WHY DO CORPORATIONS HIRE MAJOR (EXPENSIVE) LAW FIRMS WHEN THEY NEED A LAWYER?
I spent as fair part of my career as an in-house corporate counsel for several large corporations. I don't regret that experience at all, and I watched as corporate executives made many (sometimes costly) errors in judgment despite counsel to do something different.
But when the need for outside counsel arose (usually to defend a lawsuit, but sometimes to get specialized advice about certain areas of the law) the business almost always hired a major law firm. Why? Larger law firms are expensive, and some have a tendency to load up cases with lawyers. (Assigning multiple lawyers to a case - thereby giving all the lawyers a case where they can charge their time. )
I once called a large (I wont mention the name) firm in Washington DC to ask if they had anyone in the firm that could handle a specialized international law question. I talked to a senior partner and he set up a telephone conference with some other senior people at the firm so I could ask them about their capabilities. We had a telephone conference that lasted about 45 minutes where I asked a number of questions.
We had not even made the decision about who to hire as counsel when, within a week, they sent me a bill for $3,500.00 for the telephone call. Their theory must have been that my company should pay for the time they took to convenience me that they could handle the matter I inquired about. I told them what they could do with their invoice, but the larger lesson is that large firms need to generate fees to stay alive. So they charge everything - regardless of how inappropriate it is. I probably don't even need to mention that we elected to give the work to another (smaller) firm.
Does the corporate client get more for their money? Do they get a better result that is worth the extra money? I truly doubt it. That is not to say that larger firms always overcharge or that teams of lawyers are never appropriate. There are some issues where, because of the complexity, there is a need to get several lawyers involved, or the resources of large firms are sometimes needed.
When I set up my practice I was able to handle both large and small cases. When necessary I teamed up with other lawyers. I enjoy cases where the opposing party hires a large law firm, because they generate lots of motions and bill for every minute. The opposing party sometimes gets real sticker shock when the first legal bills arrive. I try to wait until I am sure that the other party has received bills from the law firm before I will suggest settlement discussions.
The point of this post is not that all larger law firms are bad, but in my experience they are not a bargain for the corporate client either. I once saw a $6,000,000 problem resolved by another large DC firm and the legal bills were - yes, you guessed it - a little over $6,000,000.
I handle a lot of business and commercial disputes. Usually the client is a smaller firm or an individual. I think that I bill fairly for the work I do, and I don't need to feed a large overhead. Business owners should think about the cost of legal services and at least investigate other possibilities. My recommendation - interview different firms or lawyers and ask a lot of questions. It rarely pays to get the most expensive legal services when the matter does not justify the expense. It never hurts to ask a law firm how they bill and what can the client expect for the cost! And, it can be costly to react and not ask! It is also costly to assume that the larger the firm is better at handling the matter at hand. Big does not equate to better.
