Outside Counsel Retention Agreements
Sep 16, 2011 QuickCounsel Download PDF
By Rob Thomas, Vice President, Strategic Development, and Bernadette Bulacan, Market Development Group, Corporate Legal Segment, Seregenti Law - Thomson Reuters
With many law firms struggling to attract or retain corporate clients, companies now often have the upper hand in negotiating new engagements. This increased bargaining power presents a great opportunity for corporate legal departments to re-tool their relationships to ensure that they receive more value from their outside counsel. Fewer law departments use retention agreements provided by their various firms; rather, they are taking advantage of the “New Normal” and insisting that law firms use the legal department’s set of uniform guidelines. Retention agreements take many forms. It may be a simple letter with a few terms outlined, or it may be a long document complete with templates, sample forms, and other exhibits. Although there is no single “right” way to draft a retention agreement, a well-drafted agreement that is enforced can be one of the most effective tools that a law department uses to control spending and manage the activities of its outside counsel.
Drafting Retention Agreements
Draft an agreement with clear, effective terms. If you’ve worked with outside counsel in the past, you know some of the pitfalls to avoid and practices to encourage. In addition, include standard terms regarding conflicts, confidentiality, and other rules of engagement that apply to all of your outside counsel.
Also, it helps to draw on past experiences with outside counsel. However, it’s also useful to take a look at agreements used by other law departments. At the end of this QuickCounsel, you’ll find links to sample retention agreements as well as a matrix of common retention agreement terms that allows you to compare at a glance different approaches to the same term.
Learn From Experience
Consider the kinds of management and billing issues that have been problematic in the past, and include terms that will prevent those situations in the future. For example, if a firm drafted lengthy motions in limine even though your company has a standard set that you use before every trial, you might include a term prohibiting substantial drafting fees without prior approval, or a term requiring a detailed budget that will provide an opportunity to discuss more efficient accomplishment of major tasks. Remember that retention agreements also can help your in-house lawyers adhere to best practices. In the example above, the corporate attorney should have provided the firm with the company’s standard motions well in advance of trial.
Also, think about some of your best experiences with outside counsel. For example, if you appreciated it when an attorney kept you apprised of developments in a slow-moving but complicated real estate transaction, then consider adding a periodic status update requirement to your retention policy.
Use Matter Type-Specific Agreements
Due to the inherent differences in different categories of legal work, consider drafting and maintaining several retention agreements that map to your company’s needs. For example, you may need a litigation agreement, an intellectual property agreement, and a deals and transactions agreement. For version control and consistency reasons, it is advisable to structure your retention agreement as a core document with attachments.
According to the 2010 ACC/Serengeti Managing Outside Counsel Survey Benchmarking Worksheet, the following are the most commonly included terms in retention agreements:
Most retention agreements also include standard terms regarding the following company policies:
Enforcing Retention Agreements
Monitor and enforce your agreements. Despite their best intentions, most law firms will breach your guidelines on occasion. These may not be intentional violations, but rather, oversights due to personnel changes or misunderstandings. In those instances, you need processes that will catch invoices or practices that violate your retention agreement.
Many law departments manually review paper bills for compliance with retention terms relating to billing and expenses. An e-billing system with matter management features can provide more efficient ways to enforce retention agreement terms by automatically auditing bills for violations, and even withholding bills from processing if requirements relating to periodic status updates, budgets, or case assessments are not followed. For more information about such systems, see the ACC QuickCounsel on E-billing.
Additional ACC Resources
ACC Resource Library - Program Material
Hidden Dangers When Choosing Outside Counsel and Teaming Up with Similarly Situated Defendants: Ethical Implications of Beauty Contests, Hot Potatoes, and Joint Defense Agreements
ACC Resource Library - QuickCounsel - Sponsored by Womble Carlyle Sandridge & Rice, LLP
ACC Resource Library - InfoPAK - Sponsored by Contoural, Inc.
Model Information Protection and Security Controls for Outside Counsel Possessing Company Confidential Information
ACC Resource Library - Sample Form & Policy
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