Tuesday, March 17, 2015

"Bombs Waiting in Our Files" – A Former Law Firm GC on Client Outside Counsel Guidelines

At the recent Risk Roundtable in San Francisco, I had an interesting discussion with two senior risk professionals about client restrictions on "positional conflicts," and their firms' response strategies when facing OCGs with such carve outs.

Now from BNA comes a timely, no-minced-words, no-holds-barred analysis on the state of Outside Counsel Guidelines: "Some Corporate Clients Are Going Too Far With ‘Guidelines' for Counsel" highlights a talk given by Simon Chester at the recent Hinshaw LMRM event. The full article is worth a read. Here are some highlights of the highlights --
  • "Law firms must explain, negotiate, argue, push back and ultimately be prepared to walk away from business dangled by corporate clients that insist on unreasonable “guidelines” for outside counsel, panelist Simon Chester said Feb. 26 during a program on outside counsel guidelines at the 14th Annual Legal Malpractice & Risk Management Conference"
  • "A show of hands from the audience in response to Chester's questions supported his thesis that corporate clients are increasingly presenting guidelines for representation to their outside counsel, that those guidelines are getting tougher and that few law firm members feel confident they are aware of guidelines to which their partners have agreed."
  • "Chester said that while general counsel at his former firm, he assigned his summer associates to search the firm's document management system for outside counsel guideline packages. 'There were hundreds of them,' he stated. He said he and the firm's management team 'had no idea' of the extent to which his partners had agreed to those 'bombs waiting in our files' that 'were setting the terms and conditions for our interactions with our clients.'"
  • "Chester said at his former firm 'we would tell associates not to use the term ‘research' on their billing records. Instead, they were instructed to substitute terms such as 'reviewing options' or 'conducting analysis.'"
  • "Clients increasingly require law firms to sign off on agreements to subject themselves to the same privacy laws that govern the clients, which may include HIPAA, financial privacy laws... Additionally, he remarked, clients frequently insert provisions that all of their data must be encrypted and none may be stored on any portable electronic device. 'How confident are you that [your] lawyers do that?' he asked."
  • "More often than not, Chester said, outside counsel guidelines stipulate that the firm owes a duty of loyalty not only to the client but to 'the entire conglomerate' and prohibit any legal services, even tax work, for competitors."
  • "Chester said guidelines are including provisions that they trump any other agreements with the firm, including engagement letters, and may state flat out that the client 'will not adhere to any guidelines or standard terms imposed by outside counsel.'"
  • "He said it's not unusual for firm lawyers working with the clients not even to read the guidelines. 'They're prepared to sign off on anything that's going to keep the gravy coming,' he stated."
  • "Chester warned the audience that individual partners — 'particularly partners looking for origination credits' — cannot be relied upon to protect the firm's interests when clients present them with unreasonable outside counsel guidelines."

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