Category Archives: Articles

Law Firms’ Grueling Hours Are Turning Defectors into Competitors

Joan C. Williams

In this latest flurry of debate about working long hours, some have intimated that overwork is inevitable in highly competitive industries such as law, finance, and high tech.

But that’s just not true.

We’ve all heard by now that productivity decreases with overwork, while attrition and health care costs increase. What you may not have heard is that businesses who drive people relentlessly create competitors who poach top talent by offering a more humane way to work.

Click to Read More Source: This article has been curated from Harvard Business Review and can be found at https://hbr.org/2015/08/law-firms-grueling-hours-are-turning-defectors-into-competitors


Ten ’In-house’ Secrets For Reducing Your Company’s Legal Costs

By Gregory L. Phillips

‘General counsel,’ or “Chief Legal Officer,” is the job title of the lawyer who heads up the legal department in a corporation. As former general counsel of a small oil and gas company, as well as the assistant general counsel of two Fortune 100 corporations with annual sales exceeding a billion dollars per year, my job involved delivering and managing in-house legal services, managing external law firms, and contributing to corporate strategy. However, much of my time was occupied with finding ways to reduce legal costs.

Major corporations need a full-time general counsel, and supporting legal staff made up of other in-house lawyers and supporting administrative staff. However, smaller growth emerging companies may not have the luxury and the resources to hire such legal support. This article will assist you in developing legal management principles that can reduce cost and increase efficiency in your business.

The primary goals of managing legal costs are: reducing the cost per hour of a lawyer’s time, and reducing the number of hours of lawyer time required by the Company for external lawyers.

Reducing The Cost Per Hour for Legal Services.

1. Recognize the ‘in-house’ advantages.

Corporations with in-house lawyers typically generate internal legal services at a cost per unit of time lower than hourly rates of external law firms. When legal services are delivered on-site, the lawyer becomes a familiar face, and can learn a lot about the company and the overall strategy of its management team. This makes it easier for the in-house lawyer to give pro-active advice that is in line with the company’s corporate strategy and business objectives. Having one lawyer responsible for delivery and management of all company legal requirements gives continuity critical to strategy implementation and facilitates cost management of the legal function.

2. Identify legal work critical to the core mission or strategy of the Company. Target doing it on an ‘in-house’ basis.

As in other skill areas, the approach of ‘new economy’ companies is to hire for core mission critical and strategy requirements and outsource the rest.

3. Recognize the requirements of the job, and obtain the skills needed.

The ability to perform legal services at a high performance level is often the primary basis of evaluation for a potential in-house counsel. Just as important are the in-house counsel’s ability to source and manage legal requirements that exceed his or her geographic, skill or time limitations. A third quality that you should desire in an in-house counsel is the ability to design and deliver internal legal liability reduction programs by creating standardized practices, materials, and processes aimed at reducing the Company’s legal costs over time and to reduce any potential legal liability, or risks, as the Company pursues its business goals and objectives.

4. Calculate your Company’s legal costs.

This requires adding up all of your legal bills for the previous year AND estimating the cost of productive executive time lost due to involvement in, concern about, or management of legal issues. Now you have identified the value of managing the Company’s legal environment. Adjust this amount upward or downward to reflect how you expect the current year’s business activity, and legal activity, to compare to the past year for the same activity. You can label the adjusted amount as your Company’s ‘projected legal costs.’

5. Assess the cost of bringing a full-time lawyer on board as an employee (‘in-house’ employee cost) and compare the cost to buying legal services from an external lawyer ‘a la carte.’

Recognize the value of educational, business, legal, ‘in-house’ and management experience and skills necessary to do the legal job for the Company as it is now and as you plan it to be in the future. Remember technical and industry knowledge may be important candidate factors. The fully loaded ‘in-house’ employee cost for an in-house lawyer recognizes lawyer recruitment fees, salary, executive benefits, support staff, allocated office space, office furniture, equipment, law library and electronic legal research costs, law society and practice insurance annual fees, and costs of ongoing legal education courses. If there is a risk that the newly hired in-house lawyer will not work out, an allowance for costs of severance is prudent.

