What is Outside Counsel?
Outside legal counsel is an attorney or law firm employed by a corporation, organization, or governmental agency to provide legal services on an as-needed basis rather than employing full-time in-house legal team members. Utilization of outside legal counsel can be beneficial for a variety of legal needs and contract requirements. They provide expert legal advice in various areas and are often utilized by companies because they offer specialization in a current or emerging area of law that an in-house counsel does not have. Outside legal counsel typically assist companies with contract negotiations for both domestic and global initiatives, regulatory compliance, intellectual property concerns , and intellectual property rights protection. Outside legal counsel is an attorney who can either be a consultant (typically hourly) or a contract employee within a company. Contract employees on a global or domestic scale are typically salaried positions, which most likely are full time. Outside legal counsel typically report to the C-level executive officers of the company that are affected by their expertise and are overseen by the general counsel or chief legal officer. Outside legal counsel is not a permanent position and can be long-term or short-term assignments depending on the current or emerging legal needs of the company. Sometimes periodic or regular consultation may be required, but often outside legal counsel is required for a particular task or project.
Advantages of Outside Counsel
The introduction of new legal technology has means that hiring outside legal counsel is a viable option for all businesses big and small. There are three key reasons why:
Cost-Effective
Legal costs are one of the biggest expenses any business has to monitor. Hiring in-house legal counsel is entirely unfeasible for many businesses, especially smaller companies. However, consulting outside counsel on a project basis means that you only pay for what you need.
Outside legal counsel can be brought in for specific projects or retained at a set monthly fee. Not to mention, because technology is readily available, outside legal counsel can do their work much quicker than an in-house lawyer, saving your business big money. In addition, it means you will only pay for outside counsel when you need them.
Specialized Expertise
It is highly unlikely that one individual can be an expert in every single area of the law. Due to the complexity of the law and the quickly growing nature of different niches, being a jack of all trades is no longer feasible. Outside legal counsel usually focuses on a few specific areas, so you can get exactly what you need.
Additionally, the use of outside legal counsel means that you can change counsel depending on the matter. For example, you may have one outside counsel for employment matters and another for property matters. That way, you have the necessary legal expertise while keeping costs down.
Flexibility
Many businesses have noticed that using outside counsel is much more flexible than having an in-house lawyer. For a start, you aren’t locked in like you are when you hire in-house counsel. You’ve easily fired a lawyer (by simply not renewing their contract), but it is much harder to fire an in-house lawyer.
This means that both sides of the deal are free to walk away when it becomes infeasible for either side to continue the relationship. It also means that you can change firms depending on the matter, as previously stated. Not only does this mean you have more control over the legal talent, but it also means outside counsel is under far less pressure than an in-house lawyer. An in-house lawyer often has to "obey" their higher-ups, whereas outside counsel can offer honest advice without worrying about the effects on their job.
When to Hire Outside Counsel
Hiring outside legal counsel can be a necessary step in various situations. Business leaders should consider the involvement of outside legal expertise in the following scenarios: Complex Litigation Many times, clients reach out for assistance with a litigation matter at the end of the discovery phase and are either shortly before trial or about to enter mediation. These clients have often been well-served by local counsel but their current need requires specialized expertise that can often only be provided by counsel who is not local. Counsel without ties to the community or the adversary, and who has no other case at that point in the litigation, can offer justice many times because they do not come to the table with preconceptions about jurors or the players involved in the proceedings. Future Defense Planning An experienced outside lawyer can work with you to make sure you consider all options available under the law and the business situation. Possibilities may include the use of arbitration or mediation. Building a relationship with a lawyer now may save you time and money in the future and provide you with the insight of an experienced trial lawyer who specializes in the field of law that you may need to rely on in the future. Mergers & Acquisitions Transactions involving the purchase or sale of a business – from the local corner bar to international conglomerate – require the analysis and guidance of outside counsel who knows the local, state and federal laws applicable to the transaction. In addition, such transactions often require the presence of legal counsel at inconvenient times and places, such as in international business deals, and the right outside attorney can be there for you when needed. Regulatory Compliance Working with a lawyer for help in corporate compliance with federal, state and local laws allows a more objective review of your business activities by someone not directly involved in those activities. The outside counsel can provide a level of objectivity that may be impossible with inside counsel and employees of the company.
