Legal Feeds Blog
A new report from TGO Consulting says in-house counsel will avoid difficult fee negotiations with law firms with whom they’ve had long-running relationships. Instead, they’ll move the work in-house, or send it to a lower-tier firm or an alternative service provider in order to meet budgetary needs.
|Instead of negotiating price, in-house counsel will ‘vote with their feet’ by finding less expensive options, says new report.|
“[I]nstead of hard negotiation on price with their lawyers, the in-house department has found an easier and far less confronting way to realize savings on the budget; instead of negotiating they push work down. In effect they ‘vote with their feet’. Work that is deemed too expensive is simply taken from one law firm and given to another that is less expensive to start with,” says the report, called The Trend is Clear, the Blow is Yet to Come.
The report is based on face-to-face interviews with 15 general counsel or people in charge of managing outside legal services for international companies spanning a broad range of sectors, from the financial sector to heavy industry. TGO Consulting focuses specifically on the legal sector and its ownership structure.
Some of the findings of the report may be hard to confront, especially for law firms that see their work as bespoke.
“From the client’s perspective, for the vast majority of legal matters there are multiple law firms and numerous lawyers that can perform the same task equally well,” said the report, which focuses on the increasing “commoditization” of legal services. The report later said: “When judging if a service is a commodity or not, is the opinion of the client that counts.”
So, how does this pull by the client to pull down costs manifest?
The report says that “surprisingly” the biggest savings haven’t happened thanks to “negotiating special rates, whether during a panel appointment round or on ad-hoc basis.” Lawyers feel it’s important to have a good relationship with their “incumbent” law firms, so a pattern of avoidance emerges.
“Instead of confronting the trusted outside legal advisors they work with, nearly every single general counsel speak of ‘pushing work down.’ The same work that a client would hand to a firm in Tier 1 of its panel is increasingly being given to a firm from one tier below,” said the report.
Law firms are not feeling the pain, said the report.
“A pattern clearly emerges from this survey: the erosion of work for upper mid-market firms. By being able to shift work down when they need to cut cost, without having to compromise on the results, general counsel can reach their budget taregts. But for most lawyers this has been done in stealth,” said the report.
David Felicissimo, general counsel for Valnet Inc., says the legal industry is ripe for disruption.
He says negotiation around price is a careful area for in house counsel with law firms where they have an established relationship. For example, he points to section of the report that said “in-house lawyers also typically have an excellent working relationship with their outside counsel. A relationship they do not want to spoil by breaking bad news on the pricing and the hourly rates.”
“That I find absolutely true,” says Felicissimo.
Felicissimo says in terms if negotiation, he does not negotiate with his external law firm as much as he negotiates with “everybody else."
“I’m sure that has to do with or it does have to do with, the personal relationship you have with them, the excellent service they provided — obviously if you’re still with them for many years it means they’ve provided excellent service in return. When you have a history with a certain firm, and you’ve been through a lot of battles with them, they’ve done a lot of great work, excellent advice, it kind-of feels like you’re watering down their services when you’re trying to negotiate a rate. That’s how I feel,” he says.
Helen Fotinos, national co-chairwoman of McCarthy Tétrault LLP’s franchise and distribution group, says she challenges “clients to leverage their position by selecting firms they can truly partner with.”
Price should not be the only focus, she says.
“I agree with the report’s findings that clients have the upper hand, but I would also challenge clients to leverage their position by selecting firms they can truly partner with, and not focusing on price alone, they would be doing themselves and their companies a disservice if that’s the only metric,” she says in an e-mail to Legal Feeds.
Using many firms to do many things costs time and money, not to mention how cumbersome it is to manage, says Fotinos.
“The majority of in-house legal departments are lean, with resource challenges of their own. Given the option, why wouldn’t a client invest with a single service provider, who similarly invests in the client’s business, and who could work as an ally to manage portfolio risk and control legal spend?”
Update 2:30 p.m.: Comments from David Felicissimo updated.
Traditionally, if a person wanted to sue someone in Ontario and that amount fell under $25,000, he or she would have to prepare all the necessary documents and then take the time to go to small claims court to file them.
As of last week, the court has finally entered the Internet era, as the Ontario Ministry of the Attorney General announced all small claims can now be filed online.
Brendan Crawley, a spokesperson for the AG, explained that since small claims court online applications were piloted online in 2014, more than "20,000 small claims have been filed online, and over 15 per cent of those claims were filed outside regular court hours.”
Crawley adds that the process is made secure by requiring “users to create and use a One-key ID and password, a unique electronic credential that allows users to communicate securely with online Government services.”
Why is the Ministry of Attorney General doing this now?
Crawley said that this was done to make “court services easier, faster and more accessible by delivering them online”.
“The intention has always been to expand it [the e-filing system],” adding that “filing online is really an advanced feature and it’s overdue, it should be expanded beyond small claims to all courts," says Toronto commercial and franchise litigator Ben Hanuka, of Law Works PC.
There will also be actual cost savings to clients if a lawyer or paralegal represents them, because they can now save on having to use a process server.
