Tough Times for Corporate Legal Departments

Lexakos asked law department leaders again about their concerns, priorities and resource allocation plans for 2009. This year’s benchmarking survey covers reporting metrics, outsource planning for IP and litigation, budget pressures, e-discovery, privilege waiver management in relation to new Federal Evidence Rule 502, and other compliance priorities.

In 2007 and 2008, Compliance Week, the leading publication and information service on corporate governance, risk and compliance, chose Lexakos as a conduit for gathering and analyzing compliance needs across all industries

On February 3, 2009, Compliance Week featured the results from Lexakos’ most recent strategic planning survey, with over 230 corporations participating. In addition to highlighting Lexakos’ relevance in the compliance arena, this coverage gives Lexakos an exclusive perspective of hundreds of companies’ needs and practices.   Here is an excerpt:

The new study of corporate law departments confirms what most general counsels already know: 2009 is going to be a rough year.

Forty percent of legal departments expect a decrease in their overall operating budget for 2009, compared to only 8 percent last year. At the same time, however, litigation activity is rising—particularly for the financial sector, besieged by investors unhappy with the sub-prime mortgage meltdown and victims of the Bernard Madoff Ponzi scheme.

Wolf “Even though budgets are being tightened, litigation is going up,” says Rick Wolf, CEO of the consulting firm Lexakos, which conducted the survey. “What it suggests to me is that they’re being asked to do more with less.”

David Cohen, co-chair of the e-discovery analysis and technology group at the law firm K&L Gates, has observed similar trends. “Corporate law departments are facing two realities. The first reality is that litigation does not go away in troubling economic times, and the cost of that litigation tends to go up, not down, every year,” he says. “General counsel are left on the horns of a dilemma: how to cut litigation costs in the face of no decrease in litigation, and often increasing e-discovery demands.”

Those pressures should lead in-house legal departments to prune back the volume of work they leave to outside law firms by doing more work themselves. But law departments are now under their own pressure to cut back on staff. “The result of all of that, paradoxically, is that lawyers are stretched even more thinly than they have been in the past, making it difficult to bring more work in house,” Cohen says.

As a result, law departments are getting more creative in how they cut costs and managing themselves more efficiently, Wolf says. For example, only 32 percent of law departments last year used a centralized litigation group; that number jumped to 49 percent for 2009. And while only 20 percent of respondents last year said their legal departments had a strategic plan for the year, that number soared to 57 percent this year.

Compliance Week ran a similar feature article on the Lexakos 2008 Strategic Planning Survey titled “Records Management: A Governance Crisis?”

For a copy contact information@lexakos.com.

Data breaches rose sharply in 2008, study says Most of the lost data was neither encrypted nor password-protected

By Jeremy Kirk

January 7, 2009 (IDG News Service)

More than 35 million data records were breached in 2008 in the U.S., a figure that underscores continuing difficulties in securing information, according to the Identity Theft Resource Center (ITRC).

The majority of the lost data was neither encrypted nor protected by a password, according to the ITRC’s report.

It documents 656 breaches in 2008 from a range of well-known U.S. companies and government entities, compared to 446 breaches in 2007, a 47% increase. Information about the breaches was collected by tracking media reports and the disclosures companies are required to make by law.

Data breach notification laws vary by state. Some companies do not reveal the number of data records that have been affected, which means the actual number of data breaches is likely much more than 35 million.

“More companies are revealing that they have had a data breach, either due to laws or public pressure,” the ITRC wrote on its Web site. “Our sense is that two things are happening — the criminal population is stealing more data from companies and that we are hearing more about the breaches.”

The data breaches came from a variety of mishaps, including theft of laptops, hacking, employees improperly handling data, accidental disclosure and problems with subcontractors.

For the rest of this story, see computerworld.com.

Litigation: Lawsuits are only thing “up” on Wall Street in past year

The worst bear market since the 1930s has left investors wanting to see Wall Street pay.  Investors filed 210 federal securities class-action lawsuits in 2008, up 19% from 176 in 2007, according to Stanford Law School’s Securities Class Action Clearinghouse (SCAC) and Cornerstone Research. Plaintiffs claim they’ve been wronged out of up to $856 billion, up 27% from 2007 and the highest in six years.

Hard times spark falling-out of partners in leading law firms

Once regarded as secure for life, partners in Britain’s leading law firms are now being presented with a stark choice: prove your worth or leave. Almost 2,000 of them could go.Senior equity partners, who earned an average of £1.1 million in the top ten firms last year, are being told that they must accept a reduced share of profits or leave. Younger partners, promoted during the boom of recent years, are also being forced out.

