Client-Firm Value Series - Kayak Software Corporation

From the 2011 article on In-houseAccess.com

Welcome back to our “value practice” blog series featuring real-time and real-life value conversations between an in-house counsel and their trusted law firm.  For those of you new to this series, ACC hosted our first client-firm blog pair last year with Ken Grady from Wolverine Worldwide and Lisa Damon from Seyfarth Shaw, which focused on the restructuring of Wolverine’s trademark portfolio to incorporate new service methodologies.  Their fresh approach and candid commentary made these posts a must-read. 

For our next partnership, we are pleased to welcome two new bloggers, Karen Klein, General Counsel for Kayak Software Corporation, and Nicole Nehama Auerbach, a founding member of the Valorem Law Group. From now through March, Karen and Nicole will offer a weekly ‘behind-the-curtain’ look at the evolution of their developing plans and solutions to Kayak’s portfolio of litigation work.  I anticipate that they’ll be giving us all a run for our money – they are the original dynamic duo, but we’ll be working hard to keep up. So often we hear that value-based relationships don’t adapt well to the litigation context and/or that smaller law departments may not be as well-leveraged to convince firms to handle work using value-based fees (.ppt download). We fully expect that Karen and Nicole’s capture of their value discussions will demonstrate that both of those presumptions are fundamentally misinformed. First, some background on our featured bloggers: 

Karen Klein is the general counsel of KAYAK, a great travel site that uses innovative search methods to help you take your travel decisions to a whole new level.  Being a hot property on the Internet poses all kinds of issues that Karen must navigate for her company, for example she may call on Nicole to help her efficiently budget, manage and resolve whatever comes in the door. 

Nicole Nehama Auerbach is a veteran litigator and a leading innovator in value-based fee structures. She is a co-founder of a law firm, Valorem, which is premised on the principle that a lawyer’s work is best measured on a scale of client satisfaction and results for cost, not on a scale calibrated by rates times hours. What makes this even more fun is that both Karen and Nicole’s legal careers started in the same BigLaw firm that they both left, at least in part because institutionalized law firm practice did not accommodate the kind of creative relationship they’ve now set off to explore on this blog.

Thank you, Karen and Nicole, for your time and for offering to share your perspectives on the “Client-Firm Value” relationship.  As always, any comments, questions, constructive criticisms, cries from the bewildered and notes of appreciation are welcome in the comment area at the end of the blog posts.

A hearty welcome to Karen and Nicole: we’re grateful beneficiaries of your shared wisdom and innovative ideas.

- Susan Hackett

Lifting the Curtain: The goal of this effort is to ‘lift the curtain’ in order to help you assess how you can learn from this example and apply value-based practical solutions.The voice, views and stories expressed by the authors below are their own and not ACC’s.

Join in: Please be sure to join in the conversation with your comments and observations, and enjoy.

Susan Hackett, Senior VP and General Counsel, Association of Corporate Counsel and the ACC Value Challenge (hackett@acc.com)

The client side:

   

Blogger Karen Klein is General Counsel at Kayak Software Corporation  

Full disclosure: I was not an early adopter of alternative fees.  Some (like Nicole, perhaps), may even say that I came late to the party. But adopt (or adapt), I have — at least on some of my matters.  I suspect that my pace in utilizing alternative fee arrangements is typical of most in-house counsel today. Some were instantly on board, some will never make the move, and most of us in between see their value in some, though not all, circumstances, and will use them when a number of variables come together at the same time. I also suspect that many other in-house attorneys have grappled with the same issues I’ve faced, or at least have had the same questions along the way. As Nicole and I discuss our experiences and perspectives in the course of this series of posts, I hope that we provide something useful to both the early adopters and those who are just getting their feet wet with alternative fee arrangements. My guess is that I may learn something new along the way as well.

I should first start by telling you a few things that I think have influenced my mindset. I started my career in the corporate department of a large Chicago law firm, and of course, the only way we billed was by the hour. When I left the firm, I embarked on a series of in-house jobs at start-ups and technology companies, including Platinum Technology and Orbitz.   As you probably know, currently, I am the general counsel of a travel metasearch company called Kayak Software Corporation. In the simplest sense, our website, www.kayak.com, allows users to search for travel-related services (air, hotel vacation packages, etc.), and then link to providers’ websites to make travel-related purchases. Until about 14 months ago when I hired an associate general counsel (a true godsend, really), I was a department of one with what seemed at times like enough work for a department of twenty.  To say that things move at breakneck speed is an understatement, and when I’m trying to staff something quickly, grasping the hours times dollars system is often the quicker and easier thing to do.

So, while I’ve always been open to change, I was simply too busy on a day-to-day basis to make such a change without some concerted effort from a proactive law firm. Even then, it needed to be the right matter, and I had to feel that I understood how the process was going to work. All of those stars aligned in the form of (a) some pieces of litigation we were involved with, (b) some (gentle) prodding from Nicole, with whom I had worked for several years and had a good working relationship, and (c) a VP Finance who loved the idea of budget certainty when I brought the proposals to her. And so, under those circumstances, I took the first step on a path that probably, if all continues to go well, will be walked upon a little more frequently and with less hesitation as the right situations arise.

 The firm view:

Blogger Nicole Nehama Auerbach is the Co-founder and Partner of Valorem Law Group LLC.

Full disclosure: I was an early adopter of alternative fees. It was for that reason that, after more than 14 years, I left my career at that same large law firm in Chicago where Karen started. I left to help launch a litigation law firm built entirely on the alternative fee model. When the four founding members (we now have 8 attorneys), all large law firm refugees, started Valorem Law Group in 2008, we believed to our core that clients wanted: (a) budget certainty for their matters; (b) attorneys who were willing to tie a part of their fees to the outcome of the matter; and (c) lawyers who would focus on the end-goal, not “boil the ocean to make a cup of tea.” We were not at all surprised when alternative fee arrangements became the talk of the legal world so soon after we opened our doors.

And though we have been blessed with our share of the early adopters on the client side, one thing that we discovered early on was that many potential clients out there are like Karen – lots of work, great intentions but little or no time. Like anything new, alternative fees take time for people to get their arms around. And while most lawyers consider themselves to be very “cutting edge,” in fact, they are some of the slowest people on this earth to embrace change. Luckily for us, with all things, there comes a tipping point, and this one is being helped along by progressive legal department budget cuts that cannot be accomplished with a simple discounted billable rate.

As Karen said, it often takes a number of things for in-house lawyers to make the move to alternative fees.  From our perspective, it is (1) a lawyer (i.e., the general counsel, AGC) who understands that time invested up front will pay dividends and is confident enough in his or her role to be willing to risk using a new fee arrangement in the (unlikely) event that it does not go exactly as planned; (2) a matter where the scope is generally definable from the outset; and (3) a case that is not simply a routine and small-dollars matter, but also, is not a bet-the-company matter. Since we handle litigation only, we are constantly fighting against the fallacy that all litigation is uncertain. While many aspects of litigation may be influenced by the conduct of the opposing party, by and large, all litigation has the same core elements. As we hold ourselves out as expert litigators, identifying the scope of a matter is naturally within our expertise. In our firm’s three year history, we’ve seen that when the three things listed above are present, and the client or prospect is willing to embrace change, an alternative fee arrangement is born. 

As we continue in our series of posts, we’ll discuss the journey – the good, the bad and the potential pitfalls. Best of all, we won’t do it by the hour.