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Robert Zausmer Authors, “Managing Outside Counsel”

Publication Source: Nassau Lawyer

Zausmer_BobI presently am “of counsel” to Meyer, Suozzi, English & Klein, P.C., a law firm in Nassau County which I first joined in 1983. I became a partner in the firm the following year, and remained in that status until July 2004. At that time, in a career-change decision, I decided to become an “in-house” attorney at an insurance company (for purposes of this article, the “Company”), working with the Company’s general counsel, which also was located on Long Island. I had represented the Company in a number of litigations during my tenure at Meyer Suozzi. (I returned to Meyer Suozzi in April 2007 because the Company had no further need for multiple in-house counsel.)

My specialty as an attorney is, and was, litigation and criminal law. (I began my career in 1973 as a prosecutor with the Nassau County District Attorney’s office.) This background is not typical of most in-house attorneys, who commonly are experienced in corporate law and/or the type of law most akin to the nature of the business of the company by whom they are employed. In my case, my experience with corporations, generally, and insurance companies, in particular, derived from whatever litigations I had handled in which those businesses, and the substantive legal areas associated with them, were involved.

However, far from being a deficit, I found my 25 years of law firm experience, and my skills as a litigator, were invaluable in dealing with matters being handled by the Company’s outside counsel, and in my interactions with those attorneys. These interactions essentially encompassed three broad areas of matters: litigation, corporate and regulatory.

The balance of this article will focus on some practical suggestions for dealing with, and managing, outside counsel, based on those experiences.

1. Communication is the Key

I firmly believe that communication is essential to the success of every relationship, personal or professional. Consequently, the first thing I made a priority in dealing with outside counsel was speaking with and, when possible and practical, meeting with those attorneys. Many of the outside counsel had been representing the Company for many years, and had been dealing with other in-house attorneys at the Company, or no attorneys at all (i.e., they only interacted with officers or managers of the Company). Now, these outside attorneys would have to work with me (and vice versa). Naturally, before making contact with any outside attorney, I tried to make myself familiar with each matter that they were handling. My goal in opening the lines of communication was several fold.

First, to develop a rapport between myself and each outside counsel (sometimes there were several if a law firm was involved). Second, to get that attorney’s thinking and perspective on the particular matter that he/she was working on and, in particular, to discuss that attorney’s “game plan” for the matter. Lastly, and quite candidly, far from least, I wanted to get a sense of what the attorney was like as a person and the level of his/her ability. An attorney mentor once told me early on in my career that there were two types of lawyers: those that know what they’re doing, and those who don’t. I considered finding out if the Company’s various outside counsel “knew what they were doing” to be critical to my role as an in-house attorney.

Obviously, my experience as a litigator enabled me to make informed judgments on the various litigation matters that were being handled by outside counsel. However, even in an area where my expertise and background was less developed, it did not take long to get a good sense of which outside counsel inspired confidence, and which ones did not.

Communication with outside counsel, particularly the litigators, occasionally raised what I would call “diplomatic” issues. The fact that I did not necessarily agree with a strategy, or the way litigation papers presented the Company’s position, did not mean that I was going to demand that the Company’s outside litigators do it my way. Rather, as long as I felt that the outside attorney knew what he/she was doing, I deferred to their judgment. This did not mean that I expressed no opinion. Rather, I would discuss my view of what I thought should be done in a particular matter, with the caveat that the final decision was outside counsel’s.

I think that because most of the outside litigation attorneys I dealt with recognized that I was knowledgeable in this area, they were more amenable to listening to my opinion, and incorporating some of my ideas into the final product (be it strategy or litigation documents). In areas where I was less knowledgeable, I made sure to have the outside attorneys explain what the matter was about; what the issues were; what their plan was and their thinking behind it.

The second component of good communication was to keep it constant and current. I made it clear to the Company’s outside attorneys that I wanted to be kept “in the loop” and I tried to stay on top of the matters that were front burner or of significant import to the Company. I found, generally, that once I had developed a good rapport with outside counsel, they were diligent about keeping me current on the matters they were handling.

