FACTORS IN DECIDING TO UTILIZE IN-HOUSE LEGAL SERVICES OR TO CONTRACT OUT A recent article in the Long Beach Business Journal dealing with the inflated salaries of City employees, asserted that the City should reduce the number of contracts with outside law firms. After all, it reasoned, given the generous salaries paid to its deputies isn t there enough legal expertise among current employees to handle more of its legal services in house? Thus, the underlying assumption is that the decision of a public law office to contract out may represent an abdication of responsibility. The purpose of this paper is to briefly outline those considerations which bear upon and which legitimize the decision to employ outside counsel. For most cities in California, small in size and resources, the comments of Donald Greenberg, former City Attorney of Ventura, express a fundamental fact: As we approach the 1990s, city attorneys are generalists in a field that used to be a specialty called municipal law. But municipal law increasingly has become an area composed of a great many subspecialties. The city attorney of today and the future, is more and more like the general practitioner in medicine--more and more a true general counsel to the municipal corporation having to work harder and harder to keep up with his/her field and no longer able to know instantly, with the easy depth of the specialist, all of the intricacies of vast areas that have become major specialties of their own. The old model of the general practitioner of municipal law who could advise the governmental entity on nearly everything it might
need to know, possibly on a part-time basis, has long since passed. 1 It is submitted that for those public law offices the basic question is not whether to employ outside counsel, but rather whom to employ. 2 This paper will address the decision making process as it applies to those city attorney s offices which are staffed to a level which may suggest to its citizens that there is enough legal expertise. Why then would such an office resort to outside counsel? A succinct response to this question is contained in a recent article dealing with the issue as experienced in Baltimore, Maryland, which has 80 lawyers in its legal department: However much cities may want to do their own legal work, they will never stop using private lawyers. Not even the largest city government could afford to keep on staff an array of lawyers competent in every legal specialty it needs to call upon occasionally. Some marathon cases would tax the capacity of even the best-stocked legal department all by themselves. Baltimore has been involved in labor-intensive litigation involving its public schools for several years. I can t hire 10 lawyers to handle this case, solicitor Thompson says. When it s over I ll have 10 lawyers on staff. What do I do with them? 3 With the foregoing in mind, the following points are submitted: In general, the decision to contract out will be based upon one of, or a combination of, three factors: a legal conflict of interest, a lack of technical expertise, or a lack of staffing. The existence of
a conflict of interest will normally require outside counsel and therefore all public law offices must contract out to some degree. There should first be in place an overall plan or philosophy as to the desirability of resorting to outside counsel. The Long Beach City Attorney s Office, consistent with most full service public law offices, attempts to handle the City s legal services in-house as much as possible. Particularly with respect to litigation, this has obvious advantages in terms of cost control and management of the course and outcome. Simply stated, absent a conflict of interest, if the in-house technical and staffing capability exists, the matter is handled in-house. The decision to hire outside counsel should be made only after full consultation with in-house staff. This may seem an obvious point. However, once a decision is made to contract out a lawsuit, it is realistically difficult to bring the matter back in-house. The basis for hiring outside counsel should be clearly articulated. While the need to contract out a particular legal matter may be obvious to staff, the public perception may be different. Criticism based upon an inaccurate or simplistic view of the reasons for resorting to outside counsel may be avoided by an early and detailed analysis of the basis for the decision.
Is the decision to contract out based upon a lack of technical expertise? For example, the City of Long Beach maintains its own gas department. With unique and complex legal questions relating to deregulation, it is not only reasonable but fully cost effective to contract out. Is the decision based upon lack of staffing? Even apart from the marathon cases, the cyclical nature of litigation, as well as unforeseeable but time consuming legal issues, might well dictate the use of outside counsel. The alternative of hiring extra staff, apart from being politically incorrect, ultimately results in over staffing. In some instances, it may be advantageous to seek the expert advice of outside counsel for only a facet or several facets of a case. This may be particularly true where an otherwise routine litigation matter delves into areas requiring specialized knowledge not available from in-house staff. Close monitoring of outside counsel activities by an assigned in-house attorney cannot be over emphasized. This will insure that the litigation or other matter is resolved as expeditiously and inexpensively as possible. Situations involving a legal conflict of interest present issues which are largely beyond the scope of this paper, since the
need to hire outside counsel is normally clear cut. However, in tort litigation, potential conflicts of interest may be anticipated and thereafter avoided or mitigated by early full disclosure to the employee. In certain circumstances a waiver of conflict may be appropriate. In any event, it is crucial to secure the cooperation of the employee even where the employment of outside counsel is necessary. This is accomplished (hopefully) by demonstrating that it is not in the financial interest of the City to take a position contrary to that of the employee. The decision to contract out in a municipality employing a full service inhouse municipal law office is properly subject to close scrutiny. The city attorney in these circumstances must be prepared to place the decision in the context of an overall strategy that contemplates the use of in-house counsel whenever possible, but recognizes the rare situation in which contracting out is fully appropriate and in the public interest. 1 Astute readers will note that this quotation is lifted from an excellent article by Michael Miller, City Attorney of Arcadia - Selection and Using Special Counsel, League of California Cities Directory of Municipal Law Practitioners (1995). He, of course, lifted it from Mr. Greenberg. 2 Issues arising after the decision is made are well addressed in the aforementioned Directory of Municipal Law Practitioners. 3 Ellen Perlman, Costly Advice, Governing, May 1997, at 45, 46.