When clients think your lawyers make too much: lessons from Coke.

• Author: Stickel, Amy I.

It's a familiar tune for law firms-corporate clients think firms charge too much. They are tired of the high fees, sick of the billable hour and irked by those overpaid first-year associates. Many even say they are doing something about it. More than 60 percent of corporate clients fired a law firm in the last year for too-high fees/cost, according to the 2006 "Association of Corporate Counsel/Serengeti Managing Outside Counsel Survey Report."

It's a message that was stressed during the LMA Annual Conference earlier this year by Michael Chabeli, senior counsel in the office of the general counsel at The Coca-Cola Co. As he told attendees at one session, Coke is a 120-year-old company with 160 lawyers in-house. It has a long history with some of its law firms, but sentiment plays very little part in any of its law firm relationships--when it comes to fees or other aspects of the relationship.

"[Our relationships are] not 'til death do us part," said Chabeli, who could not be reached at press time for further comment. "My company is very quick to go back to a law firm we've had for 75 years and say, 'This is not good enough.'"

An Integrity Issue

Coke has many expectations for its law firms, he said [see sidebar, "Things to Remember If You Want Coke's Business"].Among the key considerations--what their law firms are charging, and whether those fees are excessive.

"Clients are more vigilant about fee abuse," Chabeli warned. "It's an integrity issue. "When firms charge partner rates for paralegal-level work or when attorneys stretch hours to pad bills or increase their own billable hours, clients have to question the sort of people they are working with. "Is this the kind of firm we want to stay with for the long haul?" he asked rhetorically.

Of course, fees and bills are a common complaint among corporate counsel. But Mary K Young, a partner at the Zeughauser Group, points out that few clients are presenting alternatives to the current system. "Clients always talk about it--does this model [of the billable hour] make sense?" she says. "Some alternatives have been put into effect. But nobody has come up with a good alternative."

And she questions how much actual fee abuse really goes on. "I don't know how widespread that is," says Young, who spoke at the same LMA Annual Conference session as Chabeli. "Most law firms are trying to develop long-term relationships, and clients will pick up on that pretty quickly."

When it comes to...