ParfumGigi@aol.com

Familiar faces show up on our annual survey of the most-used outside firms -- even though we changed our methodology

Anthony Paonita

August 20, 2007

It's easy to get stuck in a rut: Just do the same thing over and over again. Every spring Corporate Counsel conducts a survey of the go-to law firms for America's biggest corporations, feeling a bit like the characters in the Bill Murray movie "Groundhog Day." For the past six years, the same marquee firms have topped the list with reassuring regularity.

But there were a few problems. For one thing, we realized that our methodology needed a tune-up. For the past few years, we've asked law departments to name their seven top firms in four different practice areas. But some departments didn't want to offend their firms, or had trouble playing favorites by limiting their top picks.

So this year, in the hopes of getting more comprehensive data, we tried a more objective approach. We combed through public records -- court papers, filings, etc. -- to tally which law firms were being used by the Fortune 250. And guess what? Despite the change in methodology, the same Am Law 200 law firms topped our lists of the most-mentioned.

______________________________________________

Public records helped us track down the go-to firms for America's biggest companies

Jill Nawrocki

August 20, 2007

When the results of our sixth annual Who Represents America's Biggest Companies survey came in this summer, many of the same names landed on top. Take the San Jose, Calif.-based networking giant Cisco Systems Inc. In 2005 its most-used corporate transaction firm was Fenwick & West. In 2006? Fenwick & West was on their list again. What about defense contractor Lockheed Martin Corp.? In 2005 the Bethesda, Md.-based company named King & Spalding as the transactions firm that it turns to most. And in 2006? King & Spalding was still number one.

In a way, the similarity in the results came as no surprise. What struck us in the past was the consistency of our "most mentions" from year to year. "There's no real reason to move elsewhere, and there's risk involved with moving on" to other firms, says Rees Morrison, a law department consultant at Hildebrandt International in Somerset, N.J. Companies, he adds, "need these relationships, [and] most law departments stick with the partner and the firm they trust."

Still, we were intrigued by the findings. We changed the methodology for the survey this year and were curious to see how this new approach would affect the results. In the past, we asked general counsel at the Fortune 250 to list the seven firms that they rely on most for litigation, corporate transactions, labor and employment, and intellectual property. But corporate counsel are a discreet group, and many were reticent to name the firms that top their speed-dial menu.

This year, in search of a more complete data set, we combed through state and federal records to see which law firms corporations were actually using when it came to commercial law and contracts litigation, corporate transactions, employment and labor litigation, and IP litigation and patent prosecution. We tallied the number of mentions each firm received and compiled our new list. Keep in mind that, in order to appear on the charts in commercial law and contract litigation, and labor and employment litigation, firms needed to appear in at least two lawsuits. But because fewer firms appeared when we examined documents for corporate transactions and patent filings, we included every firm named in those areas.

Our new system, though improved, isn't bulletproof. We realize that much of what goes on in legal departments never sees the inside of a courtroom, so our emphasis on litigation and court filings inevitably limits how many times certain firms appear. Our data sources, which survey all federal courts, don't cover every state. And we don't make any distinctions between firms that may have been hired repeatedly and firms that are preferred providers. But as a trade-off, we have more data for more companies -- and hence, a more complete picture of corporate America's go-to law firms.

Despite all of that familiar faces dominate our listings. Chicago-based Kirkland & Ellis tops the commercial law and contracts litigation chart, and New York­-based Skadden, Arps, Slate, Meagher & Flom, which has appeared among the top two corporate transaction firms from day one, led the pack again this year. Davis Polk & Wardwell was second. Littler Mendelson won the nod when it came to handling the most employment and labor matters, with Ogletree, Deakins, Nash, Smoak & Stewart and Morgan, Lewis & Bockius tied for number two. Fish & Richardson, Banner & Witcoff, and Hogan & Hartson tied for the top spot for intellectual property.

There's a good reason for this consistency, say consultants and in-house lawyers at blue-chip companies. When it comes to high-profile matters, it's all about outside counsel's track record and the firm's relationship with the law department.

