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In-House Lawyers Have Brutally Honest Conversation About Selecting Outside Counsel

Recently over at Big Law Investor, there was a post about the bloat in Big Law:

  1. More partner profits (which can never, ever be compromised) = more associate billable hours.
  2. More associate billable hours = paying higher associate salaries.
  3. Paying higher associate salaries = associates scrambling for client work to justify the salaries (as clients push back and keep more matters in house), even if it means re-researching, re-doing, revising, and re-working — all paid by the client.
  4. Higher associate salaries = clients paying higher hourly rates.
  5. Clients paying higher hourly rates = disgruntled clients who push back and take work away from Biglaw.
  6. Taking work away from Biglaw = Biglaw charge clients higher rates to sustain its profits.
  7. Clients being forced to pay more for less = clients searching for an alternative.

In the LawyerSlack finance channel, it generated a brutally honest conversation between in house lawyers about:

  • How they feel about rates
  • What they want from outside counsel
  • What they don’t like about associates
  • How they feel about “training”

What follows is a redacted and edited version.

In-House Lawyers Talk Outside Counsel

The players:

  • Bob: In-house counsel doing mostly IP.
  • Chuck: In-house Senior Counsel at a FinTech company with about 100 employees
  • Pat: OC Patent lawyer
  • Marge: OC M&A lawyer

Bob [9:43 AM] i didn’t like the article’s claim that associate salaries are ultimately what drives up rates put a graph of associate salaries next to PPP, and the real culprit will be unmasked

during Obama’s recession (tongue in cheek), we were told all these things about belt tightening, be happy you aren’t somewhere else with massive layoffs, etc. and PPP hit record levels.

i don’t mind junior attorneys working on my stuff. but please, 1st years should not be billing at $700 an hour. that’s just f*cking asinine.

Pat [9:50 AM] Seeing 1-year associates in other cities bill on par or more than my partners is part of the problem.

Bob [9:50 AM]  i do love a competent 5th year though. always pushing for them to do more.

Marge [9:57 AM] Do you think its PPP @Bob driving up rates? I assumed PPP is being driven up by the creation of the nonequity class of partners.

Bob [10:29 AM] in the words of willie sutton, that’s where the money is

Marge [10:34 AM] That’s where the profit is going for sure … but it doesn’t explain who is getting screwed. I think it’s the nonequity partners and the clients.

Although clients at least get to choose whether or not to pay the bills.

Bob [10:39 AM] i don’t like words like “screwed” with respect to arms length transactions in non-manipulated markets. but i do think that equity partners are getting the lion’s share of the benefits.

Marge [10:47 AM] I’m not following why you think higher PPP is causing an increase in Biglaw billable rates. You said “the real culprit will be unmasked” but I’m not getting the unmasking or the culpability.

And I definitely think non-business owners (like associates and nonequity partners) lose out to the business owners, as is the case for nearly all businesses. I don’t often get in-house perspective on this problem. Am genuinely curious.

Chuck [11:53 AM] No idea about why but I agree – its frustrating training new attorneys at full billing rates when dealing with biglaw – especially since a lot of times I feel like the associates know they are just shoveling shit and treat it like such

I’ve had firms try to bill $250 per hour for associates to do dock review, only to discover its coded about 50% accurately

More recently, I was working with a potential customer, a small startup, that hired a big law firm but wanted a cheaper associate

we spent weeks educating the guy on the structure of the agreement, only to have deadlines get tight, a more senior partner come in, and say “Yes, we should do this exactly as Chuck is recommending”

It was no fees for me, but end result is that the client 1) didn’t get good service 2) still spent money on partner level fees 3) still spent money on associate fees 4) feels burned by the whole thing 5) I have a pretty low opinion of the firm because I missed dinner with my family because deadlines got tight

As far as I can tell, everyone lost except the hourly billing sheet

Pat [12:00 PM] How do you in-house folk feel about associates who bill at 300+/hour?

Bob [12:00 PM] PPP going up from $2M-$3M is going to have a bigger influence on revenue pressure, for a 400 partner, 800 associate firm, than going from $160K to $180K. That’s just math.

Chuck [12:00 PM] Fine – if they can do the work

Bob [12:01 PM] @Pat as always, depends on the sophistication of the work

Pat [12:01 PM] Maybe a better question: do you think associates are worth what we’re charging you?

