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CCCA_V2No4_RedefineValue-FIN.qxd:CCCA_V1No1_DriversSeat-FIN.qxd 11/24/08 2:57 PM Page 37 Feature For instance, rather than assign routine document production A matter of time to top-credentialed associates at high hourly rates,Valorem makes Neither VLP nor Valorem are the first to buck the so-called use of lower-charging contract lawyers or outsources such tasks “Cravath system” of law firm governance put forth early last entirely, Lamb says.Valorem strongly encourages, if not implores, century by New York City’s Cravath, Swaine & Moore and its clients to retain the firm’s services on a fixed-fee, bonus-based adhered to almost religiously since by the upper echelon of or contingency basis to ensure value and cost-predictabili- North America’s legal profession. ty. (Roughly 70 percent of its new client engagements Both, however, seem to have timing on their side, thanks to are not based on the billable hour.) general counsels’ increasing disenchantment with sky-high asso- And its compensation system promotes collabo- ciate salaries and their widely suspected role in outside law firms’ ration between its four equity members — all self- ever-rising hourly rates. “Every time I see [an outside counsel’s] marble conference table, I wonder what’s wrong with the metal one in my office.” Mark Chandler, General Counsel, Cisco Systems Inc., California proclaimed “refugees” of “elite BigLaw” practices — by equaliz- ing the incomes they earn.They don’t benefit financially by hord- ing over client relationships, Lamb says. Even more revolutionary is a new law firm headed by Craig With many Johnson, former chairman of Silicon Valley’s entrepreneurial prospective clients Venture Law Group, calledVirtual Law Partners (VLP). Its clients still digesting VLP and don’t have to worry about whether they’re paying extra for their Valorem’s value-minded in- outside lawyers to lounge in luxury offices.That’s because VLP novations, Johnson and Lamb are lawyers — the firm’s entire staff, in fact — don’t have offices. unable to cite any major new client rela- They all work from their homes, connected by advanced infor- tionships at this early stage. But the fact mation technology, and charge substantially less hourly rates as a that corporate counsel are readily returning result, Johnson says. their telephone calls, they say, is evidence that After a year and a half of preparation,VLP unveiled itself on they’re on to something big. May 1 with eight partners. By Oct. 1, its partner headcount had “So far, we are doing better than we had nearly tripled.“We plan to grow at a rate of maybe two partners allowed ourselves to believe we would,”says Lamb. per month,” Johnson says.All lawyers join as partners and keep 85 In-house legal departments, he asserts, would not be percent of the revenue they generate.The other 15 percent goes responding to Valorem’s sales pitches if it were not to pay for firm billing, marketing, IT, and other costs. bringing something new to the table. The firm’s mis- OneVLP lawyer resides as far away as Cali,Colombia,although sion, he notes, is now to prove to them that “we are able most are scattered throughout the U.S. Johnson eventually fore- to provide them the quality [service] they are looking for.” sees the enlistment of Canadian lawyers onVLP’s anticipated path And therein lies the challenge: persuading Fortune 500 to rivaling BigLaw firms in terms of its capabilities and number general counsel to break tradition and bet on something other of lawyers. than the traditional law firm model.That model places relative- One area where it won’t match BigLaw is its hourly rates, ly few equity partners atop a vast pyramid of worker-bee lawyers Johnson promises. Brand new associates at many top San and legal support staff, limits associate recruitment to the pre- Francisco-area firms are billed out at $325 an hour. For that same sumed “best of the best,” and has come to fully embrace the price atVLP, clients can receive the services of a corporate secu- billable hour — a concept in-house legal departments them- rities partner with 15 years of experience at law firms that include selves created to bring structure to what had been a fairly sub- global behemoth Latham & Watkins. jective billing process. HIVER 2008 CCCA Canadian Corporate Counsel Association 37