6. Compare the projected legal costs to the fully-loaded ‘in-house’ employee cost.

Make sure that you compare ‘apples to apples.’ Avoid the “pitfall” of hiring an in-house lawyer that is too junior to do the job that you need done due to a lack of experience, skills and knowledge; this could actually increase your Company’s costs due to the need to use external lawyers to supplement the work of your under skilled in-house lawyer. Of course, the more junior a lawyer is in experience level, the lower their salary for employment. But all other costs (which usually exceed salary) are more or less the same regardless of experience level of the lawyer employed.

7. If a new full-time ‘in-house’ employee is not in your Company’s current plans, due to staffing freezes, lack of desired flexibility, or other reasons, consider going for the ‘in-house’ advantages by permanent outsourcing.

Some common benefits identified for outsourcing legal services for your Company include (a) strategic benefits such as an ability to focus company resources on its core business, access to better, and more efficient, technology; (b) operational benefits such as access to legal expertise, and experience, not otherwise available in the marketplace, scalable solutions, increased accountability; and (c) financial benefits such as cost reduction and the “freeing-up” of capital for key projects.

8. If you do not require a ‘full time equivalent’ for your company’s mission-critical and strategic legal work, consider permanent outsourcing as an alternative to buying external legal services on an hourly ‘a la carte’ basis.

Outsourced legal services provide an opportunity to buy the services you need on a flexible, scalable basis. For example, The Phillips Law Group offers experienced in-house lawyers on a flexible schedule based on your Company’s legal requirements; such schedule can include a morning a week to full time. The services for such in-house lawyers can be priced on an hourly fee arrangement, or alternative billing arrangement such as target-fees, monthly retainer, project fees, or other basis. They work on-site at your premises. The pricing model reflects aggressive use of labor-saving technology and a belief that your Company should not pay any more for legal services than that which is absolutely necessary. Reducing The Quantity Of Legal Services Required.

9. Divide your Company’s legal functions into four categories: maintenance-related, avoidable, transaction-related, and crisis-related. Then adopt management plans for each.

Avoidable legal expenses are those that can be reduced through training employees responsible for causing them. An example would be targeting reduction of wrongful dismissal lawsuits by developing standard Company employment contracts and providing related training to the human resources staff.

10. Develop standardized materials and procedures to delegate low-level legal functions to business staff that can then be monitored by a lawyer.

Functions relating to the Company’s compliance status and asset maintenance (e.g. routine procurement contracts, company and securities compliance filings, trademark and patent renewals) may offer a substantial opportunity to save money. Completion and return of standard forms can be delegated to trained staff and then monitored by a lawyer. Your Company can develop a process to review all patents and trademarks to make sure that the Company is exploiting them, or has a potential use or revenue from each, before spending money to renew registrations.




Overview of An “Independent General Counsel”

By Gregory L. Phillips

An Independent General Counsel, also known as an “outsourced” or “part-time General Counsel,” is a private practitioner who performs the services of a General Counsel for a number of companies on a contract basis, and not as an employee or law firm. They charge hourly rates that are much lower than those of comparable outside counsel, or a guaranteed monthly retainer, and work on-site at the corporations.  Some of their clients maintain an in-house legal staff; others have no other inside lawyers.

Most startups and growing companies recognize the need to have lawyers represent them in contract reviews, drafting and negotiations, and to provide legal counsel generally; but, many such companies find that traditional methods of retaining counsel are not cost effective because law firm overhead cost, for office space and support staff, limit a firm’s flexibility in fee-setting.

When outside counsel fees climb, emerging companies consider hiring an inside counsel as an employee. With all the benefits that employee status entails, hiring someone to be an inside counsel can also be costly.

Independent general counsel services offer a third option that many companies find attractive. For a specified fee, the company contracts with an experienced and well qualified attorney to provide in-house corporate legal services.

The Independent General Counsel is an independent contractor, not an employee. He or she works at the company’s site and uses company offices and services for typing and copying. Thus, the attorney reduces his or her overhead, while providing the same high quality, high level of service of law firms or employee counsel.

