Fixed Fees, Efficiency Combine to Slash Spending
By Jennifer J. Salopek
Home Depot employs more than 125 people in its in-house legal department, under the leadership of General Counsel Teresa Wynn Roseborough. The quest for fixed-fee arrangements began in the employment arena, when Jocelyn Hunter, Vice President and Deputy General Counsel - Benefits, Employment, Litigation, Merchandising and Regulatory Affairs, challenged several members of the Employment Law Team to develop an overall retainer program covering the majority of the employment law spend. "Our General Counsel at the time pushed us to achieve lower cost, predictable cost and shared risk," Hunter explains.
This initiative evolved into a program of retainer and fixed-fee arrangements across many of the department's practice areas. Ranging from employment and benefits to general liability, commercial litigation, patents and a long-standing fixed fee program for M&A transactions, the arrangements share the basic principle of using a core group of retainer counsel to handle a portfolio of cases or corporate/transactional matters in their area of expertise for a fixed fee. Deputy General Counsel Briley Brisendine observes, "Once we saw the potential savings being generated, it became important to identify other practice areas where there was a similar opportunity for success."
Home Depot's lawyers wanted to get control of their legal spend, but didn't want to squeeze the outside firms on cost completely; they wanted strong firms as partners but they also wanted greater predictability in their legal expenses. "The shared risk aspect meant that we could align the firms' interests with those of the company," Hunter says. "We pitched it as a win-win, pointing out that the firms would have predictable work and revenue."
The fixed fee retainer programs cover:
- Employment Law Regular Litigation: all single plaintiff and small multi-party employment litigation, high profile agency charges, and miscellaneous state law employment advice; divided geographically among 12 firms.
- Employment Law High Exposure Litigation: alleged class/collective action and large multi-party matters. Nationwide portfolio handled by one or two firms with significant expertise.
- Benefits Retainer: advice and counseling on benefits issues and ERISA litigation at a fixed annual fee.
- General Liability: covers premises liability litigation matters across U.S. and Canada; divided geographically among 15 firms.
- Commercial Litigation Consumer Class Actions: covers all non-indemnified consumer class actions. Handled by one firm nationwide; three-year term with fixed fee retainer adjusted annually.
- Commercial Litigation Customer Litigation: covers customer damages claims. Handled by nine regional firms who employ local counsel as necessary; fixed fee per matter.
- Patent Applications: covers patent application legal fees at a fixed fee per patent.
- Corporate, Transactional and Contract Matters: fixed fee arrangements negotiated for a majority of transactional work, including credit/bond issues, M&A transactions, and contract matters.
The legal department has also implemented a variety of initiatives aimed at increasing efficiency and adding value. These include:
- Retainer Counsel Meetings and Conference Calls: regular meetings and calls among in-house and retainer counsel for sharing best practices, providing business updates, and interactive discussions on strategic topics.
- Brief Bank Technology: web-based platform organized by practice area to share resources, including briefs, court opinions, deposition transcripts, discovery documents and form documents.
- Recovery Program: concerted effort to seek out potential recoveries in cases where the Company is a member of a class or subject to regulatory fees, including areas such as shipping, pharmaceutical, credit, tax refunds and customs duties, with recoveries obtained in cash and via business concessions.
Across the department, Home Depot has reduced annual legal fees by 45 to 55 percent since the start of the program in 2008. Additionally, the legal budget is more predictable. "We are now able to predict with near certainty approximately 70 to 75 percent of our annual legal fees, and our total fee spend is more consistent month to month," Hunter says.
Most promising, the company has reaped improved legal outcomes by better aligning the goals and interests of outside counsel with those of inside counsel, and thus, those of the company.
"We've found that creating true partnerships with outside counsel consistently drives the best results for the company, minimizes business disruption, and fosters the sharing of knowledge and resources among participating firms," says Roseborough.
"You can't argue with the strong results of this program," says Hunter. "Some firms were initially reluctant citing all the reasons the program could fail. Happily, the programs have been enormously successful for Home Depot and in providing certainty for the firms, and we believe similar initiatives could be successful at other companies."