Chapter § 1.04 Other Cost Containment Techniques

• Jurisdiction: United States
• Publication year: 2020

§ 1.04 Other Cost Containment Techniques

[1] Arbitration

In today’s litigious environment, all companies, especially consumer-facing ones, should consider implementing a mandatory arbitration program and/or class action waiver to improve the predictability of the outcomes in litigation and to mitigate exposure to potentially costly litigation, such as class actions. Generally, the company can extend the program to all types of claims relevant to its industry or business, including personal injury, statutory or employment-related claims.²⁹ The program’s arbitration agreement will require any party to conduct the arbitration under the auspices of an arbitration administrator such as the American Arbitration Association (“AAA”) or JAMS, Inc. Please refer to Chapter 8 for a detailed discussion on arbitration.

[2] Outsourcing

Outsourcing, specifically offshore outsourcing, might help control costs. In countries like India, there are vast pools of English-speaking, highly educated employees who employers pay much lower salaries than law firms pay associates in the United States. As an added benefit, the time difference essentially permits offshore companies to work around the clock.

Companies are now outsourcing legal-based services, such as document review, much in the same way corporations have long outsourced functions like information technology or call centers. Some in-house counsel believe that, because their company as a whole engages in outsourcing for sound economic reasons, the corporate leaders should also expect the legal department to find ways to move some of its business offshore.

Hundreds of legal outsourcing companies have sprung up in India,³⁰ and companies, such as General Electric, have, at times, spent $3 million a year with Indian vendors on routine legal work.³¹ Offshore companies charge their clients between $25 and $90 an hour, even for the most sophisticated jobs they handle,³² such as document review. A junior lawyer in India who does this work typically earns between $8,000 and $10,000 a year,³³ which is in stark contrast to the salaries of many first-year associates in the United States, who earn considerably more than $100,000.³⁴

Although some observers have raised ethical concerns about people who are not licensed to practice law in the United States performing legal-type work,³⁵ outsourcing vendors in India and elsewhere typically structure their businesses to ensure that all such work is supervised by an attorney admitted to practice in the United States.³⁶ This arguably obviates the ethical concerns.

A company should supervise the work performed by outsourcing vendors, particularly offshore ones, through a dedicated team responsible for managing that relationship. In some cases, outside lawyers are instructed to use a particular outsourcing vendor and to supervise their work, especially when the legal department is small. In these circumstances, outside lawyers should assist in-house counsel as much as possible in keeping a close eye on the work performed by the...