“Prevention is better than cure.”
- Desiderius Erasmus
We’ve received some attention following the Portland Business Journal’s feature, as well as inquiries about the origin of our Preventive Law practice and how it works.
It all began a few years back while serving as in-house counsel for a global product manufacturer. We retained a large law firm to represent the company in a lawsuit involving a recalled product. The lawyers weren’t cheap, with the partner charging over $500 per hour and the associate charging nearly $400 per hour.
Less than a year into the lawsuit, in which we had already spent over $75,000 in lawyer fees, my assistant forwarded the partner a brief list of questions from our insurance broker about the case to assist with upcoming renewals. A week later, we received a multi-page formal report on firm letterhead followed by a $3,000 invoice for this work.
Frustrated by what I deemed to be an unnecessary report and excessive invoice, I called the partner and requested these entries be removed. I viewed them as a value-added service, reminding him of the amounts already paid. I also questioned the business sense in spending several hours on a formal report given its limited purpose. The partner wouldn’t bend, arguing the value of his firm’s time and how it needed to be compensated per the terms of the retainer agreement.
Where was the concern for our value?
Sometimes You Need to Distance Yourself to See Things Clearly
Prior to joining this company, I had been an associate with a private law firm for several years, so I was well-versed in billing hours for my work. My firm, like many other firms, had a strict rule that associates were required to bill at least 2,000 hours per year. Year-end bonuses and opportunities for advancement were largely tied to hitting this figure. Performance was largely inward-focused.
After managing a corporate practice, I finally noticed and began to appreciate the other side of the coin. It felt as though outside firms had been preying on our need for their services, as opposed to focusing outward toward our business success.
After this epiphany, I began reaching out to other in-house colleagues and managers to determine whether they were facing the same struggles with outside law firms. I wasn’t surprised with what I uncovered:
Growing distrust with outside law firms, at times wondering whether services provided were always in the best interests of the company;
Frustration with having to pay increasing hourly rates due to firm bloat and rising overhead, especially when attempting to manage legal spend;
Perception of law firms as not cost-effective on day-to-day inquiries given fears of receiving a large invoice for even minor requests; and
Confusion as to why law firms were only interested in reacting to client problems, as opposed to being proactive with preventive strategies to stay ahead of exposure.
It was clear the traditional law firm model of reactive services and billing hours was not client-facing, and it certainly was not business-forward in its approach.
The Ounce of Prevention
Having practiced on both sides of the fence, this was truly a problem in need of a solution. Fortunately, more nimble legal practices (not anchored by bloat and overhead) were already beginning to disrupt the legal industry by offering specialized services and flexible fee arrangements. This disruption extended to practices dedicated to helping businesses minimize their exposure to risks.
These Preventive Law practices specialize in anticipating and reacting to risks before they materialize, providing cost-effective guidance with long-term benefits. When done properly, these practices can assist businesses with:
Improved understanding of risk exposure along primary and support activities;
Developing and implementing proactive strategies to prevent exposure;
Better informed decision-making;
Improved efficiency and reaction time, as well as consistency in application;
Lower contract, claim, litigation and regulatory exposure; and
Better opportunities to recover significant insurance proceeds when necessary.
Like preventive medicine, Preventive Law practices help companies stay healthy up front in order to minimize likelihood of “disease” later.
It Works, It Really Works!
Shortly after starting our practice, we were approached by a product manufacturer that had no in-house counsel and a significant annual legal spend. They were in the middle of several lawsuits and couldn’t see a light at the end of the tunnel. They wanted a plan to get out from under the litigation and what seemed like endless invoicing by lawyers and legal strategies they did not fully understand or trust. Because of the competitive market, profit margins were already razor-thin and cash flow was closely monitored.
We sat down with the executive team to explain how a Preventive Law practice could be of benefit. For a fixed monthly fee, we would manage all company claims and litigation as well as relations with insurers, help review and prepare enterprise-wide contracts, and further assist with developing and implementing strategies from supply chain operations to human resources to labor relations to procurement. We took the position that no project would be outside the scope of work, and that employees should feel free to call us with any matter. Our primary goal was to be an accessible, business-forward resource.
Ultimately, the manufacturer signed with us. The increasing number of calls and expanded projects since then demonstrate that we’ve become a trusted resource. Cases are being closely managed, keeping litigation budgets within reason. We’ve also helped the company recover millions of dollars in insurance proceeds that may have otherwise been missed due to lack of awareness and strategy.
We include updated time-sheets with our monthly invoices to provide a comparison against the old hourly rates paid, as well on-boarding costs (since we’re really competing with that possibility as well). So far, so good. We’re nearing a year together and it’s safe to say both parties are looking forward to renewal.
Preventive Law won’t work for everyone. Many established law firms are too hesitant to adopt more outward-facing models. At KEEFER, we’re fully embracing this new world order. As always, we’re here to help.