Team of Rivals? Toward a New Model of the Corporate Attorney/Client Relationship

Abstract

At the heart of the traditional understanding of the lawyer's role stands a simple but powerful assumption: That the attorney/client relationship is essentially one of agency. In this paper, I argue that notwithstanding its pedigree and intuitive appeal, this traditional assumption is no longer an appropriate template for the relationship between large companies and their primary outside law firms. My claim is both descriptive and normative. Using a variety of data including the results of an on-going study of the legal purchasing decisions of large US companies, I argue that a series of recent trends - the "convergence" of law firm relationships by companies, "consolidation" among firms, increasing integration and information exchange both within and across organizational boundaries, and a surprising amount of turnover among in-house lawyers - are leading companies and firms to enter into relationships that look more like the kind of strategic alliances or partnerships that companies often have with their other important suppliers than the principal-agent relationship envisioned by the traditional model. Borrowing a phrase that has been used to describe the long-term strategic partnerships between Japanese automakers and their suppliers, I call these new relationships "legal keiretsus".Rather than emphasizing the typical principal-agent "logic of power" where stronger actors attempt to gain by coercing their exchange partners into an asymmetric distribution of value, these new legal keiretsus rely on a "logic of embeddedness" that seeks to encourage reciprocity and mutual trust to produce joint gains that will be fairly distributed between the parties. This new logic, however, arguably threatens the ability of outside counsel to function as public-regarding gatekeepers. Although these concerns are legitimate, I will argue that the logic of embeddedness is no more corrosive of public regarding values than the logic of power that now typifies the relationship between companies and their outside firms. Indeed, this logic has the potential to be significantly less corrosive - particularly if we move away from an ethical and regulatory structures based on a principal-agent model that serves only to entrench the ability of powerful corporate-principals to impose their will on increasingly vulnerable lawyer-agents. I conclude by identifying questions for future research, particularly in light of the current economic crisis, recent initiatives such as the American Corporate Counsel Association's Value Challenge, and the growing tendency among corporate clients to focus on the "department" or "team" level when making legal purchasing decisions.