In-House Counsel

Confusing data on the number of law firms typically retained by law departments

By Rees Morrison

Surveys report widely different figures for the number of law firms retained by large US law departments. A low-end metric comes from the ACC Docket, Vol. 27, April 2009 at 18, and the ACC/Serengeti Managing Outside Counsel Survey. That survey found that law departments with more than 10 lawyers used 20 law firms in the United States.

A trio of other surveys, however, makes the collective case for a much higher figure. Data from the past three years suggest five times as many firms used by large law departments (See my post of April 13, 2009: three-year run of about 100 US law firms used, at the median, per department.). That same survey series found in 2005 that in companies with more than $20 billion in revenue, the median department reported using 200 law firms (See my post of Aug. 21, 2005: issues about the absolute number of firms retained.). A third survey, conducted in 2005 and 2006, suggests that 4-10 lawyer departments retained 48 law firms and 11-25 lawyer departments retained 98 (See my post of Nov. 20, 2006: until 25 lawyers roughly every doubling of in-house size doubles the number of firm retained.).

In 2006, a survey of mostly large departments found that the median number of law firms that were paid three-quarters of all outside counsel payments was 11 firms (See my post of March 13, 2007: concentration of spend on firms.). Given the drop off in amounts paid per firm, the remaining quarter of payments might go to well more than 50 firms.

My tentative conclusion is that the lower figure of 20 US firms as a (presumably) median for US law departments of ten or more lawyers is less likely to be correct that the higher figures ? more like 50+ should be the figure. Obviously, the larger the company the more firms it retains; eventually we will have benchmark formula for a typical ratio of law firms used by number of in-house lawyers or total legal spend (See my post of April 18, 2009: FTSE 100 companies average 9 law firms.).

Full post as published by Law Department Management on April 18, 2009 (boomark / email).