The Benefits of an Independent General Counsel are:
  • the ability to operate at a senior level in the company’s organization;
  • a close understanding of the company’s policies, strategies and objectives;
  • a close understanding of the company’s operating methods, processes, products, suppliers and customers;
  • the ability to manage legal risk, to analyze the company’s strategies and in order to identify legal issues, and to develop plans and programs to manage and, if possible, to avoid legal problems that arise;
  • the timely delivery of work of high technical quality that also provides practical solutions which meet the company’s business goals;
  • the ability to work closely and co-operatively with company personnel, suppliers and customers as may be required;
  • the ability to add value to the efforts of internal clients, whether this is by saving money, avoiding losses, solving problems, achieving their business objectives, by using knowledge and skills to improve the way the company manages its legal risks and pursues its legal rights and opportunities; and
  • the ability to manage external legal services for extraordinary legal issues that arise (e.g., litigation; public/private securities offerings; bankruptcy) in a cost-effective way that achieves optimum benefits for the company.



Outsourcing your General Counsel – When is it appropriate?

By Gregory L. Phillips

The concept behind “general counsel outsourcing” is that a business organization may not need to hire a full time in-house lawyer to perform the services and functions performed by a general counsel.  Some business organizations may be able to contract outside the organization, resulting in improved efficiencies and profit.

The concept of outsourcing certain business and services functions is not new.  It has been used for years.  For example, most companies do not maintain their own payroll function, they outsource it – there are specialists outside contractors who can manage the function more cost-effectively.  For the same reason, many companies outsource most non-strategic functions – the annual report preparation; staff recruitment; insurance; public relations; advertising; internal audit; staff training; and information services.

When considering a task or job function, a two-question test can be applied as follows:

  • Strategic: Should this be done in-house?
  • Cost Benefit: If not, can it be done outside as well, or better, and as cheaply?
 So what is new about outsourcing?

What is new is that outsourcing has become a major response to the profit pressures on many businesses.  Using a medical analogy, many companies are going through major surgery.  There are several favored surgical procedures that have new titles but are familiar in reality.  There is “reengineering” (going back to basics); “restructuring” (re-allocating resources); and “down-sizing” (shedding surplus operations and staff).  Outsourcing, on the other hand, seems to be the favorite post-surgical procedure.

In the past, companies have outsourced mostly functions considered non-strategic to the company, such as some of those listed above (e.g., staff recruitment and training; public relations; advertising; and internal audit).  However, due to increased pressures on profits and accountability issues with respect to corporate governance, there is a trend towards outsourcing “strategic” functions of business organizations, such as the general counsel and corporate development/strategy.

The potential application of outsourcing is now such that one has to assume that no aspect of the company is safe from outsourcing.  We may come to see a company outsourcing entire departments and functions such as accounting, sales and distribution, human resources, corporate affairs, and even manufacturing.

In each case, the directors and senior management will need to be satisfied that the essence of the business remains intact, even if most of the functions are contracted out.   Come to think of it, why not also contract out the directors and senior management? We may then be left with shareholders owning a company whose only non-cash asset is a brand name and whose only staff and functions are those which are required by law to remain in-house; and, of course, those required to stay around to manage the outsourced contractors and suppliers (or, could that function also be outsourced?).

Outsourcing the general counsel legal function.

Where does the outsourcing of the general counsel legal services sit in the outsourcing question?

It is important to understand that for some business organizations not all functions should be outsourced.  The strategic and cost-efficiency test provided above should be applied in each case.  Modified to apply to the general counsel legal services function, the test may be posed as follows:

  • Are there strategic reasons why the general counsel legal services function should be delivered in-house?
  • If not, can general counsel legal services be delivered from outside as cost-effectively?

There is not space in this article to go through the detailed analysis that may be required to arrive at final answers to these questions.  It generally comes down to the following principles.

Due to business reasons and company culture, some companies may not want to entirely entrust certain functions to outside contractors – strategic planning, operational planning and control.  However, the legal services typically performed by a general counsel that includes the legal analysis, planning and other input, that needs to go into such strategic planning process, and the operational planning and review process could be outsourced to a lawyer who understands the company’s business and culture who, in essence, becomes a part-time extension of the company’s senior management team.