Bob [12:01 PM] if you’re doing meaningful analysis on complex deals or litigation, it’s a bargain

if this is for someone to pull a form off the pile, meh. but i wouldn’t go for OC there anyways

for mid to large firms, i wouldn’t blink for $300/hr, for solos who Get Shit Done, i would send every piece of business i could to $300/hr

Chuck [12:02 PM]

In my role, I honestly never need associates – I need advice, and associates tend to not provide good advice

Bob [12:03 PM] hmm, i’ve found that associates at the 5th-7th year levels, basically jr partners, are pretty sharp. the dum dums and the lazies have been filtered out by then

Chuck [12:03 PM] We have a partner at a smaller firm who bills at $350 per hour but Gets Shit Done and he gets tons of work.

But the real joy of working with him is that he has the experience to say “push this, let this go, etc”

Bob [12:04 PM] Absof*ckinglutely

Chuck [12:05 PM] On our IP side, we have someone who is partner level and when we send in questions we get brief, straightforward advice with cost benefit analysis

Bob [12:05 PM] our solo master does a lot for us, but one of the bigger things he does is negotiate with a Very Large Vendor who has crazy complex licensing agreements. he’s our guru on those. un-fireable.

what inhouse lawyers want

Chuck [12:05 PM] that’s what I want – recommendations on how to proceed

I don’t want to read a brief or some “here are the pros here are the cons” analysis – know my business, give good advice, get paid. associates can’t make decisions

Bob [12:07 PM] you need better associates

example: we work with a very large firm for our biggest M&A deals. the partner leading the charge is very much a You Need To Fully Cover Your Ass and slows deals down

almost kills them

when he knows damn well it’s happening, so we just need to figure out what we really need to worry about – but the IP person on the deal team is a 6th year

she says ‘ok this you can let go. this is market. this is an aggressive ask. here’s why their symmetry argument doesn’t hold. etc.’ she will literally keep the business there, because we’d fire them otherwise

Chuck [12:08 PM]

Fair enough – maybe its not the associate v partner, its just the talent level

Bob [12:09 PM] yep

Chuck [12:09 PM] I do think you need at least 3 years to be of any use though any direct use

Bob [12:09 PM] agreed

i have no problem ‘training’ them, if the rate reflects that

this year’s deer in the headlights will be your cheap expert in 3-5 years. treat them as such.

Chuck [12:11 PM] Actually, thinking back on it, I have no problem with doing some training as long as someone senior is somewhat involved and will step in – if the firm corrects it, I’m fine with paying a little training, but if I have to correct it, I’m less satisfied – even if they write the bill off

Bob [12:11 PM] yeah, you want to know that someone’s watching

Chuck [12:12 PM] I’m thinking back on it and I’ve trained a new associate to cover a line of business, but he was transitioned in by the senior attorney who had previously covered it, and she was very quick to step in when he went wrong

Now he is great and I never was up late at night because he goofed

Bob [12:13 PM] that’s how it should work, and that’s a place that values the long term

Pat [12:16 PM] This is fascinating.

Marge [12:17 PM]

I’m surprised you guys interact with junior associates. At our firm, almost all of the interaction is done by the mid-level and senior associates (except for the “important” events which are always covered by partners).

Pat [12:17 PM] Same with us, sort of.

Chuck [12:18 PM] God if some of the people I’ve dealt with are “mid-level” I fear for the bar

Marge [12:19 PM] By mid-level I just meant 4th, 5th or 6th years. If you’re dealing with biglaw associates at that level and not happy with them, let the senior associates or junior partners know. They will VANISH.

Pat [12:26 PM] So basically, (1) give recommendations, not equivocations, (2) bill associates commensurate with their worth, and (3) quality can warrant price.

Chuck [12:27 PM] I think with 2, its more that I would rather you fix associate errors than lower my bill – save me time and stress and I’ll spend the money

but with 1 and 3 yes – spot on

maybe a soft 4) is: Know my business/industry

TL;DR – What Inhouse Lawyers Want

  1. give recommendations, not equivocations,
  2. bill associates commensurate with their worth,
  3. quality can warrant price, and
  4. Know my business/industry
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