"Contract Counsel" arrangements provide small and mid-size businesses with affordable, reliable representation

Many small and mid-size businesses recognize their need for regular legal advice but can afford neither a full time staff attorney nor the risk of unpredictable legal bills from outside counsel. Indeed, the billable hour, that standard of lawyer’s bills, often prevents business owners from seeking advice when they should.

Business owners, looking at the bottom line, resent the fact that they need worry that every call to their lawyer is “on the clock”. Often, lawyers hear, clients are hesitant to pick up the phone to make routine inquiries for fear that they will pay for even the simplest two minute phone call.

It wasn’t always like this. Indeed, the billable hour as the standard way of doing business is largely a creature of the post-war era. It was a Harvard Law School Dean, hired to manage a Boston law firm in the thirties, who determined that modern accounting and office efficiency required marking a lawyer’s time in six minute increments. Prior to that time, attorneys often billed for services in a variety of ways involving time, flat fees and contingencies.

In recent years, the trend has begun to reverse itself, with more and more clients seeking alternative fee structures and lawyers and law firms necessarily accommodating such wishes.

Many start up, small and mid-size businesses could benefit from the consistent, hands on approach of full time counsel. In the past, that meant either the expense of hiring a full time in-house counsel or relying on an expensive, outside law firm, for often necessary but routine tasks such as contract negotiations or document reviews. For many businesses, which need regular counsel but can afford neither a full time attorney nor unpredictably high legal bills, there is a third alternative. Across the country, such firms are turning to so-called “contract general counsel” arrangements which afford the benefits of regular legal advice, the integration of the attorney into the “team” and the financial benefit of a predictable, negotiated fee. When neither the client nor the attorney is constantly watching the clock, the client tends to be more willing to involve the lawyer in the larger picture of the business. Likewise, the lawyer has the opportunity to fully integrate his legal services into the “big picture” of the client’s business plan and goals.

Attorney Vida Harband operates Advanced General Counsel in Tiburon California. As she points out on her website, serving as outside general counsel her office is “able to work closely with [its] clients and provide more hands on service”. Indeed, Harband notes that her initial client meeting is not only intended to learn the client’s legal requirements but “to begin the process of learning about [the client’s ] business to meet [its] goals”.

Typically, under a contract general counsel arrangement, the attorney will agree to dedicate a specific number of hours or days per month to a particular client’s legal needs, often on site at the client’s place of business. During that time the attorney can handle routine legal matters, keep an eye on all of the legal ramifications of the client’s business dealings and be available to the client’s officers and employees for advice and counsel. The attorney also, typically, agrees to be generally available to answer the client’s inquiries by telephone or to attend meetings outside the office with the client. The client, in exchange, agrees to pay a negotiated, monthly fee, typically discounted from the attorney’s ordinary hourly rate. The contract counsel model differs from traditional retainer agreements in that with a retainer, the client pays a set amount up front or over time, but the attorney still bills hourly against the retainer leaving the same “clock watching” phenomenon in place.

In my own law practice, I have established such contract arrangements with multiple clients. The advantages have become quickly apparent. Freed from concerns of constantly mounting legal bills and assured of my regular attention, clients have been quick to integrate me into the day to day operations of their business. In that way, I can spot legal issues before they become legal problems and often point out ramifications of decisions the client might make before they require extra “lawyering”. The clients know that they can rely on my office to monitor their business for the full spectrum of legal issues and, yes, when necessary recommend the need for outside counsel. Like any in-house general counsel, part of what the client pays for with contract general counsel is the ability to recognize when a particular legal specialty is necessary. Even in those cases, however, the client has the comfort of knowing that, as part of his regular duties, the contract general counsel is monitoring the retained outside counsel.

Contract general counsel arrangements are a win/win for clients and lawyers alike. The client has the comfort of knowing that for an agreed upon cost its business is being protected by counsel fully familiar with its business plan and goals. The lawyer, taken off clock and knowing that the client isn’t looking at every conversation as a mounting charge, is freed to fully integrate his legal expertise with the client’s overall business strategy.

As more and more start up and mid size businesses recognize that they can obtain the benefits of in house counsel without the time and dollar commitment of hiring full time staff, contract counsel arrangements and similar alternative time and fee structures will become more commonplace.