Appendix B

Library Business Case

Business Case for a Managed Program
for Legal Research and Writing

Presented to
Members of the Expanded Staff
Office of General Counsel
ABC Corporation

Prepared by
The Operations Team
Office of General Counsel
ABC Corporation

2003

Executive Summary

The purpose of this business case is to recommend a managed program for legal research and writing for the ABC Corporation Office of General Counsel (OGC). The objectives of this program include:

• Reducing overall spending of the OGC on research and writing (estimated at $7–9 million annually) while maintaining the quality of work
• Making budgeting easier by using the fixed-fee services of a specialized research vendor
• Avoiding duplication of work by storing existing research memoranda in an electronic database

The program has three components. Due to the potential for immediate savings (up to $2.25 million annually), the Operations team recommends adopting all three components now. They are:

1. Establishing a business relationship between the OGC and a vendor that specializes in legal research and writing
2. Creating the role of “research director” and making that person responsible for managing the OGC’s research agenda
3. Developing an electronic database that will house OGC work product and make it available for re-use

If we do not rely on software already owned by OGC for the third component, then the Operations team recommends delaying that step for 1 year due to the cost of purchasing new software.

Background

Research is the bedrock of legal advice. It is a competency that should be managed like any other element of practicing law. Unfortunately, most corporate law departments do not take advantage of current best practices. In-house attorneys, paralegals, and their assistants cannot research and write on all the issues they encounter daily. Moreover, heady law firm costs vis-à-vis the inexperience of junior attorneys who do most of the research and writing at those firms make it necessary to explore better avenues.

On the basis of this idea, the Operations team researched industry practices and talked to members of the OGC to arrive at a description of how legal research is handled. At ABC Corporation, the current process for assigning research projects is as follows:

1. Telephone discussion of research need between law firm partner and in-house attorney
2. Conference(s) between law firm partner who will manage the research and law firm associate(s) who will conduct it
3. Hours of research and writing by associate(s)
4. Review of draft memorandum or brief by law firm partner
5. Revisions and possible second review by partner
6. Delivery of final document to in-house attorney

All the time that the law firm commits to this process is billed to OGC. Invoices also include overhead costs that the firm can pass along—photocopies, long distance phone calls, postage, and computer-assisted research (a capability that we already have). In addition, we may not receive copies of what law firm attorneys write as an outgrowth of their research, raising the question of how we assess the efforts that undergird our representation—groundwork that is not cheap.

For example, from June 2002 to December 2002, a sample of 14 OGC attorneys approved invoices containing roughly $524,985 for legal research and writing.¹ It seems likely, then, that the entire OGC (80-plus attorneys) spent $7–9 million for the year on those tasks alone. This is consistent with industry reports suggesting that 6–20 percent of a corporate law department’s outside counsel expenses go to research and writing.²

Discussion

Legal Research Vendor

Over the last 3 decades, companies specializing in legal research and writing have sprung up.³ Their employees are legal experts, not fledgling associates, and they work in conjunction with networks of independent contractors consisting of law professors and former practitioners who bring years of theoretical amplitude and practice experience. DuPont, Prudential, Motorola, State Farm, and Johnson & Johnson are some of the U.S. companies that have hired a vendor to handle their research and writing needs.

In search of a way to make research management part of OGC’s aggressive plan to reduce outside counsel costs in 2003, the Operations team began talking to a pair of these vendors. Their presentations and third-party acclaim of their business model led to the consideration of a long-term relationship with one or both of them as a cheaper alternative to outside counsel. In time, this idea became part of a larger plan to make legal research and writing a process that could be unbundled (to some extent) and managed, resulting in significant savings. According to our inquiries, California-based Legal Research Network (LRN) and Minnesota-based Legal Research Center (LRC) seem to be the industry leaders.

These vendors use a different process than outside counsel. After an initial call to define the project, the vendors develop a blueprint for the proposed research and quote a price. The price varies by number of jurisdictions, number of legal issues, tone of the final memo (objective versus persuasive), turnaround time, and specialty area. Research is done according to client specifications and delivered via email, fax, or overnight carrier. Some projects can be completed within 48 hours. More complex assignments take 10–14 business days. The vendors prefer to collaborate with a company’s outside counsel, but, in some instances, they may substitute for legal research normally conducted by in-house attorneys and paralegals (see Figure B.1 for a map of the research process).

Figure B.1 Research process

The benefits of a relationship with one of these vendors are conspicuous. The biggest benefit is the potential savings. As a test, the Operations team hired a vendor to write a memo on an issue that a law firm had researched in 2002. The firm’s memo cost $4,200; the vendor’s price was $3,500 (a 17 percent savings). For two other projects, OGC paid law firms $3,991 and $5,600; the vendor quoted prices of $2,150 (47 percent savings) and $2,400 (58 percent savings), respectively, to do the same work. Several sources indicate that using a research vendor can save up to 25 percent of a law department’s research budget,⁴ which could work out to savings of $2.25 million a year for OGC. Table B.1 summarizes other benefits.

