When it comes to legal representation, it’s not uncommon for companies to utilize outside general counsel in addition to or in place of inside general counsel.
A 2023 report from the Association of Corporate Counsel and legal recruiting firm Major, Lindsey & Africa showed the average legal spend by companies is 53% internal and 47% external — about the same as it was in 2022.
Donald O. Chesworth, a partner in the Rochester office of Tully Rinckey PLLC, has been practicing law for nearly six decades. He’s always seen the use of outside general counsel by companies, but the frequency ebbs and flows.
“It kind of goes in phases,” Chesworth said. “As the economy slows down and companies seem to be making less money, then they start looking at ways to save money, and one of those ways is to reduce their in-house counsel expense and go to non-in-house counsel as an economy measure.”
Chesworth currently sees strong activity in the outside general counsel space — which can be referred to in several other ways, including fractional, outsourced, outside, or non-in-house. The types of businesses Tully Rinckey represents as outsourced counsel run the gamut from restaurants and resorts to small stores and charitable organizations.
“We represent a lot of smaller companies and partnerships that can clearly benefit from using the services we provide in lieu of them hiring somebody full time,” said Chesworth, who also noted larger, mature companies also sometimes prefer outsourcing legal work because they don’t have the workflow to justify having in-house counsel or they have in-house counsel, but they need specialized counsel or litigation assistance.
Some of the more common areas the firm’s outsourced attorneys assist with are corporate formation, commercial transactions, intellectual property, labor and employment, business consulting, financial services, and mergers and acquisitions.
“Most in-house lawyers do not actually do the litigation,” said Chesworth, who notes some is this is because the company usually does not have insurance that covers the handling of litigation. “In many cases, it’s more efficient to have an outside attorney in that role, because that outside attorney has that insurance and can also do the litigation.”
When looking at a firm to provide outside general counsel, Chesworth says one of the most important things you can do is talk to other companies that are like yours.
“The best way to make sure you’re getting a good product is to get a recommendation from somebody else who’s already utilizing it,” Chesworth said. “Go to someone who’s already using these kinds of services and find out who they would recommend and who they would stay away from.”
He also says that once you’ve picked a firm to make sure the retainer agreement is clear and there is understanding on both sides in terms of what the outside counsel’s duties are, the cost, and how billing will take place.