On the other hand, once a company has made a strategic decision, the legal services involved in the implementation of such decision may need to be handled by a legal specialist in an outside firm.  As a general rule, these transactions that implement the strategic decisions may include the buying and selling of businesses and other assets, financing arrangements, applications for regulatory consents and licenses of all kinds, and litigation and dispute resolutions in all forms.  It simply may not be cost-effective for an outsourced general counsel to duplicate such specialized legal services, unless they are strategic to the company; but, the outsourced general counsel can manage the services to be performed on behalf of the company by outside counsel to ensure cost efficiency and quality of work.

Most companies recognize that they need legal resources at a senior level to perform this strategic legal function to ensure that the company’s major assets and rights are suitably protected and its major exposures and obligations are suitably managed.  In practical terms, this involves an on-going legal risk and opportunities audit, and an ongoing legal compliance program.   Small to middle market companies must make tough decisions when addressing such strategic legal resources.  Such companies are constantly seeking ways to obtain the strategic legal resources that their business requires while at the same time trying to save money and increase efficiency.  Many such companies find that traditional methods of retaining counsel are not cost effective because traditional law firm overhead costs, for office space and support staff, limit a firm’s flexibility in fee-setting.  When outside counsel fees climb, emerging companies consider hiring an inside counsel as an employee.  With all the benefits that employee status entails, hiring someone to be an inside counsel can also be costly; such companies simply may not have the justification or the resources to hire a full-time in-house general counsel.

Outsourced general counsel services offer an attractive option to such companies.  For a specified fee, the company contracts with an experienced and well qualified attorney to provide strategic in-house counsel legal services.  The outsourced general counsel is an independent contractor, not an employee.  He, or she, works at the company’s site and uses company offices and services for typing and copying.  Thus, the attorney reduces his or her overhead, while providing the same high quality, high level of service of law firms or employee counsel.  The outsourced general counsel becomes an extension of the company’s senior management team.

In no event, should any company buy the idea that the outsourcing of general counsel legal services decision is an all or nothing choice.  Certainly, some legal services are best delivered externally, from law firms that offer specialized legal services.  However, other legal services such as certain legal day-to-day corporate governance issues and strategic functions, can be performed effectively by the company with the help of an outsourced general counsel who understands the company’s business.

As in most things, it is a matter of balance and the result of informed and objective analyses.  The key issue of determining whether outsourced general counsel services are proper for a company is a question of balancing the delivery of the company’s needs for legal services between inside and outside legal providers to ensure an ultimate advantage for the company.

The important thing is to have resources of the correct caliber in the right place to deliver each aspect of the company’s legal requirements.

Standards of legal services.

What qualities are required of the lawyer who performs the strategic legal services provider role for the company in an effective way?  Most companies who have addressed this question would agree with many of the following:

  • the ability to operate at a senior level in the company’s organization;
  • a close understanding of the company’s policies, strategies and objectives;
  • a close understanding of the company’s operating methods, processes, products, suppliers and customers;
  • the ability to manage legal risk, to analyze the company’s strategies and in order to identify legal issues, and to develop plans and programs to manage and, if possible, to avoid legal problems that arise;
  • the timely delivery of work of high technical quality that also provides practical solutions which meet the company’s business goals;
  • the ability to work closely and co-operatively with company personnel, suppliers and customers as may be required;
  • the ability to add value to the efforts of internal clients, whether this is by saving money, avoiding losses, solving problems, achieving their business objectives, by using knowledge and skills to improve the way the company manages its legal risks and pursues its legal rights and opportunities; and
  • the ability to manage external legal services for extraordinary legal issues that arise (e.g., litigation; public/private securities offerings; bankruptcy) in a cost-effective way that achieves optimum benefits for the company

Almost by definition, these qualities can only be performed by someone inside the company, who has absorbed the company’s culture and become part of the way the company does business.  An outsourced general counsel can provide this level of service and resources for the company.

