In House Counsel And The Selection Of Law Firms
Over at What About Clients, Dan Hull wonders whether an overwhelming portion of large corporation legal work could be handled as well by small boutiques as by the mega firms that typically garner such business. Quoting Paul Clifford, a law firm consultant, he suggests that only 10% of these clients’ work qualifies as “bet-the-firm” material – matters that you cannot trust to anyone but the biggest and most sophisticated shop. The rest, he hopes, is up for grabs.
Dan poses the question in terms of quality: can small firms handle sophisticated corporate matters on par with the biggies. The answer is clearly yes. Excluding particular cases – not only bet-the-firm matters, but ones that require serious resources due to size or speed – I imagine that high quality mid-size and boutiques have the capacity to do much work that currently lands in large firms. The question, then, is why the big firms so often get this business. There are lots of reasons, but in many cases they start here: the in-house counsel.
What motivates the work distribution decisions of in-house counsel? They are supposed to maximize the quality of outcomes in cases. And they have to stick to a budget. When a case is really important, fidelity to both the company and their own personal buttocks requires bringing in a top-flight firm. In lesser cases, one might expect counsel to be more cost conscious – and thus more open to smaller firms. But two factors cut the other way. First, if the attorney came from a big firm – as so many in-house counsel do – he or she may have personal connections that bias the decision. These connections aren’t just friendly; in some cases an attorney is looking to maintain the option of returning to the private sector. In addition, in certain cases – particularly ones that he or she sees as losers – counsel may be motivated to send the case to a pricier shop simply so that he or she can say “we lost, but it wasn’t my fault. I sent it Cravath.”
So a small firm looking to lasso corporate business needs competitive pricing. But because the hiring process is driven not only by price and corporate risk, but also by personal concerns of in-house counsel, small firms will always have more difficulty piercing the corporate market. That may not be best for business, but it certainly conforms to human nature.