Set out below is my seventy (70) item checklist that I use in reviewing outside counsel legal services agreements.
As with any substantive agreement executed by your company, outside counsel legal services agreements are important contracts that need to be properly reviewed. Companies typically spend more on their outside counsel arrangements than on their own in-house law departments. I have reviewed many legal services engagement agreements with outside counsel. In order to systematically cover the multitude of unique issues in a typical outside counsel agreement review, I have (over the years) developed a practical Outside Counsel Legal Services Agreement Checklist. Set out below is my seventy (70) item checklist that I use in reviewing outside counsel legal services agreements:
1. Consider the use of a multi-year (e.g. 3 year) master agreement with separately authorized/ signed statements of work for each legal matter. [ Development of the specific statement of work for each legal matter would address: effective date of the specific legal services matter; confirmation that any conflicts issues have been resolved; names / contacts for applicable engagement & relationship attorneys for each party; and a clear and complete scope of the legal services matter (to include background, objectives, duties, obligations, requirements, tasks, deliverables, schedule, assumptions, your company's responsibilities, budget, staffing plan, statement of work pricing type (fixed price, hourly rates, etc), etc ] 2. Use an ownership/use of legal services work products provision 3. Use a SOX 307 reporting requirements provision 4. Include diversity requirements 5. Consider including pro bono requirements 6. Address conflicts (actual, potential or subject matter) and establish a conflict waivers procedure 7. Address confidentiality of your company information 8. Address attorney-client privilege 9 Address data privacy 10. Add a termination for convenience provision 11. Address publicity constraints 12. Add a document retention provision 13. Address business continuity 14. State governing law 15. Consider a convergence on several preferred outside counsel providers that can provide the full range of legal practice areas in return for discounted rates and volume discounts 16. Consider the use of alternative billing when applicable (discounted rates, volume discounts, cap on annual hourly rate increases, incentive billing, value based billing, performance billing, firm fixed fee, blended rates, etc) 17. Consider risk sharing provisions 18. Consider the use off-shore outside counsel firms by your company and outside counsel 19. Consider the use of e-billing by outside counsel tied to in-house concurrent of matter management 20. Use centralization of outside counsel authorizations by only in-house legal or else resulting invoices will not be valid 21. Use of better outside counsel project management techniques [e.g. statements of work, periodic progress reports (to include an assessment of the current merits of the matter, range of current liability exposure, estimate of settlement value, cost of going to trial, etc), engagement plans, designated engagement & relationship attorneys for both outside counsel and in-house for each matter; etc] 22. Use periodic outside counsel performance assessment / scorecards 23. Use of matter budgets with monthly spend vs. budget vs. progress analysis 24. Use monthly skill vs. task analysis for each matter 25. Use contractual prior approval control gates for outside counsel expenses / disbursements 26. Obtain periodic range of exposure reports from outside counsel for each matter 27. Consider potential use of contract attorneys by your company and by outside counsel 28. Consider the use of actual and virtual secondment of outside counsel 29. Consider use of virtual outside counsel firms 30. Require a monthly write-off hours report from outside counsel 31. Consider adding a provision of free CLE for in-house counsel provided by outside counsel 32. Consider making outside counsel responsible for complying with your company policies and guidelines 33. Require the outside counsel be knowledgeable about your company 34. Require outside counsel (on each invoice) to report monthly professional fees and expenses & disbursements; total year-to-date professional fees; total year-to-date expenses & disbursements; total inception-to-date professional fees; and total inception-to-date expenses & disbursements 35. Require a negotiated contractual budget with each legal matter 36. State that in the event of conflicts between the master engagement agreement and the applicable statement of work, the statement of work will prevail 37. Require that outside counsel discuss potential alternative dispute resolution methods for matters with your company at the outset of a legal matter engagement 38. Set up a one outside counsel lawyer rule for meetings, negotiations, depositions, court appearances unless otherwise agreed to by your company in advance 39. State that your company does not pay for replacement attorney learning time or other ramp-up learning costs 40. Prohibit duplication of effort. 41. Require that charges for outside counsel inter-office conferences be minimized unless discussing meaningful direction or strategy 42. Require run-rate forecasts of anticipated future costs reports on a matter at any time if so required by your company 43. State that attorney fee rates are firm for one year. Use percentage cap (e.g. 3%) on annual attorney fee increases 44. Require additional volume percentage discounts at the end of each year to apply for the next year 45. Require timely monthly reports of accrued but unbilled (pending) charges if so required by your company 46. Require compliance with all applicable insider-trading laws, FCPA, anti-boycott laws, and export compliance laws/regulations 47. Consider the use of a prompt payment discount 48. Consider reasonable charging limits such as no more than 10 hours per day for a given attorney (unless approved in advance) 49. Address how travel time will be handled (e.g. no attorney fees for travel time) 50. Consider requiring: (1) prior approval on air travel; (2) compliance with your company travel policy; and (3) use of company-approved hotels 51. Require timely prior written notification to your company if outside counsel becomes aware that matter budget will be exceeded 52. Prohibit formula billing (e.g. $100 for a letter). 53. Require compliance with equal opportunity, anti-discrimination, affirmative action, etc 54. Consider stating that charges for computer research (Lexis Nexis, WestLaw, etc) are not billable 55. Consider stating that photo copy costs in excess of $XX require prior your company's approval. (Perhaps require the use of your company-approved photo copy supplier) 56. State that non billables include: office supplies, local telephone, per-page fax charges (excluding long distance charges), routine mail, etc 57. Require the use of your company-approved couriers 58. State that there is no alcohol re-imbursement 59. State that there is no overtime transportation for outside counsel personnel 60. Prohibit phone charges at hotel rates 61. Require the use of good judgment on business meals 62. Consider the use of videoconference instead of travel if reasonable 63. Attach a list of all of your company's affiliated entities that are to be covered by the agreement 64. Seek most-favored-customer pricing 65. Use service level agreements (if appropriate) 66. Potentially use an audit rights provision 67. Consider prohibiting your company's responsibility for third-party invoices 68. Address how attorney fee disputes will be handled (via arbitration, litigation, etc) 69. Require that copies of all pleadings, correspondence, memos, etc be provided to your company 70. Include a partnering provision to proactively help discover mutually beneficial ways to improve the outside counsel relationship as well as to discover ways to further enhance communication, innovation, technology improvements, performance, risk-reduction, continuous improvement, and spend / cost savings with outside counsel
The goal of an outside counsel legal services engagement agreement is to facilitate a win-win in-house / outside counsel relationship. This Outside Counsel Legal Services Agreement Checklist is not exhaustive. Every outside counsel engagement arrangement for legal services has some unique aspects that may not be addressed in this checklist. However, if you routinely use this Outside Counsel Legal Services Agreement Checklist as one of several resources when you review a legal services agreement with outside counsel, you will be pleasantly surprised with the large number of substantive, material, risk-reduction, performance-improvement, and cost-savings issues that will be surfaced for proper resolution.