Relationships with outside counsel have taken on increased scrutiny as companies become more focused on the administration of their legal departments in addition to the legal work they do. General counsel are looking more closely at the law firms they hire, what they pay those firms, and the outcomes of the cases they’ve handled.
As discussed last month in our series on managing your legal spend, one effective way of managing outside counsel is implementing and maintaining legal billing guidelines.
Outside counsel billing guidelines allow a legal department to tell their law firms upfront what they will and won’t pay for, processes for staffing cases and requesting rate increases, and other expectations of how their matters will be handled. For example: Do you want a budget on a matter? If so, when should it be submitted? How will budget revisions be handled? What happens when a matter goes over budget? Drafting legal billing guidelines requires a legal department to actively assess their case management practices, their law firm relationships, and the importance of compliance with the guidelines once implemented.
A few considerations will help general counsel draft effective and enforceable legal billing guidelines:
Are you including a process by which law firms need to get authorization for new time keepers or rate increases? Is there a specific person in the department to whom these requests should be sent? Make sure to include that person’s name and their contact information in the guidelines. Depending on the size of the firm, invoicing may mainly be handled by a billing department that doesn’t have direct involvement in the matter. Providing clear information will better allow for compliance with required processes.
Are you using guidelines to get outside counsel costs under control? If so, make sure to outline all areas that you consider non-compensable (such as office overhead, scheduling, or review of local rules) or that will have a cap (includes a maximum cost per page for copies, mileage, only allowing coach airfare, etc.). Will the guidelines also include information on matter management practices such as status update requirements, case staffing limitations, or expectations on the handling of matters? Including this information, as well as the requirements for any possible exceptions, will notify outside counsel up front of how to approach a matter.
Legal billing guidelines for outside counsel should not be set in stone. While in theory what is decided and drafted sounds appropriate, it may not be once set into practice. Some requirements may prove unduly burdensome on outside counsel, while other areas may be too lenient. Additionally, there will always be that one matter that is the exception to the rule, and the guidelines should provide for those outlier cases. Undertaking an annual review of the billing guidelines in response to law firm and internal counsel feedback will allow general counsel to revise and implement guidelines that best fit their needs.
No one likes someone looking over their shoulder or second-guessing their work. Outside counsel provide a valuable service to legal departments, and should be compensated for doing so. Many law firms are resistant to implementation of guidelines, viewing them as intrusive and in place only to cut their bills. However, billing guidelines are becoming standard practice for legal departments, and almost every law firm has a client with billing requirements. Informing outside counsel of the guideline implementation, as well as the purposes behind it, will help to alleviate some of the animosity from law firms.
The most important piece to consider when implementing billing guidelines is enforcement. Many legal departments have billing guidelines in place, but don’t have the internal resources to make sure that outside counsel are complying. Non-enforcement of the guidelines not only makes the effort to draft them a waste of time, but it can undermine your position with outside counsel. If there is not enough manpower internally to ensure that guidelines are enforced, an e-billing or legal spend management company can provide that service.
Drafting, implementing, and enforcing legal billing guidelines for outside counsel allows legal departments to be stewards of their company resources while maintaining control over case management and preserving relationships with their effective outside counsel.