Table B.1 Other Benefits of Using a Research Vendor

The General Counsel Roundtable reports the following feedback from its members on their use of research vendors:

• Some uneven experience with the vendor, but members note that its services improve as the relationship lengthens.
• Vendors excel at 50-state surveys and employment topics, but their work on tax issues is less satisfactory.
• Based on quantitative analysis of risk and cost data, the net benefit of engaging a vendor is positive.
• Nearly all members currently using research vendors recommend their services.⁵

Research Director

The OGC can reap savings, take advantage of internet-driven trends, and enhance the law department’s work by assigning central responsibility for legal research management to an in-house research director. The duties of the research director would include:

• Advising OGC attorneys on the most cost-effective avenue for completing research projects
• Consulting with outside counsel on significant research and writing assignments
• Managing OGC’s relationship with the research vendor
• Incorporating work product into a knowledge database
• Training others to use the database
• Using knowledge management (KM) principles to create an information-rich culture in the OGC

Other companies (e.g., the Xerox Corporation) have created similar positions and have been pleased with the results. Obvious benefits include:

• Realizing immediate savings
• Having a central contact who can explore methods of using technology to reduce legal research costs and manage relationships with legal research and writing vendors
• Developing legal research and writing as an area of in-house expertise

Knowledge Database

Any research vendor would give all the documents it writes to the OGC. With these added to memoranda written in-house or by outside counsel, we would be able to create a knowledge database. Then, when research is needed, we or our law firm partners could search the database for an existing memo to adapt, which might eliminate the need for new research. Table B.2 summarizes the benefits of this system.

Table B.2 Benefits of the Knowledge Database System

We could create this database at any time through existing technology or at an additional cost from a research vendor. While a database is a goal of this business case, additional cost–benefit analysis will determine the most appropriate method to establish it.

Research Process

Ideally, OGC attorneys could assign some issues to the research vendor via the research director and use the results to form a legal opinion. This method is especially useful for routine matters and “lay of the law” questions such as a 50-state survey. Other matters are too complex or sensitive for this type of disposition. Outside counsel will need to remain involved in these matters, but we can stipulate that the law firm will direct the “pure” research—defining terms, analyzing states and cases, and discussing options—to the research vendor. The vendor would then return a summary of the research findings to outside counsel, who would use those findings to inform their opinion to us. Figure B.1 illustrates the process.

Challenges

To make this program work, some aspects of our current model will have to change:

• Unbundling, at least so far as research and writing are concerned, will have to become a way of doing business.
• OGC attorneys must be willing to share all research needs with the research director and frame research questions clearly.
• Outside counsel must be willing to work with the research director and accept the work of the research vendor.

Nevertheless, the opportunity to save the OGC up to $2.25 million a year argues in favor of adopting the program.

Conclusion

On the basis of this discussion, the Operations team recommends:

• Establishing a business relationship between the OGC and a vendor that specializes in legal research and writing
• Appointing an OGC research director to manage the department’s research activities
• Developing a knowledge database to house work product written for OGC by the research vendor and outside counsel alike

The research director will lead OGC efforts during the inaugural phase and will remain an important advocate for a first-rate research process beyond that period.

The benefits are clear. The virtuosity of the experts available to the research vendor will be a welcome addition to the OGC’s team of partners as it delivers high-quality work. Outside counsel can devote less time to research, which is not its core competency, and more time to the tasks it does well. Using previous work product from the knowledge database will curtail duplication and keep us from losing legal knowledge when our teammates move on to different demands. Finally, the OGC can trim as much as $2.25 million off its cost of doing business—a feat that upholds our standard of accountability and reinforces our role as advisors, experts, and leaders.

Endnotes

  1.    We arrived at this estimate by adding line items in paid OGC invoices that were clearly associated with research and writing. The actual amount spent is undoubtedly higher because some invoices were not reviewed and others were too esoteric to make research costs identifiable.

  2.    Robert L. Haig, ed., Successful Partnering Between Inside and Outside Counsel (Eagan, MN: West Group, 2000), § 19:2.

  3.    Lisa Stansky, “Going Outside for Legal Research,” National Law Journal, August 26, 2002.

  4.    Haig, Successful Partnering, § 19:2; Mark Ohringer and Bill Moss, “Legal Knowledge Management Yields Corporate Rewards,” Metropolitan Corporate Counsel, December 2001; Krysten Crawford, “Finding a Way Out of the Pyramid,” The Recorder, July 22, 1996.

  5.    General Counsel Roundtable, Compendium of Cost Savings Tactics (Washington, DC: Corporate Executive Board, 2002).