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VOL. 118 | NO. 74 | Thursday, April 29, 2004

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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 probably median.

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 staff member.

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 one can.

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 you.

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.


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