Delivering Value to Corporate Clients Steven A. LauerKenneth L. Vermilion Lauer & AssociatesWal-Mart Stores, Inc. Dial in US & Canada (toll free): Dial in International (toll): Participant Code:

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Value Legal service exists to serve a specific goal – Negotiate and/or conclude a transaction – Represent a party in a dispute (or litigation) – Advise a client regarding legal risks or opportunities To the degree the legal service enables the client to achieve the client’s goal, that service has value for that client Value must be as defined by the client/business

A definition The value of legal service consists of the degree to which that service assists or enables the client to achieve the client’s business goal with an associated cost not disproportionate to that goal

Elements or types of value Service value: the benefit to the client when counsel performs his/her role as agreed Expertise value: lawyer delivers technical know-how Commercial value: lawyer understands client’s business and delivers commercially useful advice Business leader: lawyer provides to client strategic direction

The value of in-house counsel Earlier identification of issues with legal ramification for the business Consideration of legal issues more integrated into business transactions Institutional knowledge of the business Familiarity with business professionals Familiarity with operation and its legal context Internal vantage point leads to strategic view

The value of outside counsel The value added by outside legal resources (including outside counsel) “starts where the in-house focus ends” (General Counsel Survey 2009 by FrahanBlondé, p. 9) Strengths of outside counsel: – No competition for resources – Sometimes viewed as more entitled to claim privilege – Representation of multiple clients provides broader view – More in touch with judicial rules and other procedures – More resources to stay in touch with legal developments

Attributes of outside counsel highly valued by in-house attorneys Teamwork Reliability Flexibility Collaboration – With in-house attorneys – with other outside attorneys Cost awareness and cost certainty Speed Project management talent

Value varies The value of legal service varies – By client (Prudential vs. MetLife) – By law firm (Cravath for slip-and-fall cases?) The client’s view is pre-eminent Value can vary over the course of an assignment due to circumstances beyond the control of client and counsel

Firm-related factors that affect value How well it works with in-house counsel Do firm’s lawyers understand importance of a certain and swift resolution? Do outside lawyers augment law department’s capabilities with minimal duplication? Will cost outweigh contribution to achieving business goals? Does client ascribe value to the “name”

Value varies even more The same firm working with two different clients on similar matters may deliver different values Same client working with two firms on similar matters may derive different values The nature of the work will affect the value delivered

Work-related factors that affect value Level of difficulty or novelty of legal issues Potential impacts of the work on the business Number of parties Geographic scope of the factual situation Other factors – Potential personal liability of corporate officer – Personal investment in dispute by officer

Fees and value Alternative fee arrangements do not equate with greater value necessarily Fee arrangement should incorporate incentives that support achieving the goal Value might result from the following: – Time spent – Expertise applied – Familiarity with process

Unbundling – what is it? Unbundling is “any process in which something complex is broken down into smaller and simpler components. In the legal context, ‘unbundling’ refers to the process of breaking down the multiple roles an attorney might play into smaller simpler groups of tasks.” (F. Masten & L. Borden, Unbundled Legal Services, posted at borden.htm)

Unbundling – why? Cost Specialization Consistency expertise

Unbundling – how? A law department proactively manages the various aspects of the work and assigns it to the “appropriate counsel” Can a law firm unbundle work?

Project management More focus on well-defined goals shared and commonly understood by client and counsel Plans and steps Identification of appropriate resources at the right time Measurement of progress (metrics)

Hurdles to realizing greater value Communication failures between in-house and outside counsel Failures to fully delineate responsibilities Failures to “play well together” Legal profession is, by nature, conservative and resistant to change Lack of commonly held lexicon for risk

Law firms should embrace value When firms bill only on the basis of hourly rates, they invite comparisons among them on that basis Delivery of “value” apart from the time devoted to a task enables a firm to positively differentiate itself more uniquely and with less risk of comparison to others

Steve Lauer Over ten years of experience assisting corporate law departments and law firms to increase the value of legal service for corporate clients Over 16 years as in-house counsel Author of The Value-Able Law Department (2010), Managing Your Relationship with External Counsel (2009) and Conditional, Contingent and Other Alternative Fee Arrangements (1999) Frequent speaker and author on law department management, relationships between in-house and outside counsel, compliance and related topics Co-Chair, ABA Section of Business Law’s Corporate Compliance Committee Vice Chair, ABA Section of Business Law’s Corporate Counsel Committee

Ken Vermilion Senior Director Legal Department Operations and Finance, Wal-Mart Stores, Inc. Manages the selection, deployment and use of legal department-specific software and technology platforms Manages long-term financial planning and annual budget process, monthly forecasting of financial closing processes and management reporting and metrics, plus project-specific work as directed by Exec. VP and General Counsel Prior work in financial and treasury management functions and as first Director of Legal Department Operations for Sears, Roebuck and Co.

Thank you very much. Questions? Steven A. Lauer (cell)