Ilta09 Globalization Presentation Loc J Bennitt

How Globalization Impacts Law Firms Working for Global Legal

Departments

August 27, 2009

Jane Bennitt, Baker Robbins & Company, [email protected]

President of the LEDES Oversight Committee

Globalization?• The mandate to e‐bill for clients located outside of the law firm’s home country

• Law firms having operations beyond their home country

• Law departments having operations in multiple countries

• The impact of the world’s economy

How E‐Billing Went Global

Early 1990’s – In the USAuditing Ruled • Insurance Companies early adopters• Invoice sent to third parties for review• Concentrated review of

– Time spent on services provided– Cost – Appropriateness of charges

Result• Heavy Adjustment of Invoices• Delay in Invoice Payment

Late 1990’s – The Beef“You Charged How Much?” by Debra Baker, ABA Journal, February 1999, p. 20

“Insurance defense attorneys contend that auditors –eager to prove their worth to the companies that hire them – randomly slash bills, generally by a standard 10 percent, and make arbitrary judgments about the services lawyers provide impeding their independent judgment. …Typically auditors scrutinize law firms that charge for more than one lawyer doing the same task, bill lawyer time for work a non‐lawyer could do, or increase the number of hours billed by changing lawyers midway through a case. While the questions raised during auditing may be appropriate in some situations, lawyers say the guidelines lack flexibility and fail to take into account each case’s idiosyncrasies. We seem to be in this immovable position, and we’re not finding any solutions. Whatever side this comes down on, we as a profession have got to come up with some innovative solutions. “

Late 1990’s – Law Firms Fight Back!“Firm Quits Client Over Outside Auditor” by Anna Snider, lawnewnetwork.com, 2/25/99

“After … cut more than $100,000 from invoices totaling $400,000, the firm decided it was no longer worth handling cases for the client … and made arrangements to send back 400 open matters.”

Late 1990’s – Law Firms Fight Back!“Advisory Opinions Say “NO” to Outside Bill Auditing”, by Joseph W. Ryan Jr., Litigation News, September 1998, Vol. 23, No. 6

“State bar associations in KY, FL, LA, UT, SC and PA have already [issued opinions] … Other states are also expected to issue opinions in the near future. To date, only MA ethics committee has held such disclosure to be permissible.”

The NC and SC opinions enacted were the most restrictive.

E‐Billing is BornMid‐Late 1990’s

The Evolution of E‐BillingIdea: Provide data that underlies invoice • Receive invoices electronically• Standardized format• Flat file structure, very few data elements• Leverage emerging technologies

Invoice file not intended to represent the financial transaction

Challenge: Devise platform in accordance with confidentiality requirements

E‐Billing is Born• Original UTBMS Codes set forth in 1995

• First e‐billing format, LEDES 1998 in 1998, quickly revised in 1999 and named 1998B

• Early systems allow for review of invoices by law department staff, restrict access to data by vendor staff– Confidentiality concerns no longer an issue

E‐Billing started as

US Law Departments US Law Firms

Mid‐1990’s

Global Considerations

None

E‐Billing Growing PainsIssue‐ Format did not support taxes on legal fees

‐ Format did not support instances where the client paid less than 100% of the bill

‐ If adjusted line items were taxes, …?

‐ AFAs came into vogue

Solution‐ Jerry‐rigged UTBMS codes or LEDES 2000

‐ ???

‐ ???

‐ ???

And at the Law Firm…• First requests to e‐bill• System features and procedures were very confusing• Submitting first invoice was huge hurdle• E‐Billing responsibilities were handled by the Relationship Partner’s Admin

• Only 1 or 2 people at firm knew how to use system to submit invoices

• Client and System documentation distributed only to users

• No documented firm‐wide e‐billing procedures

E‐Billing Expands Beyond the USCirca 2001

The Evolution of E‐BillingLDs and CLOs finally had control of their legal spend• They knew what they were spending, who they were spending it on and could understand the services provided by OC

• Automated processes allowed for readjustment of workflows

• No more lost invoices; firms getting paid• Savings from replacing checks with ACH payments• Recognized need to run as close to 100% of legal expenses through system to take advantage of the controls and advantages provided by the system

The Evolution of E‐Billing

New System Features

• Minimal matter management to run EB increased to support reporting

• Canned reports provided

• Timekeeper and Rate Checking introduced

Law Departments Law Firms

E‐Billing Expand


Not really an issue yet

E‐Billing Growing PainsIssue‐Multiple taxes on line items‐ LEDES 2000 invoices rejected because taxes on line items did not equal to tax on invoice

‐ Different TINs depending on province where service provided

‐ Currency issues

‐ If adjusted line items were taxed, … ?