While Hanuka acknowledges, “It’s a good step . . . this saving of time for the consumer is good,” he also cautions that just because the filing is made easier, doesn’t mean the rest of the claim will be easy to handle.
“I think it will help them [consumers] with the logistics of filing it but it won’t do anything about helping them draft the claim and the drafting is the hard part," he says.
Before individuals begin filing, there are a few things they will need, including a ServiceOntario account, a credit card, a summary of why they are making the claim, and documents that support the claim.
What about people who are not exactly technologically savvy? Are they able to navigate the murky waters of online filing?
Crawley says the process is actually quite simple.
“The online filing wizard makes the process of completing and filing a small claim and receiving a judgment faster and more accessible by breaking it down into a series of easy-to-follow steps," he says.
The takeaway from the government’s announcement is that Canadian governments and courts are recognizing that they have to move with the times and many are now moving towards filing claims online.
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- Lay person could not be expected to know if she had a claim against former lawyer, says court
Personal-injury lawyers who advise their clients to settle for amounts that are alleged to be improvidently low could face malpractice claims many years after the settlement.
|Bryan Rumble says it comes down to what a lay person, not a lawyer, could be reasonably expected to know.|
“When is it reasonable for a lay person to know that she should sue her lawyer?”
The case stems from a car accident in 2002, in which Melody Lauesen was injured. Lauesen then retained the legal services of Fern Silverman, of Goldman Sloan Nash and Haber LLP, to commence an action. In 2005, Silverman advised her client to accept a settlement of $26,169.36.
Lauesen was unhappy with the low amount but chalked it up to a faulty legal system. In 2008, she requested Silverman’s help in getting statutory benefits for her injuries. In 2009, Silverman requested a $500 retainer, which Lauesen says she couldn’t afford. At that point, the solicitor-client relationship ended.
One year later, Lauesen consulted with another lawyer, Joseph Falconeri, who suggested she get a second medical opinion.
After receiving a fresh opinion that her condition met the statutory definition of “catastrophic impairment,” Lauesen was advised by her new lawyers to launch an action against her former lawyers for breach of contract, negligence and breach of fiduciary duty.
At a preliminary motions hearing, the judge threw out the case, ruling that the limitation period of two years — from the point of the settlement in 2005 — had long expired.
The appeal court, however, disagreed. In a unanimous decision written by Justice Kathryn Feldman, the court found that a lay person like Lauesen could not be expected to know that she had a claim until she understood the extent of her injuries and spoke to another lawyer.
“[A] reasonable person with the appellant’s abilities and in her circumstances would not have realized that she had a claim against the respondents, when no one, including the respondent, indicated to her that an error might have been made with respect to the settlement,” writes Feldman.
“It was only with that information, and with the legal advice of her new lawyer, that the appellant first knew or had the ability to know that she had a claim against the respondents.”
Bryan Rumble, the lawyer at Falconeri Munro Tucci LLP who represented Lauesen before the appeal court, says it comes down to what a lay person could be reasonably expected to know — not what a lawyer might be expected to know.
“You have to look at what a reasonable person would do, but that ‘reasonable person’ has to be in the same situation as the person who is the subject of the claim,” he says. “So I guess if that person was a lawyer it would be a different situation.”
Rumble says, while this case doesn’t really develop the law around discoverability, it does prove that cases such as these — where allegedly improvident settlements lead to malpractice litigation — are viable, which could lead to more of them.
It also demonstrates the court’s general attitude around limitation-period defences for lawyers: “I think we can say that courts do not like to let lawyers use litigation periods to prevent claims against them. That seems to be a general trend.”
Update May 13: Clarification: A previous version of this article contained language that implied legal malpractice by Fern Silverman and Goldman Sloan Nash & Haber LLP. The Ontario Court of Appeal’s ruling deals only with the limitation period of the claim, and any other findings are yet to be determined at trial. The article was not meant to convey any finding of legal malpractice against Ms. Silverman or her firm. Legal Feeds apologizes for any misunderstanding.
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Ontario Court of Appeal Justice Gloria Epstein will have a cameo role in this year’s Nightwood Theatre’s annual The Lawyer Show.
|More than 40 lawyers will put on the Guys and Dolls musical next month in Toronto.|
“There was someone who is close to [Epstein] in the cast this year and so that individual approached [her] on our behalf,” says Beth Brown, managing director at Nightwood.
She adds Epstein’s role is so far being kept a secret and she will not join the rehearsals until it moves into the theatre down the road.
Mark Hart, vice-chairman of the Human Rights Tribunal of Ontario, is regular participant in the show. Other legal show guys and dolls come from private practice, government, and corporations.
It’s the first time The Lawyer Show is presenting a musical; in the past, the legal thespians performed Shakespearean plays like Twelfth Night and A Midsummer’s Night Dream.
Preparing for the musical has been different in a lot of ways, says Danny Kastner, a repeat participant.
“It’s a huge undertaking, much more than any of the shows we’ve done before. These musical and dance numbers I can tell you personally are grueling,” he says.