At General Electric Co., for example, vice president and senior counsel of litigation and legal policy Alexander Dimitrief says his team relies on the same select group of law firms and partners. "It's more than just familiarity with the company. The lawyer demonstrates a certain grasp of strategy and the image you want to project," Dimitrief says. "They know what makes [us] tick." (For employment and labor litigation, for example, GE uses Dinsmore & Shohl; McCarter & English; Ogletree, Deakins; Quarles & Brady; and Spencer Fane Britt & Browne.)

While GE may be sticking with the firms it knows, some companies don't automatically hire the firms that everyone else relies on. Take, for example, Pfizer Inc. Our data show that the New York-based pharmaceutical company uses a lean roster of firms for corporate transactions that don't appear at the top of our charts -- Cadwalader, Wickersham & Taft; Dechert; and Fiddler, González and Rodríguez.

General counsel Allen Waxman says he doesn't necessarily look for big names -- he looks for big ideas, and firms that might go against the grain. "Will [a firm] bring a unique perspective on a new matter?" Waxman asks. "To say, 'I've done this a million times and here's a model' is great. But I'm interested in how you're going to handle this particular matter."

______________________________________________

Eight of the 'Fortune' 250 relied more on inside lawyers than firms for some practice areas

Jill Nawrocki

August 20, 2007

When Maura Abeln Smith joined International Paper Co. as its general counsel in 2003, she was shocked by how much the Memphis, Tenn.-based corporation was spending on its legal department -- from operating costs to outside counsel fees. Four years after taking the helm, Smith says she has slashed her department's spending by 54 percent, and about half of that savings can be attributed to bringing more work in-house. (Smith declined to specify the exact dollar amount.)

How did she do it? She streamlined the department by cutting back on intellectual property and environmental attorneys, then hired additional lawyers in growing areas such as securities and finance. At the same time, she farmed out less work to outside counsel and asked more from her own attorneys.

Smith is not alone. Our Who Represents America's Biggest Companies survey may be all about the law firms: the marquee names that general counsel turn to for commercial law and contracts litigation, employment and labor litigation, intellectual property and corporate transactions. But in the course of our research, we also found a select few in the Fortune 250 that, instead of looking outside for legal help, are actually turning inward.

Our research found that eight companies on the Fortune list (see chart, below) rely on their in-house teams for a substantial part of their legal work. We came across this figure with the help of data services that comb through court documents, public records and Securities and Exchange Commission filings. As part of our study of which firms the Fortune 250 companies use most often, our researchers found that in 2006, eight were actually using their own in-house attorney teams more often than any single outside firm in at least one of the four practice areas we examined.

The pool is small, but the results are big. Some GCs say that by bringing work inside, they have been able to recruit top talent and keep hires happy, all the while reducing turnover. Others, like Smith, have found that bringing work in-house is actually cheaper. James Wilber, a principal at the consulting firm Altman Weil in Newtown Square, Pa., says that his firm's most recent survey of CLOs in 2006 showed, for the first time in several years, an uptick in in-house hires, partly due to this in-sourcing phenomenon. "The perceived value of the law department has increased in the minds of CEOs and top company officers," he says. "Companies [are realizing that they] need lawyers."

Smith arrived at International Paper four years ago and immediately saw the need to cut costs and strategically increase staff. So she followed the lead of her old boss, the former general counsel of General Electric Co., Benjamin Heineman Jr., and brought top-notch talent in-house, including a veteran attorney who specialized in securities issues and another who was an expert in executive compensation. Then she streamlined her direct reports from 12 lawyers to just three, and reorganized the legal department. She hired hands-on litigators from outside firms and moved several of International Paper's existing litigators into other areas like global policy management. She also downsized practice groups that saw less regular business, like intellectual property. In all, Smith's department shrunk from 75 lawyers to 62 (part of the loss resulted from a move from Connecticut to Tennessee).

But Smith didn't just change staffing in-house, she cleaned up International Paper's outside counsel roster too. She slashed more than 200 firms from the list, cutting it to just 42. While her team now handles nearly all of the company's business contracts, environmental law, regulation and compliance, global sourcing, securities and corporate financing matters in-house, the department still uses outside counsel for antitrust and big acquisitions. And while the firms were resistant to change early on, she says they've gotten used to it.

