Network Firm News

Monday, December 23, 2002

McDonald's Happy with Network's Wildman Harrold
Changeable Partners -- What does 'primary outside counsel' mean these days anyway?
Ashby Jones -- Corporate Counsel -- 12-23-2002

Last July, when an over-weight Brooklyn, N.Y., man sued McDonald's Corp. for allegedly causing his obesity, the lawyers for the hamburger giant didn't laugh it off; instead, they jumped into action. Despite the seemingly outlandish claim, they feared the case had watershed potential.

But the Oak Brook, Ill.-based company didn't send the case to either of its faithful litigation firms in Chicago: Sonnenschein Nath & Rosenthal or Kirkland & Ellis. Instead, McDonald's held a beauty contest and selected as one of its lead counsel a firm with a midwestern reputation: Wildman, Harrold, Allen & Dixon, Chicago's 11th-largest (the company also tapped Chicago's Winston & Strawn to help with the suit).

According to Corporate Counsel's first ever "Who Represents America's Biggest Companies?" survey, the McDonald's experience is the tip of a trend among Fortune 250 companies. "It was sort of surprising," admits Phillip Rudolph, the company's corporate vice president and international general counsel. "But Wildman Harroldhad a group of lawyers with expertise defending allegations with similar subject matter. So we went with them. And so far, we've been very happy."

But corporate America is undergoing a sea change in the way it picks its outside lawyers. Increasingly, companies are making like the Golden Arches and venturing into uncharted waters, a trend that's diluting the whole concept of "primary outside counsel" -- and possibly putting it on the cusp of obsolescence.

The reasons? For one thing, companies feeling the pinch of the economic downturn are looking to farm their more routine work out to less expensive lawyers; by the same token, the big, highest-priced firms aren't as interested in the small stuff either. What's more, as companies spread their wings both domestically and worldwide, many are adding local law firms to service complicated work in far-flung jurisdictions.

And then there's been an attitude shift: In recent years, lots of companies have started keeping more work in-house. So they've had to hire more sophisticated lawyers, who typically bring their own sets of trusted contacts to the table. As a result, general counsel have a lot more ready-made sources to tap for outside help.

The result? "The marketplace [for legal services] feels more in flux than ever," says William Barr, the general counsel of New York-based Verizon Communications Inc. "We try to limit the number of firms we use, but nowadays we'll always give a new firm a chance if we see something that attracts us."


That attitude represents a change in the way companies are picking outside counsel. About a decade ago, some executive committees and general counsel took a hard look at their legal departments and saw inefficiency. Their verdict: too many law firms. Too many bills. Too much paperwork. So they demanded that their departments streamline operations and cut costs.

The GCs concluded that they could save money by pushing more work to fewer firms, many of which were happy to extend bulk discounts. Legal departments created tiered ranking systems of their outside law firms and established rigid protocols for farming out cases and deals. "Consolidation" became the buzzword. And it promised to be the wave of the future.

But today, companies have learned that consolidation can be taken only so far. Take New York's Viacom Inc. The company's general counsel, Michael Fricklas, says that a few years ago he realized that a company's legal problems couldn't "simply be solved by people all sitting in one place." So he adopted a more realistic stance on consolidation.

Fricklas says that, last year, media giant Viacom sent the vast majority of its work to several dozen law firms (which represents an expanded pool of firms from past years), and the remainder to several hundred.

"Consolidation is only one part of the equation," says Fricklas. "We look for the best person to handle each piece of work. And [being familiar] with a lot of firms is the best way to ensure that we're doing that."

And how are these firms finally chosen? Fricklas and other GCs still rely on the time-tested dog-and-pony shows.

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