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Avoid Expensive Bargains

Q&A With In-House Counsel

By: Adriana Gardella

David Crowe has learned that, when it comes to legal services, better doesn’t necessarily mean faster and cheaper. Mr. Crowe, senior vice president of claims at Lexington Insurance Company and global head of property claims at Chartis, is a member of the Carlton Fields Jorden Burt Client Advisory Board. He recently discussed choosing and managing outside counsel, the pros and cons of alternative fee arrangements, and the potentially staggering costs of e-discovery. A condensed version of his observations follows.

Q. What do you look for when hiring outside counsel?

Mr. Crowe: It’s important to work with people we trust. This applies to everybody on the team. So we need to know a firm’s bench strength. This may sound harsh, but we need to know the lead partner’s plan if he or she gets “hit-by-a-bus.”

Q. How do you work most effectively with the teams you assemble?

Mr. Crowe: We set expectations during initial conversations, direct the case, and are actively involved in managing it. To facilitate this, we ask outside counsel to prepare what we call an “agreed-to litigation plan.” This serves as an outline for how we anticipate we will handle the litigation, but the key is to maintain open lines of communication. You have to be willing to challenge counsel about their assumptions, case evaluation, and recommended strategies. It’s especially important to find out whether we are dealing with a bad case early on through an aggressive investigation that gathers statements, photos, and other documentation. This will drive our strategy for litigating or resolving the case.

Q. What mistakes do clients make when dealing with outside counsel?

Mr. Crowe: They often focus exclusively on their bottom line in a short-sighted way. This typically means pressing outside counsel on hourly rates or case budgets. While we care about rates and budgets, we also want a good product. The two are not necessarily related, and sometimes they can be inversely related. We don’t want to be penny-wise and pound foolish.

Q. Are alternative fees the answer?

Mr. Crowe: They work well in some cases, and not so well in others.

Q. Can you give some examples?

Mr. Crowe: Several years ago, when I was employed by a different company, we had a flat fee arrangement with another law firm. While our litigation expenses went down in the short term, our indemnity went up. The lawyers were not financially motivated to conduct the necessary discovery. Although we didn’t have to check monthly bills, we incurred a greater overall cost in the end. We have had success with blended rates, which enable us to pay one hourly rate regardless of which attorney handles a matter. This set-up works best for us in high-exposure cases where a partner handles much of the work. We are not opposed to a “win win,” but these arrangements will be successful only when the client can trust outside counsel to make prudent staffing decisions. We’ve also used monthly retainers, typically in pretty complex environmental matters. The firm gets $X amount per month, regardless of the number of cases.

Q. What’s one of your company’s greatest litigation challenges?

Mr. Crowe: E-Discovery is a huge issue, and costs are enormous. To be sure you’re complying, you need an experienced firm. You don’t want to have to teach your lawyers what they need to know. Many law firms claim to have expertise in this area, but not all law firms actually do. It is very complex, and the law evolves constantly. So you have to be sure you are working with a law firm that really knows the potential pitfalls, and how to avoid them.

Q. How can you best control costs, and ensure you receive a great product?

Mr. Crowe: It all comes down to knowing and trusting your outside counsel. Rates, budgets, litigation plans, and the like are just tools. They can’t substitute for a great relationship with a firm you trust. When you have that, and it’s working, it’s all too easy to take it for granted. But when you don’t, you know it in your gut and live with unease until you’ve fixed the problem. Maintaining regular communication with outside counsel is key to an ideal relationship. Great outside counsel quickly learn what you need to know, and when you need to know it. In my experience, virtually any conceivable problem between the client and outside counsel can be avoided with timely and effective communication.