Canadian Lawyer InHouse

NEGOTIATING A SETTLEMENT IN REAL TIME I f external firms think going through the RFP process is tough, consider a client Jon-David Giacomelli of Cambridge LLP recently landed after an intensive bidding process against another firm. He received a referral from a Chicago lawyer regarding a crossborder financial services litigation file involving fraudulent misrepresentation. He spent 20 hours going back and forth with a third-party lawyer who was "interviewing" Cambridge and another law firm in Canada on behalf of the company to determine who would get the file. "He was brokering between the two of us saying, 'Why would you do that, this guy says he would do this.' The person involved on behalf of the client was a sophisticated lawyer quarterback," says Giacomelli. In the end, Cambridge won the file but the case was settled before it went to trial based on the strategy discussed in the interview process. "We ended up resolving that case in negotiations over a two-day meeting. I absolutely didn't enjoy that process at all but the bottom line is they were up front about that process," he says. "It could have cost the company a lot of money." It's just another indication of how companies are taking a more aggressive approach to getting litigation matters resolved quickly and for less cost. "When I started 20 years ago you didn't quote anything — you just billed your hourly rate," says Giacomelli. "In order to compete we've tried to be more competitive in fees. We're not the bottom of the street but if you're a boutique they're already looking to you to save money and that used to be enough. My hourly rate used to be $100 to $200 less than my Seven Sisters brethren — now they look to us to shave fees." –JB outlined if it took until an additional stage to settle. "If it was an early exit, it would have been a big win on the fee side for McCarthys," says Gutelius. "I don't mind having compensation incentive fees for the firms but this one could have been too one sided and difficult to explain to the business." The second option outlined five phases with capped fees broken down for each phase. The third option involved a profitand-risk model based on the amounts described in the capped fees. "We plotted out the litigation, we talked about steps; the various strategic options and the way we would defend it and then we committed to a target number for the first piece," says Christine Lonsdale, a McCarthy Tétrault partner who is working with RBC on the class action file. "The agreement is if we come in under budget 22 • ju n e 2013 INHOUSE we split the savings and if I go over I'm only billing at 50 per cent of my rate." In combination with other things the firm pitched, RBC saw the third option as the most attractive. "I've had a lot of discussions with them and they think — and they're not wrong — that it sets up a different incentive," says Lonsdale. In fact Lonsdale welcomes the change in how large files like the one put forward by RBC are approached. "Litigation is a team sport and we have always talked about it as a team sport in the law firm but it's a team sport with your client as well and it can foster better conversations about how they want the file to be handled. In the end they are much happier with the outcome," she says. Part of this arrangement isn't necessarily about certainty in the cost but having more predictability of the cost, says Gutelius. "There's no question a lot of this is about trying to bring down the cost. It's often viewed by our outside counsel as, 'You'd like us to do everything we did before for less money.' But that's not what we want — what we're saying is we want you to be a lot more efficient and focus in the right places and the net result should be less money. But they don't usually understand or listen to the first part." Gutelius is not surprised that in 2013 this kind of creative approach is still not germane to the way most external firms think or operate. He feels the responsibility falls with in-house counsel who need to push the envelope and work alongside the external firms to make sure litigation cases are planned out strategically and not just handed over cold to the firms to defend — and bill — in the same way they have in the past. "I'm in the camp of people that say that until the companies with the large spend actually walk the walk there's not all that much incentive for firms to change their model. We are trying to walk the walk and so there are other firms who are starting to realize this may be a good marketing tool and are coming forward with it. A lot of other firms entrenched with clients believe 'this too shall pass.'" He admits it takes a lot of work internally to do what RBC does and the bank has a sizeable internal team to help determine the right strategy and share the load. "As a company we have a large legal spend so that means the firms tend to care," he says. "That is a huge advantage. If you're a company only spending $1 million or $2 million on legal spend it's hard to put the effort into any one individual file." Historically, firms provided litigation

• Cover