Solution‐ Combine all taxes into one tax amount

‐ Allow for tolerance in electronic rule

‐Multiple instances of the same law firm with different TINs; separate invoice submissions for each TIN

‐ Invoices submitted and paid in USD

‐ ???

And at the Law Firm…• E‐Billing not new to (US) firms• Using multiple systems• Need to figure out how EB is different for each new client• E‐billing responsibilities were handled by the Relationship Partner’s Admin• Pockets of people at firm know how to e‐bill, but knowledge is specific to

a client’s system• Client and System documentation not centrally saved• No documented firm‐wide e‐billing procedures• Generally, Law Firm system features poorly executed• Timekeeper and Rate Checking increased firm overhead necessary to

support system• Difficulties tracking invoice status and payment

Clients Request• Matter management capabilities• Multiple levels of invoice review• Timekeeper and rate checking• Ability to enforce approval authorities• Budgeting and case assessment• Elaborate electronic rules checking of invoice submissions• Ability for law department to initiate payments to law firms• Time tracking and submission for in‐house counsel• Ad hoc reporting capabilities• Appeal functionality

The Expansion ContinuesCirca 2002/2003

The Evolution of E‐BillingMore Law Departments begin to e‐bill– Many previously did not have any means to track matters

• More system integrations established• More matter management tasks for all users• More need for electronic invoice file to represent the financial transaction

• Steeper learning curve; training very important• Systems accepting only LEDES 98B• Payments largely originate from a single central location and A/P system

• Emergence of law firm e‐billing administration tools


E‐Billing Expands


Slow understanding that things are different (particularly in the UK)

E‐Billing Growing PainsIssue‐ VAT requirements ‐ Invoice adjustment

‐ Requirements to recoup VAT (if allowed)

‐ Currency Issues

‐ Invoice submission format

‐ Global firms

‐ Help Desk staffing challenge

Solution‐ Also submit paper invoice‐ Not allowed on invoices with VAT

‐ Don’t recoup VAT

‐ All invoices submitted in USD

‐ LITIG group works with LOC to develop LEDES 98BI Beta

‐Multiple instances of law firm for each country/TIN

‐ Reliance on email, expanded hours

And at the Law Firm…(In the UK)• UK firms very slow to come on‐board for e‐billing• Lots of discussion and study on what they were being requested to do• LITIG group at the forefront of organizing a collective response(In the US and Canada)• Using multiple systems• Recognition that EB represents a big effort by and expense to the firm• One‐off instructions driving them crazy!• Lots of manual editing of invoice files required• Tracking invoice status and payment becoming an issue • Only a few firms beginning to establish e‐billing as an organized discipline

Sidebar: Organizing E‐Billing at the Firm• Identify a lead person for EB at the firm • Identify the systems currently used by the firm• Create teams for each system to assist with training,

troubleshooting and backup• Establish a shared network workspace for all e‐billing‐related

client and system documents, manuals, etc. • Create an e‐billing manual for the firm• Identify one‐off requests and situations being handled

manually; enlist IT to automate solutions where possible• Determine whether a new business intake process is required

to support requests for e‐billing

Sidebar: Handling New Requests to E‐Bill• Read the material provided by the client• If there are questions, meet with the client to confirm the firm’s responsibilities,

expected timelines, and to identify who to contact if problems arise• Determine what this request will cost the firm and investigate associated annual

billing. If an issue, follow‐up with the client• Identify “gotchas”• Set up team and identify who will:

– Handle setup in the EBS– Check initial system information for accuracy– Handle on‐going tasks

• Update time and billing system:– Identify the client as an e‐billing client– Ensure system is set up to properly format entries and apply the client‐required codes– Modify bill templates as necessary– Update unbilled time to comply with the new e‐billing requirements

• Require all LF system users to attend training offered by the client or vendor

Global Law Firms More Prevalent“The Global Expansion of Law Firms: An Update” by W. Scarborough and L. Budlong, Thomson West Practice Innovations, Volume 4, Number 2, July, 2003

“Since the early 1990s, the legal and business press has chronicled the diminished relevance of national borders, the rise of megafirms based in the United States and the United Kingdom, the decline of regional firms, and the overall consolidation and internationalization of the legal industry.”