How to Select the Right Outside Counsel
When the need for specialist advice arises, in-house counsel tend to grapple with the same question: how to choose an outside counsel. A successful lawyer-client match can be a matter of legal malpractice prevention.
When choosing your next outside counsel, consider the following:
Experience and Subject Matter Expertise In addition to familiarity with the law and regulations that govern your organization, your outside counsel should also know the geography in which your business operates, the market, the players, and the processes. Having worked with your competitors and in your industry, your outside counsel will be able to anticipate issues before they arise, advise on them and follow through in those challenging moments.
Reputation Among Other Lawyers Some lawyers simply have "it", but what does "it" mean? It means that you have earned the respect of your peers, the wisdom to know what not to do or say. Outside counsel who are well-respected among other attorneys and judges are the people who most often secure favorable outcomes for their clients.
Results-Oriented Approach While respecting his or her duties as an officer of the court, a lawyer should be directed by his or her client’s wishes. Your attorney should seek to achieve, with speed and for the minimum cost, the objective you have set. He or she should be free to advise on the best and most efficient route to take, even if prerogatives may cause you some discomfort.
Accessibility When you need help quickly, you need outside counsel to be there for you. At the outset, make sure that your outside counsel has a track record of responding quickly and efficiently. Be vigilant, though, because some lawyers may take advantage of being too available, and run up a bill on your behalf.
Professional Reputation Reputation of your outside counsel matters. Rarely can you afford a case with a lawyer whose reputation in the profession is questionable. The reputation of your outside counsel is more often than not your reputation, as people will associate you and your business with your counsel. The problem can escalate when your outside counsel’s misconduct becomes subject of an investigation for money laundering, bribery or whatever else.
Fees A lawyer’s fee will be one of the first criteria to be considered when choosing outside counsel. But sometimes, hiring the counsel with the lowest fee may be the worst choice. Be careful not to use fees alone as the criterion of selection; weigh other variables equally, and remember that fees are a reflection of the service rendered.
As an in-house counsel, you have a right to receive a prompt response to your inquiries. Your outside counsel should keep track of his/her time, respond quickly to reasonable requests for assistance, and follow through after matters are completed.
Remember that external lawyers also have the right to ask questions on behalf of his/her client. Good communication, therefore, goes both ways.
How to Work with Outside Counsel
Maintaining an effective relationship with outside legal counsel is crucial for both parties. Understanding how to interact with outside counsel can maximize beneficial outcomes. Key elements to a successful relationship include communication and agreed upon practices.
A productive relationship between in-house counsel and outside counsel relies largely on good communication. Frequently, the preference for communication between the parties should be explored. Does outside counsel prefer e-mail, or are phone calls and video chats acceptable, as well? By discussing the best modes of communication up front and adopting a policy that reflects those preferences, less time will be lost in back and forth messages and video chat invitations.
Set expectations early on in the relationship, and discuss the billing process. Ask how outside counsel prefers to bill, and identify any specific rules for billing. A clear understanding of how time will be billed, and at what rate, can prevent unexpected increases and miscommunication. Discuss the possibility of spending limits , and express a willingness to work together on assignment of tasks. A basic agreement on billing can help outside counsel adequately prepare for the case and avoid rating his or her services too high.
Business applications such as Slack are perfect for busy legal teams with multiple physical locations. Apps such as these allow users to collaborate and discuss ongoing issues in real-time. Create workgroups for immediate response to time-sensitive matters. To further support outside attorneys and the in-house team, taking advantage of shared cloud storage can allow all involved parties to access files and information during a trial or deposition.
