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How to Make the Case for a Smaller Law Firm to Your Board

T he list of reasons why small law firms offer big advantages is well known — this is especially true for businesses that are mid-sized or emerging. But here’s a quick review for in-house counsel when their businesses are facing litigation and need help from outside counsel.
With a smaller law firm, seasoned lawyers are the norm, rather than the associates who typically handle day-to-day business for big law firms. The attention given to the client is second to none. So, relationships between the law firm and general in-house counsel tend to be closer. Then, of course, there is the matter of fees, which tend to be much more reasonable.

With all these advantages, why would a client opt for big law?

Let’s say a small law firm has established its credibility with a long track record of great work. The relationship between in-house counsel and the partners is solid. But one day, the client says, “Sorry, we have to go with the big guys on this one.” What does that mean? Is it a rejection of all the hard work and success? Does it erase the great progress you’ve shared over the past few years? Not really.
There are a number of reasons why a client might go big. For instance, there is the matter of self-protection when a major audit is in order. If something goes wrong, no one can say it was because a small law firm was chosen for this arduous task. Or, perhaps a case may be the subject of intense national scrutiny. For public relations alone, the choice of a larger law firm to handle it may be most prudent, especially when internal counsel has a board of directors who must support the rationale.
When such contingent factors come into play, it is no reflection on the smaller firm or general counsel and, for the most part, no threat to the established relationship. In fact, small firms have a vital role to play in cases such as a large merger or an audit because they can bring the big law firm up to speed on day-to-day information to which the larger firm won’t have access.

When it’s best to bet on David rather than Goliath.

There are cases where trust in the relationship outweighs all other factors. For example, I represented a former chairman of a bank. The bank sued my client for losses it suffered on Small Business Administration (SBA) loans after the Great Recession of 2008. The bank had a board and an SBA loan committee — both of which approved the loans. Rather than looking at its own culpability, the bank sued the former chairman and president. Two of Chicago’s large law firms were recruited to represent the bank, its board members, and its loan committee members. Our lawyers walked into the courtroom every day and faced an army of lawyers from multiple firms; even the judge commented about the bank’s legal costs.
My firm litigated the case in state court and won, but we were denied legal fees. The bank appealed its loss, while we appealed the denial of fees. My client ran out of money long before the case went to trial, but we did not quit. He died tragically at the age of 65, shortly after the trial court’s judgment, but before the appellate court rendered its decision. We were owed seven figures by that time.
The appellate court affirmed the exoneration of my client and reversed the decision denying our legal fees and sent the case back to the trial court for a determination of our entitlement to — and amount of — legal fees. After the court determined we were entitled to fees, the bank agreed to settle the matter. This occurred shortly before the court determined the amount of legal fees to be awarded. The family and widow were gratified by the outcome. Although we went up against two large law firms that had a client with immense resources, after more than five years of this ordeal, we won.

The future is starting to favor the Davids, but don’t write off the Goliaths just yet.

Emerging trends seem to lean toward mid- to small-sized law firms. The 2009 “Bloody Thursday” that kicked off major layoffs at some of the biggest US law firms brought with it a demand for lower fees. Of course, this opened a white space opportunity for smaller, entrepreneurial firms that could deliver more for less. Not only that, but because of technology, some of the advantages that once favored bigger firms have evaporated.
The giants once owned the biggest libraries and best information. But now, thanks to the digital revolution, small and big alike have access to the same data. Keep in mind, smaller firms tend to be more invested in their clients. The partners are responsible for the success or failure of their business; this goes further than just filling out a time sheet for hours. A concern with cost efficiency is part of their DNA. But as for the Goliaths, Basha Rubin put it best in an article for Forbes:
“I’m not arguing that all big law firms will disappear entirely. Why should they? Many provide unparalleled service... they will continue to make sense for the biggest deals. The next time I merge my multibillion dollar corporation with another multinational multibillion dollar corporation, I certainly intend to hire one.”

What are the takeaways for in-house counsel?

Smaller firms tend to be the ones with their hands on the pulse of the business. They are an invaluable resource to in-house counsel and larger law firms who may need to be brought up to speed to prepare for litigation. Here are a few recommendations when presenting your case to the board:
  • Keep the outstanding small firm that has worked so hard to win your business;
  • Remind them when an audit comes up or a case with national media buzz, that leaning on the big firm is simply a matter of self-protection — not a dismissal but a fact of life in business; and,
  • Promote the great work of your smaller partner law firms to your board so that they can see the value.

Most importantly, it’s essential to remember that regardless of the size of the firm, business, technology, and culture are in a state of constant evolution — and the best partners are the ones who keep pace.

The information in any resource collected in this virtual library should not be construed as legal advice or legal opinion on specific facts and should not be considered representative of the views of its authors, its sponsors, and/or ACC. These resources are not intended as a definitive statement on the subject addressed. Rather, they are intended to serve as a tool providing practical advice and references for the busy in-house practitioner and other readers.