A classic example of this is the legal compliance area.  In recent years and with the recent corporate scandals, there has been a proliferation of laws directed against businesses.  Higher standards of compliance are required and stiff penalties threatened.  As a result, businesses are coming to see the need to introduce formal legal compliance programs.  However, many limit their efforts to the issuing of a manual, which does little more than recite, at great length, the relevant laws affecting the company.  The typical manual is usually thick, and while it looks handsome on a shelf, it is seldom consulted by employees. The manual represents a raising of awareness about compliance but is not, of itself, compliance.  Compliance only occurs when the relevant legal compliance obligations are reflected in company culture, policies and procedures, agendas, minutes, reports, guidelines, price lists, terms of trade, and so on.  Compliance must be embedded into the way the company does business externally and in the way it operates internally.

The only way such compliance will be achieved and maintained is through the disciplined, determined and unglamorous efforts of lawyers and managers.  This is a very detailed and time-consuming job.  Experience has shown that this work can only be done effectively by lawyers who understand the company’s culture and business strategy.  Even if outside lawyers tried to do the same job, they could not provide the same quality program as an outsourced general counsel, and their fees would be beyond what most companies would be willing to pay.

By following the approach as set forth in this article, a company will ensure that it has the correct mix of internal and external legal resources to meet its legal services requirements, and the outsourcing of general counsel services may be one avenue to provide the company with confidence that they have arranged their legal resources accordingly.




Closing The Deal

By Alicia L. Goodrow and Michelle Nickel

Working for months with or without an investment banker, you find the perfect match—THE buyer who will purchase assets or stock to expand your business. It’s exciting to plan how to spend the money already burning a hole in your pocket. Your current investors are also excited, and your loyal management team will be on-board when they learn about the bonuses and new equity packages they’ll receive. But before everyone orders their new toys and counts their change, you have to close the deal.

With historically high prices for oil and natural gas and super-heated demand for quality service and supply chain companies, Texas’ core private businesses are hot commodities for private equity and venture capital investors. Many private owners have patiently built solid businesses on a shoestring, leveraging their work ethic, business smarts, and reinvested capital into a collection of valuable Master Services Agreements with loyal, large customers. These quiet, mindtheir-manners, private companies have grown quickly in recent years and may have paid little attention to “back of the house” operations.

Read the Complete Article Here


On the Sokol/Berkshire/Lubrizol Facts: Would You Pay Severance?

By Jonathan K. Hustis

The Facts. The business news in the first week of April was full of public allegations against Berkshire Hathaway executive David Sokol. Mr. Sokol publicly admitted, while resigning from positions with Berkshire Hathaway, that he had purchased Lubrizol stock shortly before that company was purchased by Berkshire Hathaway. Mr. Sokol admits that soon after buying Lubrizol shares he suggested the acquisition of the Lubrizol company to Berkshire chairman Warren Buffet.



Click here to read this Article written by Jonathan K. Hustis


Using a Residuals Clause In a Nondisclosure Agreement

by Jonathan K. Hustis

Your client wants to look at confidential information from a prospective business partner or acquisition target and has been asked to sign a nondisclosure agreement. Before you sign and receive any confidential information, why should you consider using a “residuals clause” and other measures to protect your client?



Click here to read this Dallas Bar Association Article written by Jonathan K. Hustis




Foreign Outposts For U.S. Companies: Avoiding Costly Mistakes Before Hiring Internationally

by Kristen Geyer

Companies that have an international growth strategy may want to establish a small local presence (e.g., customer service or local sales representative) without opening an office in a particular country. Companies taking this step may have a specific client need for local support in a country where they have no permanent office, or may be testing the waters before deciding whether it makes sense to invest in one or more foreign offices. In either case, the company will want to take steps at the start of this process to avoid unintentional and costly application of foreign law and triggering foreign tax obligations.

Read the entire article Here


The Changing Landscape of Covenants Not to Compete In Texas by Dale Head

by Dale Head

On April 9, 2010, the Texas Supreme Court granted review in the case of Marsh USA Inc. v. Cook (discussed below). The Marsh case involves a covenant not to compete and may once again alter the legal landscape for Texas employers and employees for so-called “nocompete” covenants.

Much has changed recently and many existing and long-standing non-competition covenants or agreements, once thought to be unenforceable and/or vulnerable to attack, may (or may not) be valid and enforceable under these new Court cases

Read Here