The most widely read magazine for Canadian lawyers
Issue link: https://digital.canadianlawyermag.com/i/50800
"A true dialogue [is needed], not declaring war on excessive billing [and] profit for partners, but the fact that the old model of an hourly rate that goes up every year just doesn't work." business world considers a cost centre — the legal department — during a worldwide economic downturn. In the face of those economic pres- sures Desjardins has been on sort of a one-man mission to change the rela- tionship in-house counsel have with law firms. As co-chairman of the Canadian Corporate Counsel Association World Summit held in Vancouver last January, Desjardins, in his opening address, called on corporate counsel to work together and separately to drive down the cost of legal services. At the same conference, Rondeau warned of the dangers of treat- ing outside counsel as commodities. This may not have been surprising as Desjardins had already made simi- lar statements in his home province of Quebec. Before the January conference, he told the Montreal Gazette his panel would focus on the cost of legal services, telling the newspaper: "[I]t is becom- ing a very serious issue — how to deal with outsourcing of legal services to law firms all around the world, how to deal with legal fees and the management of those fees, and the services provided by external firms." General counsel obviously know their legal departments are cost centres, but Desjardins says the managing partners of law firms have to realize it as well. "There has to be a shift in mentality, law firms have to work on costs themselves." Due to the worldwide economic crunch, companies have become more concerned with the bottom line and, as Desjardins says, "all of us in corpora- tions have got to be better managers of our budgets." For legal departments, that has an affect on relationships with outside counsel. But with the current financial situation, Desjardins stresses the dialogue needs to go beyond one general coun- sel and one managing partner. "There comes a time where we need to have, not only a one-on-one conversation between law firms and the client, but an industry dialogue," he says. "A true dialogue, not declaring war on excessive billing, [and] profit for partners, but the fact that the old model of an hourly rate that goes up every year just doesn't work. We have to find a better way to have more effective costs [for] legal services provided by the law firms." Desjardins is calling on the CCCA and other corporate counsel organiza- tions around the world to use their influence and begin the dialogue. That discussion is in everyone's interests, in- house counsel who will become better managers of the bottom line, and law firms. By helping to trim the costs of legal departments more work can be sent outside. Conversely, if costs remain high and keep growing, legal departments will be forced to bring more work in-house, says Desjardins. Like his Bombardier counterpart, Pratt & Whitney's Rondeau believes everyone is interested in saving money. Unlike many of his in-house brethren, Rondeau is not as tied to the work of outside counsel for day-to-day opera- tions. "I try to find exceptional people that I can rely on, on the outside. For the most part they are rarer individuals, they are not the rank and file," he says. The Pratt & Whitney team provides much of the legal work in-house and when outside counsel are needed the questions Rondeau is asking are very specialized. He warns a one-size-fits-all approach isn't necessarily the best option in discussions over fees. During the Vancouver summit, Rondeau made pointed comments about the dangers of treating outside legal counsel like commodities. In a session on effective management of internation- al in-house legal teams, Rondeau said www. he doesn't "squeeze the key lawyers" and that outside counsel should be treated like "an investment, like insurance." He told the group his company does $400 million in research and development each year, and a single Pratt & Whitney engine can be powering an aircraft for 20 or more years. That naturally makes the company more risk-averse. "Tolerance for risk drives a lot of things," he told the conference when describing how his legal department is set up. Speaking from his own law firm expe- rience at what is today Fraser Milner Casgrain LLP, Rondeau warned of the dangers of viewing lawyers as commodi- ties. If you push too hard the lawyers that you really need may not be there when you really need them. "When I was in private practice, you have your standard hours and if you have more work, more clients than you can already handle you'll naturally gravitate to those that either appreciate your work best and those that pay you well," he says. "If you have a client in that base that treats you like a commodity, I would naturally gravitate to other clients and leave that client behind." Rondeau employs those ideas with his legal team at Pratt & Whitney, striv- ing to be the client that lawyers want to call back. "I am interested at being the client at the upper echelon and not the client that treats its outside counsel as commodities," he says. "But that is for specific needs, the more targeted needs. If we were to have more higher-volume work, I would not be saying that. The higher volume we treat in-house and that is how we cut costs." Its risk aversion means the legal team at Pratt & Whitney does the major- ity of work itself. "The internal lawyers take a long time to train," he says. "If I am dealing with outside counsel where I need specific advice on some points mag.com APRIL 2009 29