The top legal officers at AT&T, Southwest Airlines, Toyota and Trinity Industries have strategic suggestions for law firms who want their business: Help them solve problems. Diversify your legal teams. Write brief, to-the-point memos. And be a team player, even with other law firms.
They also have definite pet peeves for the firms they hire: No surprises. No inflated bills by doing unnecessary work. And no to lawyers who repeatedly develop new conflicts of interest in the middle of an engagement and need a waiver.
“I’m in the business of solving problems,” AT&T General Counsel David McAtee told lawyers and judges attending the Northern District of Texas Bench Bar Conference last Friday. “Look for ways to help me problem solve.”
“I like outside counsel who views themselves as an extension of my in-house team,” said Toyota Chief Legal Officer Sandra Phillips Rogers. “I want them to see themselves as part of our team and I want firms that have the values we do.”
And this from Southwest Airlines Chief Legal Officer Mark Shaw: “Lawyers and firms that constantly come to me with new conflicts – I really don’t like that.”
In an hour-long panel discussion moderated by U.S. District Judge David Godbey, the four corporate executives discussed diversity, alternative billing arrangements and ways law firms can simply get their foot in the door.
“Surprises are not well-received,” said Sarah Teachout, chief legal officer at Trinity Industries. “We can manage risk if we know about the risks. No massive surprises.”
Teachout also criticized what she described as “conveyor belt litigation.”
“That means doing things because they are always done that way,” she said. “Filing motions just because it is ‘the next step.’ Are we going to win the issue? If no, then why file it? Why are we serving 300 interrogatories? Why are we fighting over every bit of discovery?”
“It is unnecessary and expensive,” Teachout said. “The question we need to ask is, is everything we are doing going toward us winning at trial or settling,” she said.
“God bless you, Sarah,” Judge Godbey responded.
Rogers said many corporate legal departments have been asked to reduce legal spend.
“When the pandemic hit, our assembly lines shut down for six weeks,” she said. “We went to our law firms and said, ‘pencils down.’ We are forever thankful that our outside counsel put their pencils down.”
Alternative fee agreements are “an increasingly valuable tool to obtain predictability,” Rogers said, but she agreed that such agreements are not always appropriate.
“If it looks like you are losing your shirt, we will come back and look at the arrangement,” she said. “At the same time, if we see you are getting a big windfall, we will want to revisit it.
“I’ve seen some switcharoos and we ask law firms to keep your staffing levels in flat-fee agreements at levels as if it was a billing-per-hour arrangement,” Rogers said.
Teachout said she has employed flat-fee agreements in litigation matters with “success bonuses on the backend.”
“Going to trial and getting a jury win is the highest level of success,” she said. “We’ve had fights with our insurance carrier on some AFAs.
McAtee of AT&T said lawyers and firms need to be willing to take assignments that are not necessarily the lead roles in litigation or dealmaking.
“I first started doing some work for SBC that was not really that much fun but it got my foot in the door,” he said. “Then, SBC bought AT&T and relocated to Texas and now, here I am, the general counsel.”
McAtee said on larger litigation matters, such as AT&T’s huge antitrust battle against the Trump administration, teams from multiple law firms are required, and they are required to work together.
“Litigation is a sport, but it is not boxing, it is rugby,” he said.
McAtee also said “great written work product” is very important. “One-page memos almost always do it best,” he said.
Teachout agreed, pointing out that Trinity needed to hire multiple law firms a few years ago to fend off attacks related to its guardrails.
“We needed discovery teams, briefing teams, different trial teams, expert cross-examination team who focused just on the other side’s expert witnesses,” she said. “We were using some really talented associates from one law firm to work with some partners at another law firm. But the partners didn’t want their associates working for the other firm’s partners. We ended up terminating that law firm.”
The strategy by Teachout and Trinity was hugely successful, as the litigation team had a $663 million judgment reversed and more than a dozen other lawsuits dismissed.
For Southwest, a low-cost airline, Shaw said the focus is on lower costs from outside firms.
“I’m not a fan of proposed budgets because we found that if you give a firm a budget, you almost always get billed for exactly that budget amount.
“The most important thing with billing is no surprises and good communication,” he said.
All four lawyers said diversity is critically important to their outside hiring decisions.
“Our company is working to improve our diversity, including in our legal department and our outside legal teams,” Teachout said. “Diverse teams perform better. The more diverse the team, the more the company outperforms.”
Rogers said a former lawyer in her department was recently appointed to lead Toyota’s diversity, equity and inclusion task force.
“Diversity is critically important to our hiring at Toyota,” she said. “Most jurors in trials are looking for people who look like themselves. Diverse litigation teams are more successful.”