In the late 1990s Ecolab Inc. began to get slammed with lawsuits. The cleaning and sanitizing products manufacturer was growing, and as its products spread to new markets throughout the United States, so did its litigation.
The 15-person legal department had a tight budget and faced some serious products liability claims. Bringing a new person in-house to help with the increased workload was out of the question. Employing multiple law firms in the different states in which Ecolab was facing court battles seemed inefficient. The St. Paul, Minn.-based company eventually found a solution--hire national counsel.
"We believed if we hired one outside counsel or group from one law firm to work on the overall litigation, there would be efficiencies by limiting the number of outside counsel we had to deal with," says Lawrence Bell, senior vice president, general counsel and secretary at Ecolab. "You gain efficiencies by working with a law firm that understands the corporation, understands the product line and understands the company philosophy with respect to product defense."
Bell isn't the only GC who thinks so. Although the idea of using national counsel has been around for years--companies such as Caterpillar Inc. and Teva Pharmaceutical Industries Ltd. have been doing it since the 1980s--more and more companies today are hopping on the national counsel bandwagon. In November 2003, U-Haul International Inc. implemented a national counsel system in its legal department. And only a few months ago, Qwest Communications Inc. began using national counsel to handle its litigation. Even the Bush?? 1/2 Cheney campaign employed national counsel to help manage its litigation.
This increasing popularity of national counsel isn't surprising. In an America that has become more and more litigious and an economy that compels corporations to continuously tighten budgets, legal departments are constantly challenged to do more with less. Ongoing litigation is often the biggest drain on the legal department's budget, and it's critical in-house counsel effectively coordinate defense while keeping costs under control. And many GCs believe that's where national counsel can make the difference.
Secrets Of Success
The role of national counsel is to oversee similar litigation against one client in multiple states or jurisdictions. For Ecolab, that system has worked very well.
"You develop a partnership with your national counsel," Bell says. "You develop a relationship built on trust."
Bell believes a national counsel's intimate relationship with its client is the foundation for success. Rick Morgan, Ecolab's national counsel, agrees.
"I've worked with their products and their people over so many years," says Morgan, a partner at Bowman and Brooke in Minneapolis. "So when a new case comes in, I understand the product, who the key players are, who to talk to."
Bowman and Brooke currently is handling cases for Ecolab in more than
30 states. Morgan and his group are responsible for the overall coordination of all Ecolab's products liability litigation. Their duties include hiring local counsel in each state; retaining expert witnesses for consultation and testimony; controlling pleadings, discovery and depositions; and sometimes litigating the cases.
"By working with the same national counsel for so many years, you shorten the entire litigation process," Bell explains. "Together, we address the key issues to resolve the case as expeditiously as possible."
The relationship between Morgan and Ecolab's legal department hasn't just reduced costs in ongoing cases; it has prevented potential cases from ever being filed.
"Because we are intimately involved in all their cases, we are able to spot trends," Morgan explains.
In the late 1990s, for example, Ecolab experienced a sudden surge in cases involving skin- and eye-burn injuries as a result of restaurant workers misusing the company's industrial dish-washing soap. Morgan and his team brought this to Ecolab's attention, and made suggestions for changes that could reduce the number of injuries.
With Morgan's help, Ecolab switched from liquid to solid soap, and changed the way the warning label was written.
"In that situation, we were able to see what was going on and make appropriate changes," Morgan explains. "And thus, we cut off future liability."
While GCs, such as Bell, can see the benefits of a national counsel system once it's in place, those new to the idea may think the price-tag seems high. And therefore, the expense outweighs the benefit.
Making The Investment
Because the best candidates for national counsel have extensive litigation experience and work in large firms that span the United States, their fees are often higher than that of local counsel. But many GCs believe it's worth the investment.
"By paying more for lawyers now, I am very confident I will reduce the amount we're spending on the overall litigation process," says Larry De Respino, director of litigation for Phoenix-based U-Haul. He decided to hire national counsel only a year ago, after realizing he was wasting a lot of time and money working with so many different local firms.
"What happens when you have a lot of different firms and a lot of different people interacting is you start to get inconsistent information that is disseminated on things that should have consistency," he explains.
Although U-Haul has had only three trials since it implemented the program, De Respino believes his decision to use national counsel will reduce the amount of money U-Haul spends on litigation.
His national counsel, Robert Owen, agrees.
"By minimizing the amount of time in-house counsel have to spend coordinating, managing and facilitating communication among the various law firms handling cases in different states, we are minimizing the cost of overall litigation to the legal department," says Owen, a partner at Fulbright & Jaworski in New York.