Finally, sharing a contact list that includes preferred attorneys, IT staff, office managers, and other administrative assistants can keep the lines of communication open. Ideally, both parties will maintain a list of key contacts that can address issues quickly if outside parties are occupied with other matters. Stays on top of your own deadlines and keep an accurate schedule of events for outside counsel so they can best manage their time.
Costs Involved in Hiring Outside Counsel
In the past, the prevailing notion among businesses was that employing outside legal counsel was beyond their budget. Times have changed and you can now retain a qualified outside counsel without breaking the bank or sacrificing quality.
Fee Structures
It’s important to establish a budget and then anticipate if the fee structure works for your business needs. Different firms use different structures to calculate fees, while most operate on the billable hour. Typically, fees are broken down by attorney level. In some cases, however, firms will use a blended rate to reduce the cost to clients. In a blended rate structure, all lawyers in a given practice area (for example, all corporate attorneys), regardless of tenure, charge the same hourly rate.
Budgeting
It is important to budget so you can do long term planning. Once you have an idea of what you can spend yearly for legal fees, you can also start reviewing what type of work is a necessity. Budgeting helps you better plan how to delegate work internally, hire external counsel or a combination of both.
Paying Attention
Spend time to review your monthly invoices and look for inconsistencies, over billing, conflicts in hourly rates, etc. It’s easier and cheaper to flag issues when the invoices are fresh in your head, then later when you have to track down notes and emails months after the issue arises. This is also a good opportunity to clarify the expectation of communication. If you don’t put in checks and balances, what seems like a minor issue can turn into a costly mess.
Cost-Saving Strategies
Cost doesn’t have to be a limiting factor in hiring outside legal counsel. You can save by looking for outside counsel that offer flexible payment terms and billing metrics. Additionally, some firms offer alternative billing like flat fees and retainer packages.
Examples of Successful Outside Counsel Engagement
To more concretely examine the utility of outside legal counsel, it is well worth taking a look at some examples of businesses that have successfully engaged outside legal counsel in various scenarios:
Action Collision Repair: This 70-year-old family-owned business in Seattle, Washington specializes in repairing cars from major auto collisions. It handles auto insurance claims directly, using its own streamlined process for adjusting claims as quickly and efficiently as possible. In the past, the company had used outside lawyers to work directly with insurers. Today, they utilize outside counsel to provide the initial legal claim template and to jump into tricky situations when a claim is under dispute.
In its previous engagement with outside counsel, the company used a single attorney for all of its needs. Now, it utilizes a team of individuals, including two attorneys and several paralegals who are assigned specifically to cases within different practice areas. This allows the company to minimize staff turnaround by having multiple people familiar with its cases and quickly increase or decrease staff on demand without having to find new attorneys and vendors to handle their work.
Pacific Northwest Marketing, LLC: An e-commerce website development firm, Pacific Northwest Marketing, LLC, had relied exclusively on inside legal counsel to manage its client contracts. Once it began growing rapidly , it needed a solution that could keep up with its legal needs. Not being able to remain agile in its dealings with clients began to slow its expansion and threatening its long-term growth and success.
After meeting with an outside law firm to consider its options, the business began using its outside legal counsel as a virtual legal department. Using a project-based budget to manage its costs and set expectations, the company improved its client relationship processes and doubled its client base in less than two years.
ABC Company: A national real estate firm, ABC Company owns over 60 clothing stores around the country. The majority of its stores are located on retail corridors with high foot traffic, which means competition for tenant leasing is fierce. ABC Company has long been dependent on experienced retail broker relationships, but was having trouble assessing the reliability of its key partners and didn’t have well-defined contractual agreements in place to help ensure it minimizes risk. As a result, ABC Company spent lots of money on its contract negotiations with its brokers, even losing out on a few contracts entirely when negotiations became contentious.
Today, ABC Company is much more successful with its leasing program due to its more competent assessment of its brokers’ competence and skills. The company uses outside counsel to provide a standard set of contract templates, mitigated danger by providing effective checks and balances and formalized standards and best practices. Now ABC Company is able to get better deals on its contracts across the board and still move quickly to shuttle tenants in and out of its spaces.
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