2. Keeping the Customer Satisfied

Moving in-house results in a very important change in status. You still are an attorney; however, instead of servicing clients, you now, in effect, become one yourself (or, at least, the agent/spokesperson for that “client”). As in-house counsel, I was getting direction and information from the persons I worked for (corporate executives) or with (managers or other employees), and that information had to be synthesized and communicated to outside counsel so that he/she could adequately and effectively represent the Company’s interests. As in-house counsel, I was a conduit between my client (the Company) and outside counsel’s client (also, the Company). While trying the maintain the primacy of the relationship with outside counsel, I found it helpful on numerous occasions to bring the corporate executive(s) or manager(s) most intimately involved in the matter being handled by the outside attorney into the line of communication, either via conference calls with myself and outside counsel, or by face-to-face meetings.

I discovered that “diplomatic” issues were not necessarily limited to my relationship with outside counsel. Sometimes what an executive wanted (or hoped to accomplish) was not what the outside counsel recommended, or reasonably thought could be accomplished. Here, I took on a role more akin to a mediator, keeping in mind that I and the outside counsel shared the same “client.” I worked to see if some accommodation could be made to keep the Company’s executive happy without losing sight of the fact that, if outside counsel’s advice seemed reasonable and sound, I had to make it clear to the Company’s executive or manager that we should follow that advice.

3. Hiring and Firing

New matters occasionally came in during my tenure which did not obligate the Company to use prior outside counsel. In those cases, I was able to tap into my own databank of attorneys who I thought were competent to handle that particular matter. Similarly, if I was given the name of an attorney or firm with whom I had no direct experience, being the interviewer of those attorneys in the first instance enabled me both to determine if the prospective attorney met my criteria for level of competence, and allowed me to form an early positive bond with that attorney and/or his/her law firm in dealing with the matter going forward.

A necessary corollary to the principle of hiring involved terminating a negative attorney/client relationship. My sense is that this virtually was never done before my arrival at the Company. In one particular instance, involving a major litigation that the Company became involved in after I arrived, after the case had proceeded for several months I recommended that the outside litigation lawyers be replaced. This obviously was a significant decision, not only because of the importance of the case to the Company, but because of the attendant expense the Company would be incurring to replace the existing counsel with new counsel and getting that new set of attorneys up to speed. The decision was not made arbitrarily. Rather, I had spent an enormous amount of time working with those attorneys, and only made the decision when it became clear that continuing the relationship was in my judgment (and the Company’s general counsel as well) clearly not beneficial to the Company.

4. Legal Fees and Vetting Invoices

This section could be an article unto itself. One of the things I insisted upon early on in my arrival as in-house counsel was to try to have every new matter in which the Company utilized outside counsel memorialized in some form of written agreement in the nature of a retainer or other writing which clearly set forth the terms of engagement and the hourly rates of the outside attorneys who would be involved with the Company. Having dealt, while at Meyer Suozzi, with in-house counsel, I know there is a strong desire on their part for a “budget” as a means to limit costs. As outside counsel, I never found budgets to be a particularly useful way of defining an economic relationship with a corporate client. Unless the fee arrangement is simply a capped fee, budgets generally do not reflect the amount of legal expense that a company normally will incur over the course of a matter, particularly if it involved litigation.

As in-house counsel for the Company, I was cognizant of the need to keep legal expenses under control. On the other hand, I did not want to unduly restrict outside counsel from performing all necessary work on a matter because of concerns of hitting the ceiling of what could be charged for those services. Keeping in mind that the fastest way to ruin any relationship is to argue over money, I found that, even without the constraints of a budget, most outside counsel (after the bills started coming in on my watch as in-house counsel) were relatively reasonable both in their billing of the Company and in discussing any issues that I might have with the nature or amount of their time charges.

Although my career as an in-house attorney was somewhat abbreviated, I did enjoy the experience. Having now, in effect, worked on both sides of the fence, when interacting in the future with in-house counsel I will try to apply the above principles to ensure a positive, productive and harmonious relationship. At the end of the day, in-house and outside counsel should have the same goal: working together to help their respective “client” obtain sound legal advice and optimal results.