Should You Bring Litigation In-House?

Should You Bring Litigation In-House?
Blake Guy
Legal Times
May 5, 2006


At first, the term "in-house litigation" seems rife with contradiction. The legal departments of most companies simply are not set up to handle litigation without significant help from outside counsel.

Of course, companies should consider a number of factors -- company size, the nature and scope of the current litigation docket, available budget -- before they decide whether some or all of their litigation will be handled in-house.

At BearingPoint we have developed an approach that breaks with the traditional role of an in-house litigation team. Drawing upon my experiences since joining the BearingPoint litigation team, in December 2003, I can offer a sort of preliminary guide for companies that may be considering bringing some portion of their litigation docket in-house. It is as much a reflection on lessons learned as it is a set of practical recommendations to be considered before companies make such a move.

SELECTING A MODEL

The work of an in-house litigation team can cover a number of different areas. Generally, however, the litigation model for most companies will fall into one of three categories: management of outside counsel, handling all litigation in-house or a combination of the first two (a "hybrid" model).

The first step in deciding whether to move all or part of a company's litigation in-house is to define which model will be used. At BearingPoint we use what I would call a hybrid litigation model. For example, the majority of single-plaintiff employment disputes are handled in-house with minimal or no assistance from outside counsel.

Similarly, commercial disputes that fall below a flexible threshold in terms of scope and potential liability are handled in-house. But in cases that are clearly beyond the available resources or expertise of the litigation team, we turn to outside counsel, and one of the company's litigators will manage, direct and assist with their approach.

Defining which model will be used helps to establish expectations, set objectives and attract the right talent. Whatever the model, the company must commit to it (in other words, invest in the model) and identify what it expects in return for its investment. Once the model has been determined, the next step is to consider what resources will be available to the team.

RESOURCES

How will the litigation team be staffed? Of course, the quality of an in-house litigation team will be heavily influenced by compensation. In order to attract litigators who will produce results comparable to those obtained by outside counsel, compensation packages need to be established that, although below market rates for private law firms, are sufficiently generous to lure senior associates away from the comfort and stability of private practice.

Though they are increasingly more difficult to find, the focus should be on locating and recruiting attorneys who have tried cases and negotiated settlements in cases otherwise destined for trial. Rather than concentrating on attorneys who have toiled for years in the litigation departments of large law firms with little or no practical trial experience, try to staff the in-house litigation team with trial attorneys who have had meaningful trial and negotiation experience.

Trial attorneys will generally have a better feel for how the facts, as well as a company's explanation of those facts, will play out in a courtroom. Consequently, an experienced trial attorney will better serve the company's need to quickly assess and reassess the advantages and disadvantages of taking a case to trial.

In addition, it's important to invest in high-quality paralegals and administrative support. In order to properly staff a case, even a case that can be handled by a single in-house attorney, paralegal support is essential. In fact, the higher the quality of the paralegal staff, the more likely it is the in-house litigator can take on additional litigation matters without a decline in the manner in which he handles each case. In a department where in-house litigators are truly expected to serve as lead counsel on their cases, there should be one paralegal for every two, or maybe three, in-house litigators.

Of course, technology can play a huge role in allowing in-house litigators to manage their docket without the vast (and expensive) resources available at most law firms. In particular, there are two technology resources that I believe are non-negotiable essentials. First, the company must invest in commercially available software that can be used to collect, store, preserve, organize, search and produce documentation.

Without such an investment, the nature, size and number of cases that can be handled in-house will be vastly reduced. Second, the company must make available to its litigation team the full panoply of research and data available through Lexis or Westlaw. Without this basic but critical resource, a company forces its litigation team to compete on an uneven playing field.

USING OUTSIDE COUNSEL?

Although the motivation for handling litigation matters in-house is often related to growth in expenditures on outside counsel and other vendors, it would be foolhardy to think that outside counsel can be dispensed with altogether. In fact, outside counsel can play a number of roles for companies that elect to handle more litigation matters in-house.

First, there will always be a need to associate with local counsel in jurisdictions where the responsible in-house litigator is not licensed. In this scenario, local counsel should be viewed as a useful part of the litigation team. In fact, local counsel should be selected based on their knowledge and familiarity with the court, the judge, the opposing counsel, the opposing party and the jury pool. Furthermore, in the event of unexpected developments, local counsel will need to stay familiar with the case in order to assume first-chair responsibilities if necessary.

Second, outside counsel can be used in a second-chair capacity. Under this approach, outside counsel is not responsible for directing how a case is handled but is responsible for assisting in-house counsel in executing the specific game plan. The in-house litigator remains responsible for taking and defending depositions, preparing or responding to motions, and serving as lead counsel for negotiations or the trial.

Third, in those instances where the resources of the in-house litigation team are lacking, outside counsel can be used in an economically smart way. For example, some litigation matters involve extensive paralegal support but can otherwise be handled by a single litigation attorney. Other litigation matters involve voluminous document review and processing, but once that is complete, one attorney can do most of the rest of the work.

In instances such as these, it is helpful to establish relationships with outside counsel that will allow an in-house litigator to lean on the raw manpower that outside counsel can usually provide with very little advance notice.

Finally, no in-house litigation team, whether it uses the hybrid model or not, can reasonably expect to handle all litigation matters that come through the door. Most in-house teams will never match the resources, size and flexibility of outside counsel.

Not only will outside counsel remain necessary to handle overflow litigation, but a number of dispute categories should always go to outside counsel. These categories include "bet the company" litigation, class actions, significant intellectual property disputes, criminal matters, grand jury subpoenas, Securities and Exchange Commission issues and disputes with current or former executives.

THE BENEFITS

Handling the right litigation matters in-house can save a company money that otherwise would be spent on outside counsel. It also removes one of the common settlement leverage points often raised by opposing counsel.

For example, a company may decide it is going to handle most or all of its employment litigation in-house. Alternatively, it may decide it is going to handle in-house all commercial litigation with exposure under $1 million. In the traditional management model, these are the types of cases that can quickly start to become too small to defend.

As the fees paid to outside counsel start to approach the amount of the underlying claim, it is only natural to question whether the cost of defense is (or ever was) justified. By assigning just three or four of these cases each year to an in-house litigator, assuming that the results will be similar to what outside counsel would achieve, a company will more than offset the investment it makes in each of its litigators.

In settlement negotiations, the less exposure there is to the company, the more likely the other side will emphasize the cost (such as outside-counsel fees) that the company will still have to incur before it can get rid of the case. Handling certain litigation matters in-house can minimize or eliminate this pressure during the negotiation process, and the company can make a decision more focused on the anticipated outcome than the cost of obtaining it.

More than once, in an attempt to exploit the expense of defending against an employment lawsuit, I have been reminded by opposing counsel that, either by statute or agreement, "My client will incur no attorneys fees in this matter."

It is always nice to be in a position to reply, "That's great. Neither will mine."

Blake Guy is an associate corporate counsel with BearingPoint Inc., based in McLean, Va. BearingPoint is a global management consulting, systems integration, and managed services company.