“Today's GC wears many hats – legal advisor to the board of directors and Chief Executive Officer, savvy business strategist, knowledgeable interpreter of regulations and statutes, risk assessment expert, as well as visionary and manager of outside counsel.”
Although an in-house lawyer may be employed by only one company, the overwhelming majority of in-house lawyers work with multiple clients. The goal of many outside counsel private practitioners is to represent as many clients as possible. The reality for in-house lawyers is that by being in-house, they represent and interact with dozens of internal company clients every day.
Lynn Kraus, Assistant General Counsel for Dow Corning, explained that as an in-house lawyer, “You juggle a lot of clients who have a lot of expectations of very fast turnaround, and when you get big projects that come in, you don't have associates you can hand off work to — you still have to do everythi Kraus estimates that in a typical day, “working on 50 different matters wouldn't be unusual.”
Being a General Practitioner Can Be a Challenge
Although many outside counsel specialize in specific areas of the law, many in-house lawyers switch from specialist to generalist when they go in-house. Frequently, new in-house attorneys discover that many questions raised by the internal clients are well outside their areas of expertise. As one author recently noted:
“When you are in-house, your non-legal colleagues often do not appreciate the fact that most attorneys are well versed in only a few narrow areas of the law. To them, you are an attorney, and you should be able to help them get out of a speeding ticket in the morning, draft their last will and testament during lunch, and help them sue their derelict landlord in the afternoon. Never mind these are three distinct areas of law; your colleagues' default opinion is that you must know how to do all of them.”
While most in-house counsel do not fix tickets and draft wills for their company colleagues, their internal clients expect a quick response to a question “[e]ven if it is well outside of your self-professed scope of expertise,” because “when you are in-house, you can bet when no one else has an answer for a particular question…After all, you are a lawyer and should know the answer.” In short, “[i]n-house, your clients expect you to know the law cold. Occasionally it's acceptable to request some research time, but most of the time it's not.”
For example, one attorney whose law firm practice focused primarily on product liability matters started his in-house position to handle product liability matters and “generally support” a business unit in December of a particular year. When he started, he did not know that the employment lawyer for the business unit traditionally went on vacation starting the second week of December every year and did not return until January.
On the Tuesday of the second week of December (his second week of work), a manager from Human Resources came to him with an urgent question about the Family Medical Leave Act (“FMLA”). Specifically, HR needed to know whether the company could fire an employee for lying about the reason he had taken leave under the FMLA. He lied and claimed he needed to be on leave to take care of his “terminally ill” mother. In reality, he took the leave to serve a short sentence in a federal penitentiary. The HR manager needed to know the answer to the question before the employment law expert was due to return because the employee was set to return to work on January 2. As a result, the newly minted in-house lawyer had to learn a lot about the FMLA very quickly.
Another example is that of the seasoned litigator who went in-house after being a partner at a major law firm and had to learn how to be a due diligence lawyer within the first two weeks of joining a company. Just one week after going in-house, a major competitor made a high-profile unsolicited bid to buy the company the lawyer had just joined. The next week, the General Counsel told the new in-house counsel that despite not have any experience in the field, the new lawyer would be responsible for responding to the due diligence requests from the proposed acquiring company. The new in-house lawyer got a real-world crash course in due diligence.
Differing Interests Within the Company Can be a Challenge
As Lynn Kraus, Assistant General Counsel at Dow Corning, eloquently stated, for in-house counsel, “[e]verything is about helping the business succeed. It's not about billable hours. It's not about perfection. It's, ‘How can I help the business do what it needs to do?'” Thus, in-house lawyers quickly “need to develop solid commercial awarene Put simply, “[c]ompany lawyers have to make the adjustment to a revenue-based frame of mind – the idea that every choice has a financial impact.”
But for in-house attorneys, “[h]elping the business as a whole meet its goals entails working with different constituents to help them meet theirs.” Unfortunately, the “goals, cultures and approaches [of all the constituents/clients] will not always align.”
For instance, the President of a subsidiary wants the company to settle a newly filed lawsuit involving that subsidiary's new flagship product, no matter what the cost, to protect the reputation of that new product. But the General Counsel for the company thinks settling the case before discovery will invite more lawsuits or set the value of future cases at an unacceptably high amount.
Or the Senior Vice President (“SVP”) of marketing wants to announce the launch of a new product by text messages to customers for whom the company has text capable phone numbers. That SVP might be unaware that the restrictions and requirements of the Telephone Consumer Protection Act could preclude the company from engaging in that type of marketing campaign.
Or the Chief Information Officer (“CIO”) wants to implement an Enterprise Social Network (“ESN”) solution for Research and Development and then ultimately roll it out to the entire company. While her focus is on how the ESN might simplify and enhance collaborative communications within the company and achieve significant operational improvements in R&D, she may be unaware of the preservation requirements under the Federal Rules of Civil Procedure and resistant to having the expense of saving the messages come out of her budget, should the need arise.,
Or the Clinical Affairs department of a pharmaceutical company wants to include certain adverse event and warning information in the physician and patient information sheets. But the sales and marketing departments oppose including the language because the leading competitors do not include similar language for the drugs they sell to treat the same condition.
