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May 15, 2009 1:00 PM

FMC Goes the Social Networking Route to Find Law Firms

Posted by Ed Shanahan

By Amy Miller, Corporate Counsel Magazine

Houston-based manufacturer FMC Technologies, Inc., is looking to update its roster of outside counsel and hire firms that embrace innovation, technology, and especially, alternative billing arrangements. But its general counsel Jeffrey Carr isn't holding an auction or putting out a request for proposals to find them.

He's using Legal OnRamp, a social networking site for lawyers that works much like the mainstream Facebook and LinkedIn. Carr calls it the FMC Technologies 1st Law Litigation Value Challenge. "We love change. We love challenges," Carr says. "We like doing things differently. Some people call us grenade throwers. Some people call us crazy. But it works."

The process is in its first phase, which will end on May 31. Carr is asking firms to complete a two-page questionnaire that they can download from the site. Candidates can also ask questions and share their thoughts on an online discussion board.

Some of those firms will advance to a second phase, when they'll talk numbers, such as explaining how much they think certain legal matters should cost. Then two to five firms will move to the third phase, which will be a basic dog-and-pony show, Carr says.

That's when he finds out if he'd like to go out and have a drink with the candidates after work. "They are part of our business team, and they need to be compatible," Carr says.

But any firm that's selected must embrace alternative billing arrangements. FMC Technologies uses a program it calls the Alliance Counsel Engagement System, or ACES. It's a risk/reward model in which the company withholds a portion of a law firm's fees. And at the end of a set time period, or the conclusion of the matter, FMC lawyers conduct a performance review.

If the firm performed better than average, it receives the amount withheld, plus a bonus. If the company isn't satisfied, the firm doesn't get back the entire amount that was withheld. "We've been doing this for years, and it's been very, very effective," Carr says.

The company is most interested in hiring firms that are willing to work under that model. But Carr says he's willing to consider any alternative billing proposals a firm may have.

Patrick Lamb, a business trial lawyer with the Valorem Law Group in Chicago, has worked for FMC Technologies and says Carr is always open to new ideas that save money. "Jeff and his colleagues are data driven and bottom-line driven," Lamb says. "If there is a way to do it cheaper, I guarantee Jeff will give it due consideration."

The lawyers who have posted comments on the discussion board say they like the fact that FMC Technologies is sharing its selection process online. Stephen Rosenberg, an attorney with The McCormack Firm in Boston, wrote that he and others have always believed that if companies were more open about how they retain outside counsel, they would receive better, and less expensive, legal services.

"The question now," Rosenberg says, "is whether those of us who have always believed companies should do that are willing to walk the walk and compete."

Some lawyers might be afraid of performance-based fee arrangements because it introduces an element of risk, commented John Matter, an attorney in Kentucky who practices commercial litigation. But that risk can be offset by the chance to reap financial rewards for doing good work. "My hat is off to all of you for trying a new approach," Matter says. "It is about time we had some entrepreneurship in our profession."

Rees Morrison, a New Jersey-based legal consultant, said that he wants FMC Technologies to analyze the various proposals it gets from law firms and publish a report. Lawyers everywhere will want to see the bigger picture. "You may well be generating the best, most representative view of what law firms in the U.S. currently feel are innovative offerings," Morrison says.

Carr is reluctant to predict how successful the value challenge will be. The worst that can happen is that he ends up hiring the same firms he's used in the past, he says. "It's going to depend on what we see," Carr says. "And what we're hoping is that this will serve as a catalyst for law firms to think differently about the way they do things."

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