And at about the same time…Circa 2003/2004


• Mandate to e‐bill issued to global IP Associates

• Integration with IP management systems


E‐Billing Expands – IP Added

Global Considerations• Law Departments understand that e‐billing is just not possible for some IP associates

• Some currency conversion– Largely requesting submission of invoices in USD

–May be paying in other than USD

E‐Billing Growing PainsIssue‐ Non‐law firms involved; no time and billing software, never heard of LEDES

‐ Technology limitations

‐ Need for 24/7 availability of system and Help Desk

‐ Language issues‐ Currency issues

‐ UTBMS Codes

Solution‐ Other invoice submission options

‐ Provide alternative to electronic bill submission if no web

‐ Expand system architecture, hosting and support

‐ Offer multi‐lingual interface‐ Allow for submission and payment in other than USD

‐ In 2007 LOC ratifies Patent and Trademark Code Sets

And the IP Associates…• Did as requested

Law Departments very pleased

by success of IP rollout

Clients Request• Features to support global e‐billing including– Better tax support– Multi‐currency functionality– Multi‐lingual support– Ability to “proof” taxes charged

• Enhanced matter management functionality• AFA support• Better reports• Ability to track savings associated with “preferred”relationships

Truly Global E‐BillingCirca 2005+


• LDs and CLOs in US with largest legal spend already implemented e‐billing– Products reconfigured to include configurable menu of features (little/no customization)

– Less expensive, so available to LDs with smaller legal spend

• Final version of LEDES 98BI ratified in 2005• LEDES XML E‐Billing 2.0 ratified in 2005• Vendors establish presence in UK and Europe

Seven Key Areas for Focus as LDs Globalize

1. Centralization of legal department organization

2. Visibility into global legal spend

3. Visibility into global legal risk

4. Visibility into global matter/case portfolios

5. Global compliance coordination and standardization at the operations level

6. Coordinated and transparent lines of communication

7. Standardized processes and procedures

Courtesy of DataCert


E‐Billing Expands

Global Considerations• Initially not the same economic pressure to control costs as exists in the US

• Concept of “implementation” expands– First implementers are those with biggest legal spend– Often rolling out EB as a centralized corporate initiative– Matrix organizations/ PAs, BUs, Corp Entities, Geographic locations

– Mostly transactional matters – System configurations more complicated– Involves LD users in multiple countries– Multiple AP systems (20+ not unusual)

Global Considerations• Local, national and regional laws and regulations must be understood and followed– Invoice composition

• Format and content of data transmitted• Tax and accounting laws and regulations

– Invoice file needs to represent nature of financial transaction

– Whose law applies? – Behavior of receiving system

• Data recorded and displayed to system users• Authenticity and integrity of transmission• Data storage and archival • Data privacy

E‐Billing Growing PainsIssue‐ UTBMS Codes

‐ Better invoice submission formats designed to accommodate global requirements

‐ Better tools for LFs to track invoice submissions and payment

‐What are the laws and regulations that apply?

Solution‐ LOC’s Revised Project Code Set ratified in 2007

‐ LEDES XML 2.1 ratified in 2007 leading to redesigned systems which support‐ Multiple TINS per law firm‐ Global taxes‐ Multiple currencies‐ Programmable output of AFA invoices

‐ Closer alignment between vendors and LFs

‐ Education‐ Differentiate between LF and LD obligations

And at the Law Firm…Global Firms• Organize to set e‐billing parameters • Don’t want to submit separate paper invoice in addition to

LEDES invoice file• Larger firms coding their own invoice file outputIn the US• Overwhelmed by requests to e‐bill• Recognize need to organize administration of e‐billing• Matter management tasks considered burdensome• Increased use of law firm e‐billing administration tools

Some LD NumbersIn Altman Weil’s 2003 LD Benchmarking Survey• 7.7% of respondents indicated they use EB and 21.1% said they were evaluating

EB systemsIn Altman Weil’s 2004 LD Benchmarking Survey• 11.8% of respondents use EB and 3.8% said they were currently implementing EBIn Altman Weil’s 2006 LD Benchmarking Survey• 13% of respondents reported using or requiring EB

In ACC’s 2004 Docket Survey • 18% of LD respondents reported using or requiring EBIn the 2005 ACC Docket Survey• More than 25% of respondents reported using or requiring EB

4/2004 : An industry expert predicted, “Within 10 years e‐billing will be used in 50% of corporate law departments”

Some LF NumbersIn LawNet’s 2002 Law Firm E‐Billing Survey, 140 of 151 respondents e‐billed. Of these:• 50% e‐billed for 1‐5 clients• 34% e‐bill for 6‐10 clients• 16% e‐bill for 11‐ 25 clients

In LawNet’s 2004 Law Firm E‐Billing Survey, 67 of 68 respondents e‐billed. Of these:• 36% e‐billed for 1‐5 clients• 44% e‐bill for 6‐15 clients• 20% e‐bill for 16+ clients

In ILTA’s 2008 E‐Billing Survey, • 47.40% use 1‐5 systems • 27.54% use 6‐10 systems• 23.93% use more than 10 systems