Or the VP of Marketing would like to make certain claims about the strength of a new product to differentiate this new product from all the existing competitors. But the R&D product manager believes the existing data for the product does not support the statement the marketing department wants to make about the product.
Or the Chief Financial Officer (CFO) would like to settle a major piece of litigation before the end of the year. But the Tax Department would rather use that cash for other more tax-beneficial purposes.
Or a sales representative would like to extend warranty coverage on a product to her number one customer even though the customer did not comply with the express terms of the warranty. Of course, the warranty department opposes making any exceptions to the warranty coverage program, even if the exception would apply to a high volume customer.
The internal clients in each of these examples have the same ultimate goal: improve the bottom line. But in these instances, the interests of the different groups diverge in some respects and the groups will likely seek input from the Legal Department. None of these issues lend themselves to simple responses, but the in-house attorneys will be called upon to offer legal and business advice as to how to proceed.
As in-house lawyers learn early in their tenure with a company, “clients hate legally accurate answers that conflict with their business objectives.” In-house lawyers have to navigate the treacherous divide between pure legal advice and business guidance. “As a result, lawyers who start in-house, over time, often become more skilled at business counseling than legal counseling; they don't necessarily know all of the relevant legal doctrine, and the clients don't value that extra legal expertise.”
Another challenge for in-house counsel is learning to offer legal guidance without simply becoming a rubber stamp for their clients while avoiding becoming the “Department of No.” “[I]n-house counsel are socialized to give clients what they want - which is that they want a “yes,” not a “no.” But sometimes, the answer has to be “no,” while in other instances, the answer can be softened to “no, not that way.” The balance between the “yes culture” and the “Department of No” can be tricky, especially since “in-house counsel are constantly under pressure to distort their legal analysis to support a business conclusion of ‘yes.'”
Speaking the Right Language Can be a Challenge
Besides thinking like a business person and not just a lawyer, in-house attorneys also have to learn to communicate the way their business clients communicate. “Being able to speak to the CFO on an equal footing is an important goal” for in-house lawyers. The way in-house lawyers “communicate inside a company is different because it has to revolve around the business or its people, not the law. The business people want a solution, and the basis for it is assumed — they don't want to see the footnotes.” So, in-house attorneys have to “get the communicating as a lawyer out of their head.”
In-house lawyers have to learn to speak the same corporate-speak dialect as their business colleagues. Although the individuals involved in a communication may speak the same language (English, for instance), the words used may have different contexts within the different corporate functions. For example, the word “defect” has a certain context in the legal lexicon but means something different to regulatory associates and may have yet another meaning to someone working in the quality control or post-market surveillance groups. In other words, company personnel may all speak English, but a phrase in “legal English” may differ slightly from “regulatory English” which might differ from “engineer English.” In-house counsel have to learn to understand the corporate-speak nuances to be certain that all the parties are truly communicating with each other. At times, this can be a substantial challenge.
Contributing Positively to the Bottom Line Can Be a Challenge
Legal departments are under more pressure than ever to control legal costs. “The CFO expects general counsel to help the business execute its strategy while managing risk at the lowest possible co According to recent data, “[c]orporate legal expenses as a percent of company revenue increased 9 percent in the last two years.” Data reveals that “[o]n average, 56 percent of the typical legal department's spend is external, with 90 percent of that spent on outside counsel.”
Because “most corporations are built around processes and continuous process improvement,” the same “mindset and framework is now being applied to corporate law departments.” Legal departments are implementing more “project management-style approaches” to help control legal expenses.
Companies now routinely expect in-house counsel to control costs, enhance efficiencies and reduce risks all simultaneously. Over the past decade, legal departments have used many tools to meet these lofty goals. Some of the approaches have included:
- Alternative fee arrangements
- Preferred counsel initiatives and competitive bidding processes
- Budget management and tracking software solutions
- Contract management systems
- Direct contracts with legal service providers/LPOs
- Lean Business Processes and workflow management solutions
Reduce discovery expenses
- In-house discovery teams
- Minimize preservation
- Technology-assisted document reviews
There are several other methods companies have utilized to reduce legal spend. No one solution works for every company. But in-house counsel are consistently exploring options for reducing legal spend without jeopardizing the goal of maximizing the bottom line and without compromising service to their clients.
Company lawyers work with many clients on a weekly if not daily basis. Although the ultimate interests of the clients are the same -- improve the bottom line for the company – frequently, the project-based interests of different functions within the organization diverge. The challenge for in-house lawyers is to offer sound legal and business advice to advance the best interests of the company. That challenge can be daunting.
*This article was originally presented as part for the FDCC CORPORATE COUNSEL SYMPOSIUM PANEL in September 2017.