Brennan, a law firm consultant with in Newtobn Square, Pa.
“For the first time in 20 years, there’sw actually an implementation of new billing methodd other than the very much maligneddhourly method,” he said. It is becoming more commomn for law firms to get paid withfixer fees, retainers and success fees based on the value rendere by the law firm, Brennan