– 10 respondents use 25 or more different systems for their clients

The Impact of the Global Economy

The Economic Slide Begins• Hildebrandt’s Peer Monitor Economic Index pinpoints the current decline as beginning in the 4th Q 2007 – Impact not fully felt until 3rd Q 2008

• 2008 articles about first year associates earning $160k raised concerns among GCs

MarketWatch by The Wall Street Journal Digital Network, September 29, 2008, http://www.marketwatch.com/story/us‐stocks‐slide‐dow‐plunges‐777‐points‐as‐bailout‐bill‐fails‐2008929164700

MarketWatch by The Wall Street Journal Digital Network, October 4, 2008, http://www.marketwatch.com/story/eu‐leaders‐promise‐to‐support‐financial‐institutions

MarketWatch by The Wall Street Journal Digital Network, October 6, 2008, http://www.marketwatch.com/story/dow‐ends‐off‐lows‐after‐tumbling‐800‐points

“Iceland is all but officially bankrupt” by E. Pfanner, The New York Times October 10, 2008, http://www.nytimes.com/2008/10/09/business/worldbusiness/09iht‐icebank.4.16827672.html

“Filling in the blanks on plans to rescue banks” by R. Schroeder & G. Robb, The New York Times October 13, 2008, http://www.marketwatch.com/story/global‐efforts‐to‐rescue‐banking‐system‐gather‐force

World Markets – 11/2008 3 Month Change


In‐House Counsel Face New Global Challenges by S. Freedman, New York Law Journal, August 14, 2009

“Although no new claim trends against in‐house counsel have emerged in 2009, the atmosphere is polluted with an unemployment rate of 9.5 percent, liquidity crisis, congressional investigations, collapse of industry giants, massive frauds via Ponzi schemes, regulations to help the planet "go green," shrinking legal departments, pandemics, an explosion of online modes of communication, and new rules for a broad cross‐section of industries.”

Response to Economic SituationBusinesses are fighting to stay alive

Law Firms• Cut expenses to the bone• According to lawshucks.com’s Layoff Tracker

– As of July 26, 2009, over 13,311 people have been laid off by major law firms (5,190 lawyers / 8,121 staff) since January 1, 2008.

– 11,319 (4,260 / 7,059) people have been laid off from law firms in calendar 2009– 569 (229 / 340 ) have been laid off in July

• Deferral of new hiresLaw Departments• Mandates to reduce legal costs

– Implement or retune e‐billing– AFAs (beyond discounted hourly rate or flat fee)– Revisit agreed upon rates– Handle matters in‐house?

The Debate Continues“Two Veteran Lawyers Say Now is the Time for Fixed Fees” by B. Heineman and W. Lee, law.com Aug 24, 2009

“For law firms facing reduced demand and cash flow problems (if not crises), the fixed fee addresses the issues of increasing overhead devoted to the billing process, clients flyspecking bills and demanding after‐the‐fact discounts, and delays in payments and falling realization rates.”

Panel Discussion

PanelistsPatrick Collins, Finance Manager, Allen & Overy, LLPAs Finance Manager within the London office of Allen & Overy LLP, Patrick coordinates e‐billing for Allen & Overy LLP globally and is currently the International Chair for the LOC Board of Directors. Patrick recently led the UK / EU and Governance Sub Committees of the LOC and before that was closely involved in the London‐based E‐billing Law Firm Forum (eLFF) for several years, and recently led the sub group that produced the revised UTBMS Project Code Set.

Cathi Collins, Bridgeway, Vice President, Bridgeway ResearchMs. Collins has been a legal industry consultant for more than 20 years, and has a strong financial and legal background. She has helped hundreds of legal departments improve productivity by leveraging their technology investments. Ms. Collins co‐chairs the College for Litigation Management for CLM and serves on the Board as Secretary of the LEDES Oversight Committee.

Cyndie Cox, Director of New Products, DataCert, Inc.Cyndie joined DataCert in 2006. Prior to joining DataCert, she spent 10 years as the business manager for the UPS legal department which included responsibility for electronic invoicing and outside counsel management. Since joining DataCert, she has worked with corporations and law firms to better understand the challenges of legal operations management in a global community.

Roger Jarman, Director of EMEA Client Services, CT TyMetrix Roger has more than 23 years of experience in professional services, supporting the needs of many global organizations in the manufacturing, distribution, finance and legal industries. Based in the UK, Roger works closely with international corporations and law firms through the implementation and support of Matter Management, eBilling and eDisclosure solutions.

Ilta09 Globalization Presentation Loc J Bennitt

Technology

Transcript of Ilta09 Globalization Presentation Loc J Bennitt