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General Counsel, or Outside Counsel? Factors to Consider

The COVID-19 pandemic really played havoc with many businesses, law firms included. Many saw that legal departments experienced challenges when handling the matters that they faced pre-pandemic. In addition, COVID-19 brought regulatory, compliance and employment matters that didn’t exist before the pandemic began. This situation has exacerbated the general counsel versus outside counsel debate.

Florida Trend reports on addressing this dynamic and increasingly complex legal landscape. The issue of whether to rely on an in-house general counsel legal department or retain skilled outside counsel is critical to ongoing operations. The publication askes, Given the complexities, what should a company consider when deciding whether to build or maintain in-house counsel, versus hiring outside counsel?

Here are a number of items to consider when making this important decision.

The choice of in-house versus outside general counsel has historically been boiled down to paying a salary versus a retainer. An in-house attorney or department requires salary and benefits for the attorneys and administrative support. These could be far more than an outside firm’s ongoing retainer.

Years before the coronavirus pandemic, technology drove the practice of law, with the spending to support it. Legal sector IT spending increased, leading to and throughout the pandemic, according to research firm Gartner earlier this year. In fact, that number should triple by 2025. Beyond cost, maintaining hardware and software can burden a company’s IT department. Companies using outside counsel can be confident that the latest technology is in place.without paying for it in dollars or stress. This not necessarily so for general counsel.

Outside Counsel or General Counsel
Outside Counsel or General Counsel
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“Legal departments will increase spending on technology to reduce the dependency on outside counsel, address COVID-19, and satisfy a long overdue need to modernize, digitize and automate legal work,” said Zack Hutto, director, advisory in the Gartner Legal and Compliance practice.

“Even discounting the new pressures brought about by the pandemic, the trend of increased spending on inside counsel is a tailwind for in-house legal technology spending,” Hutto remarked. “Many legal leaders won’t have any scope to further increase headcount or outside counsel spending right now, so they are quite likely to look to technology to maximize the productivity of their existing investments for personnel to serve as general counsel.”

The regulatory, compliance, and employment changes COVID brought are new and quite burdensome to a small in-house law department. However, outside counsel can frequently provide a greater understanding of these matters. They also have the resources to develop insights that are continually refreshed and updated.

As the globe is connected ever more closely, legal expertise can cut across state and even national boundaries. Regulatory or legal matters from another state or country may require an attorney or litigator skilled or licensed in those jurisdictions. The offices or of-counsel relationships outside counsel often have can help bolster a company’s legal footprint.

An in-house attorney’s deep institutional knowledge of the company’s interrelated legal issues is a significant benefit. But forging a relationship with outside general counsel can bring similar benefits. It also can provide a broader scope of services and professionals from the law firm. This also can lend a “fresh perspective” to a company’s operations or the challenges it faces.

Remember that this doesn’t have to be a one-or-the-other binary choice: leverage both in-house and outside counsel can create a blended model that bolsters the strengths of both teams.

Ryan Carpenter serves as Attorney and Managing Director of Carpenter Wellington. Ryan advises clients across a broad set of corporate and commercial matters.