Introduction
The job of the corporate legal department is to help corporate management avoid unnecessary or unwise legal risks. But if Murphys Law can and does apply outside of the corporate legal department, it also can and does apply to the legal department itself. Put another way, legal departments can at times be a cause of, as well as a cure for, unnecessary risk.

Outside law firms are beginning to learn this lesson. Over the past decade, an increasing number of large, medium-sized and even relatively small law firms have begun to rethink their management structure and to appoint risk management or professional responsibility counsel to help identify weaknesses that could lead to civil, disciplinary or even criminal liability. Although a corporate legal departments position is different insofar as it is unlikely ever to be sued for damages, the principles are the same: life is not risk-free, but only careful planning and vigilance will minimize risk. Anything less is whistling in the dark: if something can happen, it can happen here.

In this article, we will briefly discuss both some of the sources of corporate legal department risk and some of the possible steps that can reduce such risks. The reader should be warned, however, that this is only an overview of a very complex topic. As some of us used to write in high school or in college, more research on this vitally important topic is necessary.

Risks in Corporate Legal Departments
Several years ago, a state attorney generals office had a rude awakening when it was discovered that a lower-level deputy attorney general had mistakenly kept the service copy of a judgment order adverse to the state in her office until after the appeals period had run. The result was that the state lost a chance to appeal a $17 million adverse judgment. In one brief moment, that state learned at its expense what many private practice firms had previously learned at their expense: centralized docketing of key dates is not only extraordinarily important but is in fact best done at the moment that the documents first arrive at a law firm or legal department office.

We are all surrounded by dates, some of which may be flexible but some of which are not. This is true not only in litigation but also in intellectual property practices, securities law practices and many other areas. In all likelihood, trusting each individual lawyer or legal assistant to remember all dates pertaining to her work is not the optimal approach.

Moreover, and depending in part upon the nature, significance and complexity of the matter and of the legal department, it may also be unsatisfactory to rely solely upon calendars or dates prepared by outside counsel. Granted that an outside law firm that misses a deadline can be sued for malpractice, such litigation is unlikely to provide a satisfactory alternative. Lawsuits take time and money to prosecute, their outcome is uncertain, and positive relationships with counsel that may have developed over years may easily be destroyed. In other words, corporate legal departments have a strong and independent interest in making sure that deadlines are not missed even when others may also be within the circle of blame.

There is also another dimension to the deadline problem besides blown deadlines. Nearly missed deadlines can be almost as bad. Assume, for example, that a corporate legal department assigns one of its own or outside counsel to handle a critical project that must be completed within six months. Assume further that the person ultimately responsible for the project hears nothing back during the first four months. Is it acceptable to wait and see whether a response is volunteered in month 5? With two weeks to go?

The answer in many cases will be obviously not. At the risk of mixing a metaphor, tickler systems with teeth are worth consideration. Businesses have milestone and reporting requirements for good reason. Their counsel should do no less.

Deadline-related problems are not the only problems that corporate legal departments share with their outside counsel. The management of workflow is clearly a critical issue. Many private law firms have learned, for example, that quality control is much better accomplished when practices or practice groups are managed or controlled firm-wide by subject matter rather than geographically by office and across subject matters. Corporate legal departments that are geographically separated can benefit from the same approach. So can corporate legal departments that are divided between parent, subsidiary and brother-sister companies.

Or consider the matter of individual incentives and the balancing of work between individuals. Although the eat what you kill mentality that appears to dominate some law firms should be substantially less prevalent within legal departments, the fact is that any group of individualslawyers includedcan include individuals who hoard work, individuals whose overwork can lead to mistakes and individuals who may shirk some or all of their responsibilities.

Several of the deadline examples also point to an external dimension of corporate legal department risk management: making sure that outside counsel do not unnecessarily or unreasonably expose the corporation to risk. As with internal problems, however, more is involved than just deadlines.

Consider, for example, a corporate legal department that is presented with a conflicts waiver request. Some law firms seem to generate such requests as a matter of form and with little or no explanation to clients of what the waivers entail, and some corporate counsel may have no objection to receiving or signing off on such requests. Whether this is sometimes, generally or always in the corporations interest is, however, another matter. For example:

• Managerial personnel who subsequently learn that their law firm may be opposing them on a matter may be less than happy if they were not consulted in the first instance.
• The law firm that sought the waiver may later argue that the waiver covered additional circumstances beyond what corporate counsel thought it covered.
• If the corporation is relying upon a waiver from another client of the law firm to allow the firm to represent the corporation in a matter adversely to that other client, the corporation needs to assure itself that the other clients waiver will stand up if subsequently challenged.
• Different circumstances require different analyses. Suppose, for example, that the waiver seeks to permit a law firm to represent multiple parties at the same time on different sides of a business or litigation matter. From the corporations view, the risks or consequences of a subsequent breakdown that could cause the corporation to need to retain separate counsel in mid-matter may be far more serious than they appear to outside counsel who wants or needs the work.
• There are steps that can be taken to make some waivers more palatable in some circumstancese.g., requiring the use of different lawyers on different matters, a formal segregation of files or an express grant of permission limited to adverse negotiations but not including adverse litigationthat may be overlooked if corporate counsel do not consider their options.

In other words, corporate legal departments need to make sure that they understand what they are and are not getting themselves into when they are asked for conflict waivers.

Responding to Legal Department Risk
There is no magic bullet to avoid all risk. Bad things happen even to the best prepared, and it is not always clear before the fact what constitutes the best preparation for a given risk. Moreover, taking calculated risks is often an inevitable part of what we all do.

On the other hand, much of what private law firms have learned about risk management in recent years is fairly directly applicable to corporate legal departments. This is true, for example, with respect to the docket and time management problems discussed above. By and large, cures exist; the question is who will use them.

Other problems will require more careful and thoughtful approaches.In principle, for example, one could argue that it should be easier to encourage effective mentoring of new lawyers in a legal department than in a firm because the drive to maximize billable hours does not exist in the same way. This difference may be attenuated, however, at corporate legal departments that have gone to far down the road of modeling themselves as if they were outside billable firms that must account for every fraction of an hour to an excessive and counterproductive extent. These kinds of problems are far from fully resolved at law firms and are unlikely to be fully subject to resolution in corporate legal departments. On the other hand, the unity of interest and of purpose that should exist within a corporate legal department should tend to make these kinds of problems more capable of resolution in-house than they are out-of-house.

Conclusion
In some ways, successful internal risk management is an unattractive field. One is far more likely to garner significant praise for that big victory over an arch-enemy or for saving someone else from danger than for the far less visible act of not placing oneself in danger. But while fighting fire with fire is dramatic, fighting fire with fire extinguishers will often be far more useful. And even if avoiding fire altogether through fire prevention techniques may be boring, temporary boredom is a lot more palatable than wringing ones hands after the fact. Corporate legal departments should icreasingly give greater consideration to internal and external risk management.

This publication has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.