There's more to bringing work in-house than burnishing the bottom line, though. At Continental Airlines Inc., doing so has had a positive effect on lawyer morale. Since the company began in-sourcing more of its work ten years ago, just two of the Houston-based airline's attorneys have left for job offers elsewhere. "The people we bring in are used to working hard," says Jennifer Vogel, Continental's general counsel. "They need variety and sophistication of work, and I focus on giving attorneys that exposure."

To attract law firm partners and senior associates -- those who don't need much training or direction -- Vogel moved several practice areas, including technology, intellectual property and tort litigation in-house. Then, using outside firms as a hiring pool, Vogel practically doubled the size of her department to 21 lawyers. She says that attorneys from outside firms were eager to come in-house and stay there because she promised them real work.

The transition took several years to complete. "It does take a bit of convincing senior management to bulk up the [department]," she says. But in the end, she says, the move has resulted in a seven-figure savings and closer ties between the legal department and the company.

At another company, the lure of hands-on, in-house legal work has become a recruiting tool. Joanne Bober, general counsel of J.C. Penney Company Inc., says she makes a point of hiring only "lawyers who want to be lawyers."

At Penney's, the 46-attorney legal team handled 38.5 percent of its employment and labor litigation and 26 percent of its commercial law and contracts litigation in-house in 2006. The majority of the retailer's litigation is staffed by company attorneys. Bober's team also handles most of the real estate, corporate benefits, operations and tax matters in-house. The department has even done away with a preferred providers list, instead opting for requests for proposal on the relatively rare occasion when it needs to hire firms for nonroutine work, like intellectual property matters.

Bober says it's more than savings she's after -- it's passion. "Oftentimes when a lawyer is leaving a firm to go in-house, they think they're going to manage people doing what they love," she says. "We don't want lawyers who go in-house to give up being lawyers. This is a place they can continue to do work [like they did at firms]."

______________________________________________

Christopher Birkett, Jesse Rothman, and Britney Sommer

August 20, 2007

How did we find out which law firms represent America's largest corporations? We did the research. In prior years, we asked the general counsel at the Fortune 250 to list up to seven primary law firms for each significant practice area: litigation, corporate transactions, labor and employment and intellectual property work. But this year, seeking more complete data, we turned to public records to determine which outside counsel were used by America's biggest companies in 2006. We looked at the areas of commercial law and contracts litigation, corporate transactions, labor and employment litigation and intellectual property.

To find the most widely used firms for litigation involving commercial law and contracts, employment and labor and intellectual property (which also included firms involved in trademark and copyright suits), we turned to Thomson West's Litigation Monitor, which compiles information about lawyers, law firms, roles, representation and parties from Westlaw documents. Cases and opinions include federal circuit court dockets filed in the U.S. Court of Appeals; federal district court dockets on active and inactive civil and criminal cases; and federal case law decisions from the U.S. Supreme Court, courts of appeals, former circuit courts, district courts, bankruptcy courts, former Court of Claims, Court of Federal Claims, Tax Court, related federal courts and military courts. At the time of our research this past spring, the database also contained information on 24 state dockets, although law firms are identified in only 14 of those states. Of those, nine did not cover all counties in the state.

We searched patent and trademark filings at the Patent and Trademark Office to find which firms represented the Fortune 250 for patent prosecution. (Firms used for IP litigation and patent prosecution are combined in the IP column.) For corporate transactions, we turned to Thomson West's Deal Monitor, which contains legal representation data for registrations, mergers and acquisitions. Thomson West compiles information about securities transactions, issuers, underwriters, lawyers, law firms and their respective roles.

Firms had to pass a minimum threshold to earn a spot on our chart. They had to be mentioned in at least two suits in 2006 to get a spot in commercial law and contracts, employment and labor and intellectual property litigation. For corporate transactions or intellectual property patent prosecution, we included every firm named in the records we searched.

We collected data for 220 companies in at least one practice area. Where we do not have data for a company, we noted "N/A" to explain that the data was not available or not applicable. Law firm names have been shortened for space