Corporate America Chooses Small Law Firms

It's much more common these days for big companies to hire small firms than it was, say, 20 years ago, general counsel say. Why? Technology has helped level the playing field. That means legal departments no longer have to rely solely on big firms to handle their company's litigation. "We hire lawyers, not law firms," says Rich Baer, general counsel at Denver-based telecom Qwest Communications International, Inc. "Everyone says that. You hear it all the time. But we really do."

There are many other reasons why smaller firms appeal to companies. For one thing, they appreciate the typically lower rates they charge. And small firms are often more willing to negotiate alternative fee agreements, a key advantage in today's troubled economy. Plus, small firms are less likely to be bedeviled by the conflicts that the large firms, with large client portfolios, increasingly have.

But it's not all about money. Small law firms can be more flexible to meet their clients' needs, whatever they are. Cases are more likely to be handled by experienced litigators who make themselves available around the clock, rather than by first-year associates. "You give them the best you've got, and you give it to them quick," says Ricardo Cedillo of Davis, Cedillo & Mendoza, a firm in San Antonio with 20 attorneys that has handled cases for E.I. du Pont de Nemours and Company for ten years. "You give them value."

It comes as no surprise that technology has helped tech colossus Cisco System, Inc., work more efficiently with more small law firms. Outside counsel for the maker of Internet networking equipment have access to computer software programs that let them share information and coordinate legal strategies, says general counsel Mark Chandler.

For example, lawyers at big and small firms alike have access to a software program that contains information about every patent matter at the San Jose-based company. "There really isn't any coordination issue we haven't mastered by technology," Chandler says. "We now have the ability to equally manage small firms."

Today, most of the 200 outside law firms Cisco hires have fewer than 100 attorneys, Chandler says. Bialson Bergen & Schwab, a Palo Alto firm with ten attorneys, handles collections cases. And Boston-based Cesari and McKenna, with about 20 attorneys, works on patent prosecution matters.

Lawyers at Cesari and McKenna say they regularly use Web-based networking programs to talk to inventors at Cisco about their work. Inventors in Palo Alto, for example, can pull up documents or PowerPoint presentations on their computers, and they will simultaneously appear on the lawyers' computers in Boston. "That's been a tremendous savings and help for us," says managing partner Michael Reinemann.

Chandler is quick to say he doesn't hire firms just because they're small. Big firms do plenty of good work for Cisco, too. But Cisco has "found a very efficient way to get the benefits of scale, without the cost," Chandler says.

General counsel at high-tech companies aren't the only ones leveraging technology to make better use of small firms. DuPont hires about 41 outside firms, and about a third have fewer than 100 attorneys, says general counsel Thomas Sager. Walnut Creek, California-based Glynn & Finley, with fewer than ten attorneys, handles product liability cases, for example. New York-based Leader and Berkon, with fewer than 20 attorneys, handles a wide variety of cases.

All those lawyers have access to an online tool that lets them share documents and information. DuPont's legal department, in turn, uses the tool to track litigation, spot redundancies, and allocate budget resources more efficiently. Now DuPont can and does hire different small firms to handle various aspects of a single big case. "They understand this is a whole different way of approaching our legal work," Sager says.

Lawyers at small firms say that the approach works for them. "You're able to stay much more current with what's going on everywhere," says Lawrence Abbott of New Orleans-based Abbott Simses, a 16-lawyer firm that's been working for DuPont for decades, primarily handling product liability, mass tort, and commercial disputes.

Technology may open the door to small firms, but their willingness to be flexible, especially when negotiating fees, keeps their clients coming back. James Leader of Leader & Berkon says his firm negotiates flat fees, as many firms do these days. But sometimes a portion of the firm's flat rate is held back when a case is accepted. If Leader & Berkon gets the results a client like DuPont wants, the company pays what was set aside, and maybe more. If the firm doesn't get a favorable result, the company keeps what was set aside. "We're basically betting on our ability to achieve a good result for our client," Leader says.

Service is key, too. Cardinal Health, Inc., for example, typically hires large firms. Two years ago the Dublin, Ohio, health care company took a chance on a smaller firm and hired Cleveland-based Benesch Friedlander, and usually works with the firm's small Columbus branch. It was a wise decision, says Wendy Hufford, chief litigation counsel. One of the firm's lawyers worked as a full-time employee in the company's legal department so he could learn how the global manufacturer and distributor of medical supplies operated. Secondments aren't unusual, but the firm didn't even charge hourly rates.

"It was a benefit to have him at cost," Hufford says. "And it tells me the firm is committed to the relationship."

Small firms are also less likely to have conflicts of interest. That's often an issue for multinational companies like DuPont, which makes everything from car paint to genetically modified seeds. "Big firms have represented pretty much everyone they can represent," says Susan Hackett, general counsel for the Association of Corporate Counsel.

But one of the most important advantages for small firms is their willingness to do whatever it takes to please clients, from being available at 3 a.m. to making sure that experienced litigators handle their cases. They offer a personal touch that's sometimes hard to find at big law firms. Small firms "are dependent on companies like DuPont, and work the relationship very hard," Sager says.

For example, GCs say that attorneys at small firms are more likely to handle their clients' cases from start to finish, and not delegate most of the work to a first-year associate. Companies also know that the lawyer they want will be available whenever needed, and "take it upon themselves in every case to make sure the fit is right and the person who is assigned to the task can meet our expectations," Sager adds.

Sometimes a small firm like Glynn & Finley will even decide not to accept a case if a client could be disappointed for any reason, partner Clement Glynn says. That honesty in turn builds trust, and the firm's client base. "We get a lot more business later on by saying no," Glynn says. "It's surprising how much that pays off."

And often, outside counsel at small boutique firms simply know the client better. Qwest general counsel Rich Baer in Denver says that his company often hires the small local firm of Steese & Evans because its rates are reasonable. But there's more: Partner Chuck Steese was once a litigation lawyer at Qwest. "He just knows this stuff inside and out," Baer says. "I know Chuck is every bit as good as any lawyer we can hire. We don't need to use a brand name."

Small firms simply can't deliver mediocre work, says Steese. Corporations have too many options to settle for less than the best. "If you do poor work, why should they call you back?" Steese says. "You have to be willing to work. If they are an early riser, you have to be, too."

Early risers or not, in this deepening recession, some of the few people who seem to be sanguine about the foreseeable future are lawyers at these small corporate firms. They predict that they'll attract more corporate clients in the months ahead. "We haven't felt any effects of the downturn in the economy," Davis, Cedillo partner Ricardo Cedillo says. "We're about to get busier and busier."

Amy Miller
Corporate Counsel
April 01, 2009