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Firm Cost-Cutting Has GCs Watchful But Not Worried — Yet

By Michele Gorman · 2020-04-06 21:12:48 -0400

Most general counsel aren't overly concerned about potential disruptions to their outside counsel services, even as law firms impose pay cuts and furloughs to reduce the financial impact of COVID-19. But some say their feelings could change if the specific lawyers they trust become unavailable.

Pryor Cashman LLP and Womble Bond Dickinson are among a slew of firms that have made staff cuts in recent days, while Cadwalader Wickersham & Taft LLP is pausing partner compensation distributions and reducing associate and senior administrative staff pay by 25% in response to the novel coronavirus crisis.

The coronavirus has also halted litigation for attorneys, as state and federal courts remain closed to help stop the spread of the virus.

"It worries me, I guess, in the same sense that a slowdown in the economy generally worries anybody," said Eric Tuchmann, general counsel at the American Arbitration Association. "It's not welcome news that you see evidence of this diminished activity in the economy that's impacting individuals."

"But at the same time," he added, the legal field is "resourceful and smart and quick to respond."

Amid the temporary measures some firms have enacted, top corporate lawyers said they are impressed with the responsiveness they've received from their trusted attorneys so far.

Tuchmann is among those who said the firms he relies on have been meeting his needs. Interactions with outside counsel — either for issues that arise in his own legal department or for the cases administered by the AAA — haven't dramatically shifted.

"I haven't had to deal with anybody or any part of a team that we're working with having changed or switched around," he said.

But like other general counsel, he acknowledged that any changes in an established firm relationship could be cause for alarm for in-house departments.

"If somebody they're relying on and they trust is no longer available, I think that would be a concern," he said. "It just hasn't been our experience."

OTC Markets Group general counsel Dan Zinn said he has been checking in with his firms about lawyers' workload and their transition to new working environments.

But so far the changes have mostly been seamless, as his counsel embrace technology — including Zoom, Microsoft Teams and FaceTime — and adjust to participating in conference calls without gathering in teams.

"People have been responsive and have been able to pull the right folks into conversation," Zinn said. "I get worried about that just because I find the communication to be so important, but firms have really come through."

Zinn said he would be concerned if OTC Markets became involved in major litigation and wasn't able to call on its regular firms and key attorneys for assistance.

"When they're scrambling and when they're trying to figure things out on the fly or have people on furlough that they need to pull back, I would just worry a little bit about how that works," he said. "I have faith in the firms that we work with, and so I believe that they would treat us appropriately and handle what we needed to have handled."

General counsel said that across the board, firms have addressed their priorities and needs, which have changed given the unprecedented situation.

In a recent Association of Corporate Counsel survey conducted with in-house lawyers, including general counsel and chief legal officers, more than 10% of respondents said they're outsourcing more legal work to law firms than they normally would.

According to Tuchmann, lawyers are providing support in areas including contract reviews, security concerns, employment issues and regulations that are emerging quickly in various jurisdictions.

"I've seen a very dramatic increase in the resources that are being made available by law firms with information and analysis about where we are," he said. "It's all been very fast; within the few weeks you see a lot of information, a lot of legal analysis on issues that really weren't present just a short time ago."

As a lawyer who is working around the clock during the pandemic, Cedar Realty Trust Inc. general counsel Adina Storch said in-house teams can't act fast enough to keep up with the required work, and that many general counsel are counting on firm lawyers' legal analysis — a valuable resource.

She added that her inbox is "being flooded" with white papers that require attention that she doesn't have because of other issues arising during the pandemic.

Zinn agreed.

"Anybody that has our email address is sending us stuff," he said. "The communication has been overwhelming at times."

He has also been thinking about the potential long-term effects of COVID-19 on the legal industry, and how staff cuts could impede associate development.

"When we think about hiring folks in-house, that might have an impact on what experience we should expect law firm associates to have had before we bring them on," Zinn said.

For now, firms are making decisions in an uncertain environment, Tuchmann said.

"The duration of this is anybody's guess," he said. "But we just all remain hopeful that we'll see some sort of horizon on this."

--Additional reporting by Xiumei Dong, Emma Cueto, Aebra Coe and Mike LaSusa. Editing by Kelly Duncan and Michael Watanabe.

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