What GCs Want From Outside Counsel As Virus Rages On

By Michele Gorman 

As some general counsel curb outside counsel work or seek alternative fee arrangements, law firms are trying to accommodate those needs in order to keep valuable clients amid shrinking demand, while empathizing with companies experiencing coronavirus-related cash flow issues.

Ben Gross’ legal department at retailer rue21 has limited its outside counsel use to time-sensitive and essential matters, and has changed the terms on payments, which he said firms understand. And for now, he’s placed longer-term projects “on ice” to help the company weather the economic challenges facing a sector hit hard by the crisis.

“Essentially it’s a small loan from the law firms going forward, just until we get out of it,” he said.

General counsel said they noticed that some firms embraced the uncharted territory of the pandemic early on, offering discounts, setting up COVID-19 teams and resource centers, and hosting complimentary webinars to guide their clients. Working together to share the burden, general counsel and firm lawyers are drawing on their relationships to agree on discounts, alternative fee structures or lengthened payment periods.

“When you have a good relationship with your outside counsel, they’re going to work with you in thick and thin,” Gross said. “They know that in ordinary times I pay my bills on time … but they also understand that every retailer right now has tremendous cash flow issues until we get back to normal.”

Joe Morford, a managing partner at Tucker Ellis LLP, also underscored the importance of relationships and assisting where he can, especially as some longtime clients approach the firm searching for ways to reduce their outside counsel costs.

“Those are circumstances where of course we’re going to help because these are our clients and that’s what you do with your good relationships in life,” he said.

Among the requests he’s seen: clients seeking temporary fee reductions, asking to limit work to the most essential tasks, and moving back a payment date, with the intention of catching up by the end of the year, Morford said.

And some lawyers predict these requests from in-house counsel might only be the beginning.

As businesses adjusted to the work disruptions brought on by the outbreak during the past few months, most general counsel have been focused on protecting the well-being of their employees and businesses. But soon they’ll have to look at the volume of unanticipated legal costs stemming from COVID-19 and adverse impacts to the businesses they support and then determine whether and how to readjust their budgets, said Jim Gallagher, general counsel at Perspecta Inc.

“It’s highly likely that every legal department will have to revisit their budgets and revisit their approach to the discounts … even the ones that have already been pre-negotiated,” he said.

Discussions about different arrangements can also help firms grow relationships and demonstrate strengths. For example, if a client promises a certain volume of work or to try out other areas of the firm, Tucker Ellis will sometimes offer a larger discount than the one requested, Morford said.

Similarly, lawyers at Heise Suarez Melville PA have been encouraging alternative fee arrangements, which shareholder Luis Suarez said have been “extraordinarily well-received” as clients seek certainty.

An alternative fee arrangement, or AFA, typically refers to any method other than the straight billable hour to pay for outside counsel. The dominant AFA is a fixed or flat fee, but there is an assortment of other methods — contingency, fee cap, success bonus — that attorneys can explore.

In April, Heise Suarez signed two fixed-fee arrangements, one for several months and the other for a shorter period of time. And in another instance, a major national chain approached the firm for work related to unfulfilled lease payments.

“They don’t want to pay high hourly rates; they wanted that certainty of, ‘You’ll get me to this point in the litigation for this dollar amount, and then after that, get me to the next point,'” said shareholder Mark Heise. “I think that certainty in this time of uncertainty is very satisfying to clients.”

He added, “Nobody wants to be out on a limb and spending a bunch of money when they don’t know if they’re going to have money to come in the door; whereas if they say, ‘Here’s X dollars right now,’ it’s gone, it’s out of their mind.”

Since it opened in January, Heise Suarez planned to provide AFAs. As Suarez pointed out, any legal budgets that clients had set at the beginning of the year are likely irrelevant now.

If they’re not already doing so, Cedar Realty Trust Inc. general counsel Adina Storch encouraged firms to offer AFAs — maybe a monthly subscription model for unlimited access to COVID-19 crisis teams that can answer questions for a flat, monthly rate. “It’s like paying it forward: When the world returns to a greater state of normal … all of these goodwill gestures I would imagine would come back to these firms, and they would distinguish themselves in terms of legal client service from their peers,” she said.

Storch said it might require biting the bullet in the short term and supporting negative cash flow to cultivate relationships. But, she added, “if law firms are able to get in the door at drastically reduced rates or even offer certain support services for free — like paralegal support, even printing and mailing support — I really do think that that is something that will pay dividends when the world goes back to normal.”

At Tucker Ellis, Morford stands by his lawyers’ dedication to their clients and is optimistic many of the adjusted structures will return to normal arrangements. But each client’s needs are different. Morford said his firm isn’t working through new pricing arrangements with every general counsel or all industries; rather, the need has mostly come from companies such as those in the hospitality and retail sectors that have shut down indefinitely. In the meantime, he encouraged other firm leaders to keep in mind that most clients genuinely need assistance and aren’t looking to take advantage of their outside counsel.

