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An In-House Perspective On How The Current Economic Climate Has Changed The Practice of Law

By

Chas Rampenthal General Counsel and Vice President of Product Development LegalZoom.com, Inc.

Brian D. McAllister Senior Vice President, Deputy General Counsel CB Richard Ellis, Inc.

1. How is your company managing to deal with its current legal workload -- and possibly growing workload -- in an economic environment that may be putting pressure?

Brian McAllister (CB Richard Ellis): Even before the financial crisis, our internal legal team was largely self sufficient, cost conscience and, as much as possible, interdisciplinary. We have approximately 30 lawyers in the U.S., with a few more in Asia-Pacific and Europe. In the U.S., with certain exceptions, our field lawyers who handle real estate transactions also handle directly, or manage, litigation related to real estate transactions. We also have lawyers who specialize in litigation, labor, SEC reporting and mergers & acquisitions, but are able to pitch in and handle overflow work from other areas. This has been a key strength in an environment of revenue contraction and cost containment.

As in most legal departments today, we are tasked to do more with less. Where we have seen parts of our practice slow down, such as mergers & acquisitions and real estate transactional work, we have shifted lawyers into areas that have seen demand increase, e.g., litigation and outsourcing. Our outsourcing business, in particular, has been a growth area through the recession, and there we've been able to move work in-house from outside counsel. Our ability to nimbly shift resources where most needed helps reduce legal spend and justify headcount.

Chas Rampenthal (LegalZoom.com): At LegalZoom, our internal legal department has always kept a close eye on outside legal costs. The key to running our department effectively and efficiently is properly assessing when a matter should be addressed internally and when it should be transferred to outside counsel. This philosophy has not changed since I have been General Counsel, and it has worked quite well to date.

The company continues to grow despite the difficult economic environment. In fact, we intend to invest more in the legal department this year than we did last year, and anticipate that this growth will continue in years to come. As an online business, we tackle the same legal issues faced by other e-commerce companies. Our company has always focused on maintaining a high quality in our product offering, no matter the state of the economy, and we continue to do so.

2. How do you expect your outside counsel to react to the changed economic circumstances to help you deal with any of these issues?

Brian McAllister (CB Richard Ellis): Quite frankly, we expect our outside counsel to share the pain. We were surprised at the number of firms that routinely tried to raise rates this past January in the middle of an economic crisis. These requested rate increases came despite the fact that companies across the U.S. were laying off employees, cutting bonuses and paring back salaries. That was a disconnect. Outside of rates, we look for outside counsel to be acutely aware of the need to bill efficiently, only provide the advice/work that is absolutely necessary, and use associates who can most effectively accomplish the necessary work in a limited time. Our radar lights up when we see multiple associates, or very junior associates, on bills. We also look for continuity in the lawyers handling our matters. A law firm that churns through associates is likely to be less efficient because the associates assigned the work will have little or no familiarity with our company and our approach. In addition, we already had billing guidelines in place that establish ground rules for how firms can bill (we use an electronic billing system and tracking database), the types of expense we will cover, and the rates that can be applied for items like telephone, fax, copier and courier expenses.

Chas Rampenthal (LegalZoom.com): Little has changed in our expectations. The slower economy has seen larger firms staffing leaner, and many capable lawyers have decided either to go out on their own or to join smaller boutique and specialty law firms. For businesses, this means a wider selection of attorneys and some flexibility with pricing. If we opt for a larger firm, I expect the matter will be staffed with the right number of qualified attorneys, and that costs will be competitive with other firms. If we select a smaller boutique firm, I find that the attorneys are willing to reach farther to prove their value proposition to potential clients like LegalZoom.

3. Are the current economic conditions impacting how you select outside counsel, and, if so, how?

Chas Rampenthal (LegalZoom.com): LegalZoom has always tried to be savvy in selecting outside counsel for business transactions and litigation matters. We focus on the quality and responsiveness of the specific team with whom we are working than on the law firm's name brand. Of course, there are times when the resources of a major national or international firm are required; in such cases, we will leverage those resources. The driving force is getting the proper "bang for the buck." We prefer to work with law firms and practitioners that are willing to request and receive assistance from our internal legal team. I am a firm believer that when it comes to diligence and discovery, internal lawyers can use their unique company knowledge to take first cuts, and then work with outside lawyers. This teamwork produces highly efficient results.

I expect senior outside counsel to guide me and my team towards appropriate strategies for particular deals or litigation matters, including strategies that reduce the need for outside counsel where expedient.

Overall, our philosophy has not changed materially due to the current economy. We still seek highly qualified attorneys willing to staff teams with the proper levels of experience and to limit overall costs in a way that makes good fiscal sense.

Brian McAllister (CB Richard Ellis): We are increasingly focused on outside counsel decisions that can more effectively rationalize how we apportion work internally and externally, while reducing our cost structure. For example, we are looking at ways to consolidate work currently performed by multiple outside counsel, combined where appropriate with alternative fee arrangements. We're also far more likely to use smaller firms/boutiques for work that might have gone to a larger firm with a more expensive cost structure, particularly for specialty matters. In addition, I think we more stringently review bills and question entries that appear on their face to reflect a less efficient handling of matters than we would expect. Firms that can demonstrate that efficiency are more likely to retain our work and get more assignments as the opportunity arises.

Company Info:

About LegalZoom.com
LegalZoom.com is the nation's leading online legal document and filing service. Co-founded by attorney Robert Shapiro in 2001, LegalZoom.com (www.legalzoom.com) offers a convenient and cost-effective way to take care of common legal needs. LegalZoom service offerings include: Wills, Living Wills, Incorporation, LLC Formation, Living Trusts, Powers of Attorney, Divorce, Small Claims, Trademarks, Patents, Copyrights and more. LegalZoom.com is not a law firm and does not provide legal advice or counsel.

About CB Richard Ellis Group, Inc.
CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world's largest commercial real estate services firm (in terms of 2008 revenue). The Company has more than 30,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. CB Richard Ellis has been named a BusinessWeek 50 "best in class" company and Fortune 100 fastest growing company two years in a row.

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