Are GCs prevented from forcing down fees?

I heard a depressing tale last week that will be familiar to many lawyers working in the in-house sector.

A general counsel was dealing with a substantial piece of litigation. He had chosen to give the job to a good silver circle firm, and was very pleased with the way this firm was handling it. But when he updated the business leaders on the status of the litigation, he found himself under fire for not having used a ‘magic circle’ law firm.

This, despite the fact that - as a lawyer himself - the GC probably knew a lot more about the capabilities of different law firms than the business person in question. So the poor GC found himself in an unenviable position. Having gone out on a limb, he suddenly looked horribly exposed if the litigation were to go badly. Despite his belief that the silver circle practice was giving him excellent service and had all the expertise he needed, he knew he would be forced to retreat to the shelter of a magic circle firm, purely to ensure that he himself did not get pushed off the cliff if the company lost the case.

This has long been a problem for in-house counsel, and indeed for the second-tier firms working hard to convince GCs to give them a shot at the biggest cases even though they don’t carry that reassuring ‘magic circle’ tag. There is much talk these days about pressure on fees, and GC wielding their power to force firms to move away from those treasured hourly rates and find more innovative billing solutions. This has undoubtedly had an effect, both outside the magic circle and within it.

But the billing revolution will not take full effect if GCs find their choices constrained by senior managers within their own business; no doubt the same folk who will be complaining at the size of external legal spend come the end of the financial year.

Rachel Rothwell is editor of Litigation Funding magazine, providing in-depth coverage on costs and the financing of litigation.

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