Set in prohibition era New York, Guys and Dolls is “a funny take on gangsters and the women in their lives,” says Kastner, who plays Nathan Detroit, a nervous gangster who makes a living by organizing underground gambling.
While some of the lawyers have backgrounds in acting and singing, others simply have the interest. They spend two months rehearsing lines, nailing down choreography, and fine-tuning their vocals. A paid, all-lawyer orchestra for the musical this year means a higher than usual number of lawyerly participants.
“There’s been a lot more technical training . . . but it’s also been incredibly fun, partly because this show is ridiculous and hilarious,” says Kastner.
“What’s so special about The Lawyer Show is that for all of us lawyers who are used to interacting with each other in serious context and very professional context, it’s a chance to work on something artistic and something silly,” he adds.
Tickets for the show and details on the cast and band are here.
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CALGARY — Having tools to demonstrate the value legal brings to an organization can help in-house counsel tell their story and illustrate their contribution in an appealing way to a chief financial or operating officer.
|Bindu Cudjoe and Kristi Lalach are all about the data. (Photo: Jennifer Brown)|
Speaking Monday at the Alberta chapter of the Association of Corporate Counsel’s Law Department Leadership 2.0 conference, Kristi Lalach, vice president legal and compliance, FGL Sports Ltd & Mark’s Work Wearhouse Ltd., and Bindu Cudjoe, deputy general counsel and chief administrative officer at Bank of Montreal, addressed the ways they track what their departments are doing internally and with external counsel.
Lalach, based in Calgary, says tools such as billing and matter management, which FGL and Mark’s recently implemented, can help justify hiring and growth opportunities in a legal department. For example, engaging a real estate firm on a regular basis may signal the need for an additional person internally in that area of law.
“It gives me oversight and transparency. It allows me to understand what my lawyers are doing, what our compliance people are doing, and frankly it allows me to understand those parts of the business that engage external counsel themselves in terms of what they’re looking for advice on,” said Lalach.
“It also keeps the law firms honest, frankly. It’s a lot easier for me to dig down into the descriptors when I have it on an e-billing system,” says Lalach.
BMO has had an e-billing system for about three years that to-date has been largely used for work with external counsel. BMO bolted its e-billing system onto the accounts payable one to take in all things tagged as legal spend.
Where Cudjoe sees the bank taking its system to the next level is to use it to create “discipline for internal lawyers.” BMO has almost 200 lawyers globally — 120 in Toronto in Montreal. Its system requires there be a budget before the law firm can submit an invoice.
“One place for us to go is to ask how accurate were the budgets? Who is following the system, and who is doing it better?” she said.
The bank is also using the system for matter management to see how files are staffed and managed internally or externally.
Lalach also likes that with the e-billing system the detailed bills come to her and not directly to the accounts payable department.
“I felt there was a risk of privilege,” she said. “That doesn’t happen anymore because once I sign off the accounts payable department doesn’t see the long descriptors on the bills. That’s giving me a lot of comfort.”
Once you are getting numbers out of a system the next stage is often using the metrics to benchmark. Cudjoe noted a good place to start is using data to benchmark the department over time.
BMO compares data from the accounts payable department to the numbers in the e-billing system.
“There is no one system that puts those numbers together so it’s up to us to build a story that says, ‘This is what internal legal cost you over time and here is what external cost and the two together comprise an aggregate,’” she said. “I think you have to trust the data will tell you a story but you have to be open to interpreting it.”
The systems can also help when in-house counsel are confronted with the common refrain that “legal costs so much” or “legal keeps growing.”
“We measure things like the aggregate quantum of legal spend over a particular period of time and we break it down by line of business. We compare how much we spent externally with costs internally (headcount/salary/benefits),” she said.
While she doesn’t advocate for time tracking internally in the legal department, Cudjoe says there is important information to be gleaned from using systems to look at where resources are being used.
“I urge you to dig in and look at what are you area doing internally and where you are spending your time,” she said. “Are you actually able to get to projects or are you responding to fires? Maybe you are prioritizing things not important to the business.”
Be prepared that your metrics don’t back the story you’ve been telling, she added.
“Not because you were trying to be disingenuous but sometimes the numbers don’t hold true.”
For example, foreign exchange forecasts can throw off legal costs if you are paying firms in U.S. dollars. But that can prompt a question about whether you have the right mix of external Canadian versus American lawyers working on a matter.
“The numbers are really useful but they’re not a panacea. You do have to think critically about how you’re using them and who sees them,” she said.
The panel also explored the challenges of managing external counsel including having a common approach to risk management, understanding organizational values, and how to better handle the cost of litigation.
“There are things we stand for at FGL and at Mark’s that we can’t bend on — competition law is one of them. We are willing to take some risks in other areas. So that’s why a law firm knowing what we stand for is important to me because I don’t have time to read opinions that aren’t aligned with that,” said Lalach.
Cudjoe also noted the importance of “tell your story regularly.”
“Lawyers are well placed to tell that story thoughtfully, strategically, responding to the circumstances. So don’t get in the way — they are the facts behind your beautifully crafted speech.”
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