VOL. 118 | NO. 74 | Thursday, April 29, 2004
Firms Big and Small Turn to Legal Outsourcing
The Daily News
Its all about relationships. Or at least Jim Raines
believes it is.
Raines, general counsel with Thomas & Betts Corp., said
its important to build a strong relationship with a firm before considering
outsourcing any legal work to that firm.
When I go outside, I generally go to the same firms that I
have relationships with, negotiate specific rates with regard to that work and
use them repetitively, Raines said. I may use the same firm, for example, to
handle my labor-related cases throughout the United States.
Need to outsource. Many Memphis-based companies, such
as Thomas & Betts, FedEx Corp. and International Paper, employ in-house
legal counsel. But even businesses with dedicated legal teams sometimes find it
necessary to outsource work to law firms.
Andy Branham of Counsel on Call, an attorney placement firm,
has experience on both sides of the coin. He previously worked as in-house
counsel with International Paper, which outsources work to firms around the
country and also maintains an in-house legal department.
Youve got fairly substantial companies in town, like
Dunavant Enterprises, that have two lawyers and will only ever have two lawyers
but still outsource a tremendous amount of their work, Branham said.
International Paper, on the other hand, has been around over 100 years, has
always had a legal department and has always outsourced a ton of their stuff to
the big firms.
And although IP has made staff cuts in the past few years,
the company has added to its legal department.
The idea is they can control costs better that way by
doing more of their own stuff, Branham said. It depends on how much you have
going on as to whether it makes sense or not.
A financial decision. In fact, a companys decision
to outsource legal work depends largely on economics.
It depends on the size of the company, Raines said. But
it also depends on the relationship. It depends on the work, it depends on the
nature of the work, it depends on its repetitiveness and it depends obviously
on the cost considerations.
Firms large and small must examine the economics of hiring
in-house versus outsourcing.
If youre paying a firm $200 an hour to do it, and say
youve got over 2,000 hours a year that theyre billing, youre at $400,000,
Branham said. You could hire a good in-house lawyer for half that amount of
money. If that lawyer can do that amount of work, youre saving right there,
and thats how you look at it.
Thomas & Betts employs an eight-attorney department,
plus one in Brussels, Belgium. Raines said for the size of the company, its
Meeting specific needs. But in addition to its
in-house legal staff, Thomas & Betts uses outside firms to address basic
needs, such as employment concerns, that arent big enough to warrant adding a
I have a series of specific law firms that I use for our
operations in Canada, our operations in Mexico, our operations in Puerto Rico,
Raines said. On an international basis, I have selected law firms and
generally use those law firms as if they were in-house in the sense that I
refer all my matters to them.
Saving money. For companies that decide to go
in-house only, its typically because the economics are right and legal needs
can still be met.
In-house lawyers are always there to help the firm save
money and do things within the four square corners of the law, Branham said.
Thats a given. You wouldnt hire an in-house lawyer unless you thought it
would save you money.
Raines said Thomas & Betts uses the services of outside
firms on a regular basis in part because he can secure competitive rates.
Because of the fact that I have this relationship with them
and they know thats what Im going to do, Im going to get extremely
competitive rates from them, he said. Im going to get a group of lawyers
that become over time extremely familiar with our company and how we do
business so there is no learning curve, and to the extent that theyre
repetitive in nature, then Im ahead of the curve.
Staying clean. Affordability might drive a companys
decision to hire in-house or outsource, but the reason attorneys are needed in
the first place doesnt change.
There is more and more emphasis on corporate compliance
the problems weve had with Enron, Branham said. The corporate legal
departments are the conscience of the company. If they cant keep you clean, no
Raines said a couple of different beliefs come into play
when selecting a firm to work with.
A lot of companies put their work on what Ill call a
beauty contest and can have law firms come in and bid on it, he said. Im
of the old school in that I believe relationships are extremely important and I
believe a good relationship also results ultimately in an economic advantage to
I think a lawyer that knows Im going to go to them with
everything I have in their area every time is going to be more inclined to
negotiate a favorable below-market fee rate with me than one that I go to on a
particular matter who has no assurance of repeat business.