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Monday, January 15, 2007

New York Lawyer - January 12, 2007 - By Jessie Seyfer

In what may be a reflection of corporate America's cautious stance on legal matters, more in-house legal staffs across the country report that they will be hiring outside firms to do increased work this year.

A survey released Tuesday by the Association of Corporate Counsel found that 25 percent of in-house counsel planned on increasing their use of outside counsel, up from 16 percent last year. However, 53 percent of the 848 corporate attorneys surveyed said the amount of legal work they planned to send out would not change.

The ACC survey did not ask attorneys why many companies are stepping up their outside legal work. But local legal recruiters and in-house counsel pointed to Sarbanes-Oxley as the chief culprit. "The main reason for it is the increased burden relating to corporate governance and how it might impact both private and public companies," said Fritz Koehler, general counsel for the Sunnyvale, Calif., semiconductor company eSilicon. "For recent changes in things like compensation disclosure rules, companies thinking they might one day go public may need to seek legal advice. Public companies have to do the same thing."

Martha Fay Africa, of the Major, Lindsey & Africa recruiting firm, believes the increase in outside legal work shows companies are bouncing their decisions off other attorneys so as to spread the responsibility around.

"Right now we're existing in a climate of fear," Africa said. "Everyone's wondering who's going to get hit next with backdating, fraud, any of the kinds of things that have been happening. ... So we have here a climate where people are saying, 'Who can I trust?' That's clearly revealed in this survey." Companies want to be "bulletproof," she said.

New government regulations, such as those addressing e-discovery, have convinced many companies to invest in document-retention technology as well.

In addition, 45 percent of the attorneys surveyed, from both private and public companies, reported that "document management" technology had made their work more efficient and cost-effective. Also, corporate compliance was ranked second in terms of areas where in-house legal work was expected to expand this year, behind transactional work.

The ACC survey also looked into why some in-house counsel had fired their outside firms. Thirty-two percent had jettisoned their outside counsel, and 8 percent of that number reported it was because of cost. Just over 7 percent said it was because of mishandling of one or more critical matters, and 63 percent declined to state why. Less than 1 percent fired their outside firm because of a lack of diversity at the firm.

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