Budgets for Legal Matters

July 19, 2023

Agreeing Upfront on the Work, the Lawyers & the Fee? Or Micromanaging Later On?

by Joel A. Webber

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The Point

A judge’s ruling last week* illustrates which of the above two alternatives is better for the client company.

The court, after reviewing a law firm’s bill in a bankruptcy case, found that AmLaw 100 firm Pillsbury Winthrop Shaw Pittman LLP** had overcharged its debtor client by about $1 million. On a $6.3 million bill†.

Lessons for a client company engaging a law firm:

1. Define the task and sub-tasks before work begins, to maximize the likelihood that the lawyers will understand exactly what you want — and that you will be able to make them accountable for following your wishes.

2. Identify by name or by experience-level which attorney will do what part of the task, to assure promised quality of representation, and to avoid paying partners and other senior attorneys for simple tasks.

3. Make your legal costs predictable by agreeing on the total fee in advance rather than agreeing to pay by the hour (perhaps with a bonus formula based on results). Continue reading

June 16, 2023

Why Law Firms Aren’t Accountable to Basic Budget Discipline, and What Management Should Do About It

by Joel A. Webber

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The Point

1. Historically, matters handled by law firms have comprised well over 50% of corporate Legal’s expenditures (Wolters Kluwer LegalVIEW Insights February 2023).

2. Though the vast majority (71%) of corporate clients want their outside law firms to create and manage to budgets on the matters they handle, only a distinct minority (29%) report that their law firms actually do so. (Minding the Gaps: Are You Getting What You Need from Outside Counsel? Thompson Hine 2023.)

3. Despite in-house counsels’ “demands” for budgets on law firm matters, in the form of so-called “outside counsel guidelines“, this disconnect has persisted for years.

4. Therefore, it’s up to CEOs, CFOs, and other P&L-minded executives to fix this problem. By leveraging their companies’ purchasing power, to get the budgetary discipline their law firms mostly refuse to provide, and that their in-house lawyers won’t enforce. Continue reading

July 14, 2022

Just Running the Fare Meter: For 60% of Legal Matters, the Law Firm Doing the Work Does NOT Set a Budget, According to a Recent Survey

by Joel A. Webber

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In about 60% of legal matters, the law firm doing the work fails to estimate the amount of money needed to complete the task, according to a recent BigHand technology survey described in The Artificial Lawyer June 28, 2022 issue.

This has two harmful implications:

1. Lax cost control: there is no number against which to manage accumulation of ongoing charges while lawyers run up the bill. “Cost control” is left to the attorneys. Continue reading