“For the most part, these are good companies with good people in the in-house counsel office who actually need help,” Morford said. “When this improves, we expect that things will return to a more baseline position.” –Editing by Kelly Duncan and Emily Kokoll.

Firm Updates

MasRec retains HSM

MasTec, one of the largest infrastructure engineering and construction firms in the world, retained HSM to file suit in federal court against certain defendants regarding a tax dispute. After many months of hard-fought litigation preparing the case for trial, the parties amicably resolved the dispute.

New Member: Daniel Crispino

As part of our commitment to align our firm with the legal industry’s best talent, we are pleased to announce the addition of attorney Daniel Crispino as an associate. Before joining our firm, Daniel served as a law clerk to two (can you say, “overachiever?”) judges in the U.S. District Court for the Southern District of Florida: U.S. District Judge Rodney Smith and U.S. Magistrate Judge Lauren F. Louis. Before his clerkships, he practiced high-risk, complex commercial litigation with a focus on class-action lawsuits and contractual disputes at Boies Schiller Flexner LLP.  He also was a part of a team who represented victims of convicted sex offender Jeffrey Epstein pro bono.

Daniel graduated from Emory University with a Bachelor of Arts in English in 2013, and from Wake Forest University School of Law with a Juris Doctor in 2016.  While in law school, Daniel completed a summer judicial externship with then-Florida Circuit Court Judge Raag Singhal in the 17th Judicial Circuit of Florida.  Currently, Daniel is involved with the local chapters of the Federal Bar Association and the Asian Pacific American Bar Association. When not working, Daniel can be found on the tennis court, at the beach, or volunteering at his local animal shelter.

Judicial Corner

HSM wholly supports the Honorable Thomas J. Rebull in the Group 65 race in the August 18, 2020, election for judges. Judge Thomas Rebull is now a Circuit Judge for the 11th Judicial Circuit of Florida, Appellate Division.

After law school, Judge Rebull clerked for Judge Joseph Nesbitt for two years. When the clerkship ended, he moved into the private sector. Eventually, he ended up with a position at Broad and Cassel where he stayed for a decade and rose to partner.  Judge Rebull was ultimately appointed circuit judge by Governor Rick Scott in September of 2011, filling the vacancy created by the retirement of Judge Israel Reyes.

Judge Rebull’s first assignment as a Circuit Judge was in the Felony Criminal Division. The Honorable Bertila Soto, after becoming Chief Judge in 2013, appointed Judge Rebull as an Associate Administrative Judge for the Criminal Division.  Judge Soto later named him co-chair of the Eleventh Judicial Circuit Professionalism Committee.  Judge Rebull rotated from the Criminal Division to the Civil Division in January 2015.

Judge Rebull is currently participating in a case management pilot program in the civil division. He is a frequent lecturer on professionalism and civility issues, as well as matters related to practice in the civil division of the Circuit Court. Judge Rebull has also served as faculty at the Florida College of Advanced Judicial Studies. For more information, please visit https://www.judgerebull.com/. To be able to vote by mail in the August election, you may wish to visit the Miami-Dade website to obtain your ballot:  https://miamidade.electionsfl.org/vrservices/mbrs

Noteworthy Legal Decisions

Following is HSM’s analysis of a recent court ruling which serves as a useful “Writ of Mandamus 101.” In layman’s terms, a writ of mandamus is an order by a court to a government official to perform an act required by law, which he or she has refused or neglected to do. In Point Conversions, LLC v. Pfeffer & Marin Holdings, LLC, the Florida Third District Court of Appeal addressed whether a petitioner was entitled to a writ of mandamus. No. 3D20-0249, 2020 WL 2048064 (Fla. 3d DCA April 29, 2020).  The Third DCA denied the petition for a writ of mandamus to challenge a trial court’s decision to dismiss its complaint without prejudice to amend for lack of subject-matter jurisdiction.  Id. at *1.

To seek a proper writ of mandamus, blackletter law requires three elements be met: “… [1] the petitioner must have a clear legal right to the requested relief, [2] the respondent must have an indisputable legal duty to perform the requested action, and [3] the petitioner must have no other adequate remedy.” Id. (emphasis omitted).  In denying the petition, the majority relied upon the determination that the Petitioner had to avail itself of the alternative remedy, i.e., it could have seized upon the permission to amend the complaint.

Interestingly though, through a short historical analysis of mandamus dating back to 1882, the concurring opinion emphasized that mandamus should really truly only lie where the lower court refused to “take jurisdiction.”  Id. at *2-3.  It should not lie where the petition seeks to “control [the] discretion [of the lower court] while acting within its jurisdiction.”  Id. at *4.  Mandamus is not available to mandate the doing or undoing of a discretionary act or a merely erroneous decision.