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The Newest Faces in Many Corporate Legal Departments Aren’t Practicing Lawyers

May 3, 2016, 12:41 PM

After one of Yahoo’s outside law firms sent a bill last year that included a noticeable, unannounced rate increase, Jeffrey Franke — the chief of staff to the general counsel and senior director of legal operations — felt compelled to drive up the coast to San Francisco for a face-to-face visit with the lead lawyer.

It was the day of the America’s Cup, and as yachts raced around the city, Franke said he found himself waiting for the lawyer in a 35th floor conference room with a “glorious” panoramic view of the Bay.

“The partner comes in and sits down with me and said ‘Jeff, it’s been a really difficult year for us... all our costs are going up,’” Franke said. “And I look around and say ‘there’s marble on the walls in the elevator, I’m on the 35th floor sitting in a conference room that’s nicer than Marissa Mayer’s office at Yahoo!”

“I said, ‘You need to talk about how you’re going to do things differently and talk about what you’re going to do for us to be more efficient,’” he added.

Franke conveyed that story while speaking on a panel about e-billing at an inaugural conference for legal operations’ experts in San Francisco’s Westin St. Francis Hotel. He left out the name of the firm, but sprinkled his talk with multiple examples of how corporate legal departments are using data and technology to wring more efficiency out of their spending, particularly with regards to outside counsel.

“We’re at a nascent point of time when a lot of companies are changing how they deal with law firms,” said Franke.

The conference, known as the Corporate Legal Operations Institute, drew hundreds of legal industry professionals — only a fraction of whom were practicing lawyers, and an even smaller subset of whom hailed from outside law firms. The heavy attendance at a conference that runs through Wednesday speaks to the growing ranks of legal operations experts, which includes e-billing specialists, and others who help manage the workflow, accounting and technology used by corporate legal departments to reduce overall spend.

Connie Brenton, a senior director of legal operations at NetApp Inc. and chairman of Corporate Legal Operations Consortium, which organized the conference, said an overriding goal is to centralize legal spending decisions so the process is more efficient.

“Corporate legal departments enable many of the inefficiencies at law firms despite the best efforts of many of us in this room,” Brenton said in her opening remarks, telling the attendees that the legal operations movement must continue growing.

For the past six years, she said her group, which goes by its acronym CLOC, has been meeting with operations experts from Google, Facebook, Oracle, and many of the largest companies in the country.

In the near future, CLOC hopes to become a standards organization that will establish a set of industry billing guidelines, according to Brenton. It has already written up a draft of some guidelines, which are posted on its website.

“We will not pay for mini-bar charges, personal telephone calls, movie rentals, dry cleaning, or similar personal items,” the guidelines state.

Many of the goals discussed at the conference, such as accurately forecasting legal costs, will hinge on technology and whether law departments are able to accumulate more data. Several speakers said changes are already taking place.

Steve Harmon, a deputy general counsel at Cisco, said about 80 percent of the company’s outside counsel bill on a “categorical fixed fee” basis as opposed to a rolling basis with no limit. That was possible in part because they had attained enough data about past costs, he said.

“If you start with a data set that allows you to extrapolate, you can quickly reach a point where you’re able to have very transparent conversations with your law firms,” said Harmon.

At Uber, similar trends are afoot.

“For the last year to year and a half, we’ve moved Uber off hourly arrangements” almost completely, said Ken Callendar, a managing principal of Value Strategies who said he has worked with 12 clients including Uber.

David Cunningham, chief information officer at Winston & Strawn, one of the few speakers from a law firm, took the position that most law firms will change at the pace defined by their clients. Sometimes, law firms even move faster than corporate clients, he said.

“The legal market is immature,” he said.