By Patrick Johnson, J.D., Senior Marketer, Serengeti Law - A Thomson Reuters Business
Have you heard the one about the Minotaur on the Mount that told the GC to slash her spending by half or face the wrath of Zeus? Me neither, nor are those the types of myths we'll be busting today. Many legal departments have preconceptions, especially about technology, that are simply wrong. This Top Ten explores several of these myths and why they're busted.
Myth: Matter Management and E-billing software may break attorney-client confidentiality.
Busted: All software and email systems have system administrators that could potentially read sensitive information protected by the attorney-client privilege. However, various court cases and opinions have agreed that these types of communications and information storage software (email, document management systems, matter management systems) have a reasonable expectation of privacy even if a system administrator could potentially view this information.
Myth: Legal departments cannot keep track of everything our outside counsel is doing.
Busted: This applies mainly to larger legal departments that have hundreds and thousands of matters going on at any given time. With that many matters, it is very difficult to understand everything outside counsel is working on. A system needs to be in place to track the matters being worked on, who's in charge of the matter internally and at the law firm, and updates (especially material updates) in the matter. It is also important to have a process in place for closing those matters when they are over, so active matters can be accurately tracked. Using a shared drive and Outlook folders is not a process that is reliable and certainly not reportable. An automated matter management system allows in-house counsel to directly connect their law firms, open and close matters, receive updates and matter information, and report on active matters. Furthermore, in-house and outside counsel can share all of their information in one place, so documents, updates, and matter information aren't scattered through various folders and emails. This software allows in-house counsel to have matter knowledge at their fingertips and prevents unwanted surprises.
Myth: If you try and get law firms to use collaboration tools, they will be unhappy and your relationship will be damaged.
Busted: Your law firms are already using these tools with their other clients. Really. With the possible exception of local five-person shops (and usually not even then), all of the firms are using these tools at the request of their clients. Do not be the client that takes the head-fake that using a tool is going to cause too much work for the firm. And no, they do not get to bill you for entering data into the software either.
Myth: Cloud software isn't secure.
Busted: It goes without saying that the legal department handles sensitive information that cannot be compromised. With the prevalence of cloud-based software products, the question becomes whether the cloud is a place where confidential legal information can be stored. Any reputable cloud-based legal software that handles matter information that is confidential will have industry standard security certifications, which often consist of bringing in auditors to hack their system (if the hackers succeed, no certification). These companies should be able to provide you with these certifications and satisfy any security questions that your IT department may have. Furthermore, the information should be backed up at another location in case of a natural disaster.
Myth: E-billing does not work internationally.
Busted: The impression still lingers that if you're being billed by non-U.S. law firms you must get invoice via snail mail to reclaim the value added tax (VAT) or similar taxes. In fact, in the last decade there has a tremendous overhaul of legal e-billing rules internationally. Starting with the EU, firms may now bill using the legal e-billing standard (known as the LEDES 1998BI). Hard copies of invoices are no longer required nor are PDF copies of the bill in the EU and countries that follow the EU VAT regulations. In countries that do not allow for the LEDES 1998BI standard, law firms can still send PDFs of invoices through e-billing systems to comply with the country's law. With few exceptions, legal e-billing is now an accepted billing practice throughout the world.
Myth: Law firms cannot budget for litigation.
Busted: It's a tale as old as (billable) time: company meets law firm, company gets sued, company asks law firm for the expected budget, law firm cries that you cannot budget for something as complicated and unpredictable as litigation. This plea has worked for many decades, but now legal departments pushing back against their law firms because of increased internal pressure to come up with a legal department budget. A budget must be had. It can be done without much difficultly as long as everyone agrees to the same assumptions about the budget, which are: 1) the budget is based on the law firm's knowledge of the case right now and their past experience handling such cases, 2) the budget may change as changes in the case occur, and 3) there is no need to budget for unknowns like an appeal until the time comes. Litigation is not a special snowflake. There are budgets for building skyscrapers, renovating kitchens, IT projects, and management consultants - all projects that deal with unknowns and potential scope changes. The key is to define the assumptions in the scope, and if those assumptions change, change the budget. Simple, right?
Myth: Outside counsel will balk at billing guidelines and rate negotiations.
Busted: Well, firms may hem and haw a bit about billing and rate guidelines, but if you haven't heard the news, the clients are now in charge, and many, many well-run legal departments have strict billing guidelines to which they make all of their law firms adhere. More and more, legal departments negotiate rate increase maximums, rate freezes, or an overall blended hourly rate with their law firms as well. The law firms may complain, but the bottom line is that your law firms are already doing this for other clients. Your law firms know this is the trend - do you?
Myth: In-house attorneys do not have time to enforce billing guidelines and hourly rates.
Busted: While many legal departments are understaffed and overworked, managing outside counsel and legal spend is part of the job description. This means that going through the bills and checking them against billing guidelines and managing hours billed and hourly rates. This admittedly can be a tedious task and the reality is that many attorneys do not look closely enough at the bills before approving them. This process can be streamlined and, to a certain degree, automated by using legal E-billing and matter management software. This type of software can automatically flag violations of billing guidelines, budgets and approved hourly rates so the time it takes to review and catch violation is minimal. This software also allows attorneys to designate someone to review and take care of billing and rate violations, if they prefer. The result? Both time and money saved.
Myth: The value of a legal department cannot be quantified.
Busted: In the old days, general counsel may not have necessarily known the outside legal spend, what matters their law firms were working on, and perhaps not even what internal attorneys were working on. (If this describes your legal department now, the time for change is nigh!). Again, using e-billing and matter management software allows all of this information to be tracked and reported upon. Because of this ability to track and report on matters, savings attributable to a legal department can be easily quantified. Savings through invoice reductions, alternative fee arrangements (AFA's), billing guidelines etc. can be shown in a report, as can statistics like reductions in overall spend year-over-year, or my favorite, reduction in legal spend as a percentage of company revenue. Legal departments can identify where legal cases are originating and where more training is needed for employees, and then report on the results of that training through the reduction of money paid out. Potentially liability for the company can be tracked and reductions in liability shown. For example, if the general counsel needs to justify a new in-house real estate attorney, she can show that there was over $500,000 spend the last three years in certain real estate transactions. Ergo, the fully loaded cost of a new in-house attorney at $220,000 per year is a no brainer, right? The legal department is a cost center and like all cost centers, when the time to cut costs come - and sooner or later it always does - it you will need to justify its headcount and demonstrate value. Be ready.
Myth: Alternative fee arrangements (AFA's) are too difficult to use regularly.
Busted: It's true; the arrival of the AFA revolution has been a long time coming. However, while the growth of AFAs has been slow, it has been steadily building over the years. The inherent conflict of interest created by the billable hour - (outside counsel needs to bill as many hours as possible, clients want excellent work product done efficiently and want to prevent "bill churning") has fueled this growth. There are many variations of AFA designed to align interests in different ways, but a good place to start is to identify matters that your legal department works on regularly, certain types of contracts for example, where the average costs of those types of matters can be tracked over time. Once there is a good idea of the average cost, a flat fee can be negotiated for all of those types of matters, for example. If a legal department can identify low-hanging AFA fruit like this and get experience with these types of arrangements, then it will be easier to later move on to more complicated AFA agreements for larger or more complicated matters.
While attorneys aren't generally known as early adopters when it comes to trends and technology, in-house counsel are part of companies whose other employees generally are up on the latest business tech. Breaking through misconceptions about technology and how it applies to the practice of law is an important first step in making your legal department more efficient and better able to show its value.