U-Haul was lucky to find a good match with Owen, and according to De Respino, that relationship is working out well. But the task of finding the perfect candidate or law firm to work as national counsel isn't always easy.
Scratching The Surface
The national counsel has to match the company's needs in terms of geographic location and expertise.
U-Haul's approach was straightforward. First the company looked at the firms with which it had existing relationships and analyzed how they stacked up against each other.
From there, De Respino chose several firms to interview, asked the firms how they thought they would benefit U-Haul as its national counsel, and tried to get a sense of the firm's level of commitment to the company.
"I always like to hire people, not law firms," he explains. "I needed people I knew I could trust, were fine lawyers and took pride in representing U-Haul. To me, that made up the ideal candidate."
Doug Grandstaff, head of litigation at Peoria, Ill.-based Caterpillar Inc., had an ideal candidate for national counsel in his mind too.
"We weren't necessarily looking for a great litigator," Grandstaff explains. "What we wanted was someone with an ego, who is respected, knowledgeable, has great expertise, sufficient experience and gray hair."
Although the company had employed national counsel for more than two decades, its use of one specific person to coordinate major litigation only took form three years ago when Grandstaff saw an avalanche of welding rod and asbestos lawsuits barreling down on
Grandstaff found someone who could handle the pressure in David Siegel, partner at Crowell & Moring in Washington, D.C. "Having strategic and management experience associated with handling a lot of different kinds of cases being litigated simultaneously is an important qualification to being national counsel," Siegel says. "I was able to bring that to the table for Caterpillar."
On The Lookout
Despite these benefits, GCs experienced in using national counsel say there are a few potential pitfalls in-house departments should keep in mind when hiring a lawyer or firm to take on that role.
First, monitor the program carefully, and make sure the relationship will continue to generate the efficiency the legal department expects.
"The national counsel's job is to create and modify a team of attorneys to service your workload," Bell explains. "In law firms, people get promoted and become partners. As that happens, their billable rates go up."
Bell says it's critical the national counsel firm keeps a team with a cross-section of expertise--from senior partners to associates--who are continually learning the company's account and working to provide the most cost-effective representation.
Second, be sure to pick a firm that is stable.
"Be careful about putting all your eggs in one basket," Owen says. "If the firm dissolves in a year, you've paid for a huge learning curve and technical infrastructure that will dissolve with it."
Third, know the law firm as intimately as possible and be sure you're getting what you're paying for.
"There is always the potential to be dissatisfied with the representation you're getting," De Respino says. "By hiring national counsel, I have hired more expensive lawyers. And unless I see some efficiencies and results, I will have increased the cost of legal services for my department."
While retaining national counsel may involve a significant investment of time and money for legal departments looking for the best, most cost-effective services money can buy, many in-house counsel believe there is no other way to handle major litigation.
"When you're talking about situations where you're facing thousands of lawsuits in different jurisdictions, it truly becomes a coordination nightmare for in-house counsel," Grandstaff says. "The level of experience and expertise you get with national counsel is invaluable."
Bush Jumps On The Bandwagon
While national counsel continue to manage corporate America's tough litigation, they also are working their magic in the political arena.
When the Bush?? 1/2 Cheney campaign predicted there would be an onslaught of lawsuits filed by the Democratic Party before the 2004 election, it decided it needed one lawyer that could act as coordinator to oversee the entire litigation process. So it hired a national counsel.
"The lesson the Democrats took from Florida in 2000 was to litigate this election before it took place, not after," says Thor Hearne, national counsel for the Bush?? 1/2 Cheney campaign and partner at Lathrop & Gage in St. Louis. As a result, the Democratic Party and other organizations brought more than 60 different lawsuits in the battleground states. The suits sought, among other things, to allow voters to cast ballots outside of the designated polling places, to take Ralph Nader off the ballot and to ignore rules about poll closing times.
As national counsel, Hearne coordinated all the suits. His primary focus was to be the litigator. But he also worked as counsel for interveners in some cases, and in others he was an adviser to local counsel.
"I needed to see that the appropriate legal responses were being made to the cases brought," Hearne explains. "There was an interest in making sure that a consistent legal approach was brought to all these [election] cases."
Like most national counsel, Hearne's objective was efficiency.
"Whether it's on the corporate or political side, there needs to be a uniform message and uniform philosophy as to how you are responding to regulatory issues, legislation and litigation," Hearne says. "Without national counsel to coordinate, that could be very difficult."