Law Review: Company lawyers reveal ins and outs of legal 'spends'

Posted: December 17, 2012

If only they knew.

Surely a recurring fantasy of many top corporate and transactional lawyers at private firms in Philadelphia is to peer into the minds of their customers: the in-house lawyers who head the legal departments of America's largest companies.

These are the in-house counsels who make decisions on their companies' legal "spends," deciding which law firms make it on their lists of outside counsel in the first place, when a company is deciding whether to sue, settle or defend in a legal dispute, and which law firm will take the lead role in a major acquisition.

Lawyers and other professional-services firms devote inordinate amounts of time and money marketing themselves to potential corporate clients and constantly agonize over things like when to call and how to calibrate a pitch to an in-house counsel.

Knowing what is most important to chief legal officers and how they think would seem to be indispensable business intelligence.

And closely guarded, at that.

Yet here they were on Tuesday, dozens of the region's - indeed, the nation's - top in-house lawyers, in a sprawling wood-paneled room at the Union League in Center City, unburdening themselves about the trials and tribulations of running a corporate legal department in the wake of the 2008 economic collapse.

The occasion was an invitation-only conference sponsored by Argyle Executive Forum - an actual, in-the-flesh networking firm, as opposed to the virtual variety exemplified by LinkedIn.

Argyle is a membership-based business that hosts conferences in big cities around the country. The aim is to connect corporate legal departments with outside law firms, headhunters and litigation-support businesses that store, sort and archive data along with other services.

The general counsels get to attend these events for free; they are, after all, the main attraction for everyone else trying to sell them stuff.

The deal-making and corporate law firms that come to hear what the general counsels have to say can spend a half-million dollars or more to be included in multiple conferences over the course of a year, sending several attendees who might also sit on a panel or attend an exclusive dinner the night before to share quality legal time with chief in-house legal officers.

The lineup at last week's conference comprised in-house lawyers for major companies, including DuPont, GlaxoSmithKline, the British pharmaceutical company with Philadelphia roots and large operations in Center City; Pfizer Inc., Independence Blue Cross, Tyco International and others.

Sports being the big business it is, the senior counsel to the Washington Redskins was on the guest list, too.

The conversations proceeded along two tracks, one highlighting the day-to-day legal issues faced by general counsels, most notably the relentless pressure to root out bribery overseas or face prosecution under the Foreign Corrupt Practices Act, if the U.S. Justice Department finds it on its own.

The other was the new normal of post-bubble corporate legal department budgets. One of the three morning panels was titled "Doing More with Less." Legal departments are belt-tightening, which of course is then felt by the outside law firms that are eager to do work for them.

Why are corporate legal departments vulnerable?

Companies are highly profitable and are sitting on huge amounts of cash. The Dow is at near-record levels and has more than doubled since the financial collapse of 2008. One general counsel remarked, only half-jokingly, that legal departments in businesses have been targeted because "no one likes lawyers."

This may be especially true in executive suites, where the legal department sometimes is seen as an impediment to doing business and a big cost without obvious economic benefits.

But there is another explanation that I think is closer to reality.

G. Gregory Schuetz, vice president and general counsel of Linde North America, a Munich, Germany-based maker of industrial gases with U.S. headquarters in Murray Hill, N.J., said legal budgets are under scrutiny for the same reason spending is being ratcheted down across the board: There is a lot of economic uncertainty out there, and a paucity of trust that the current recovery has legs.

Just like many households, corporate leaders are nervous about what happens next.

In his previous position as an in-house lawyer for another company, Schuetz said he sought as outside counsel not the largest and most prestigious national firms, but local firms with honed litigation skills.

"We wanted lawyers that the local judges would know," he said. If nothing else, Schuetz's tactic suggests that the much-discussed demise of small law firms has been greatly exaggerated.

Amid all the discussion of multiple challenges for corporate legal departments, a ray of optimism broke through during a midday presentation by James Lovett, general counsel of Covance, a Princeton-based drug-development services firm.

While many worry about cutbacks in legal services, Lovett said increasing government regulation will bolster the role of lawyers.

"As society becomes more heavily regulated, the role of lawyers becomes more important," he said.

I guess that's good news.


Contact Chris Mondics at 215-854-5957 or cmondics@phillynews.com.

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