Up to 10 to 15 per cent of the 11,726 partners in the top 100 firms could lose their jobs this year.

The firms are seeking specialist legal advice themselves on restructuring partnership ranks in the face of a sharp decline in revenues this year. According to Richard Linsell, a specialist in professional partnerships with Addleshaw Goddard, the law firm, lawyers are following the lead of the big accounting firms in targeting underperforming partners.

For more see timesonline.com.

Nine Web sites IT pros should master in 2009 — Keeping up with the latest Internet innovations

By Carolyn Duffy Marsan, Network World

Here’s a time-saver for IT executives swamped by last-minute budget cuts and end-of-the-year performance reviews: We’ve written your 2009 goals for you, with our list of nine Web sites you need to study during the next 12 months.

This list is not for geeks. It’s for IT professionals of a certain age, who don’t spend every waking hour online but need to keep up with the latest innovations on the Internet.

Master these Web sites, and you’ll prove you can innovate during the most trying economic times. And you’ll do it more efficiently than your 20-something employees, who waste too much time chasing the new, new thing on the Internet that may not survive the downturn.

1. LinkedIn
Forget Facebook. In the last six months, LinkedIn has become the de rigueur Web 2.0 site for IT professionals. LinkedIn has 30 million members, almost double what it had a year ago. And it raised more than $75 million in venture capital during 2008, so it has staying power. It has a host of new features that make it the most productive networking site on the Web. Spend some time updating your LinkedIn profile and reaching out to current and former colleagues. You can show your boss that you’re well connected, and you’ll be ready in case you’re on the next layoff list. In 2008, LinkedIn made our list of the 20 most useful social networking sites on the Web.

2. Google Apps for Business
Call it what you like — software as a service or cloud computing — but it’s the future of enterprise IT departments, and you need to get on board with it. You’ll be under more pressure than ever in 2009 to find cheaper ways to deliver IT services. One way to do that is to pilot a Google Apps project, such as document sharing via GoogleDocs or video sharing via Google Video. Your staff can build one of these collaboration projects in a jiffy, and the information will be available to employees from any location on any computer. Among Google Apps proponents: The District of Columbia government.

3. VMware Communities
Chances are you’ve already embarked on a server virtualization project, and continued consolidation of your servers is a key money-saving goal for 2009. Most of you are using VMware for your server virtualization projects, and our product reviewers recommend you stick with VMware over Microsoft’s Hyper-V for the foreseeable future. To get the best real-world feedback on how best to deploy VMware, keep your eyes on the VMware Communities Web site. It’s got user groups in your community and lots of tips from other VMware developers that can help you solve problems faster.

4. Secunia
Security will continue to be a top priority for 2009, but you’ll need to figure out how to do it on the cheap. That’s where Secunia.com comes in. This site aggregates security vulnerability information from leading vendors, providing you with one-stop shopping for the latest news about security bugs and the software patches available to fix them. The site has an active community of IT security folks who can help you fix operating systems and applications before you get attacked. Secunia made our list of 20 useful IT security Web sites in 2008.

For more see networkworld.com.

10 tips to preserve data for the long haul — A better model for preserving data is needed and it requires worldwide collaboration, according to a task force on digital preservation and access

The growth of digital data is threatening to spiral out of control. More than 452 exabytes of information have been created and replicated this year — an amount higher than the world’s available storage capacity , according to IDC.

Not all data should be preserved, but efforts to save important information are being stymied by many factors: complacency, fear that the problem of long-term digital access and preservation is too big to take on, inadequate funding, confusion, and lack of alignment among stakeholders, a new report says. A better model for preserving data is needed, and it requires worldwide collaboration, says the Blue Ribbon Task Force on Sustainable Digital Preservation and Access, which consists of experts from universities, major libraries, and one tech company ( Microsoft ).

“The long-term accessibility and use of valuable digital materials requires digital preservation activities that are economically sustainable — in other words, provisioned with sufficient funding and other resources on an ongoing basis to achieve their long-term goals,” task force co-chairman Brian Lavoie of the Online Computer Library Center said in a press release.

Although the task force says an industrywide solution is needed, there obviously are many steps individual IT shops can take to implement a better data preservation plan. The task force’s second co-chair, Fran Berman, director of the San Diego Supercomputer Center (SDSC) at the University of California, offered a list of 10 tips for preserving data in a recent article.

For a look at Berman’s advice, see infoworld.com.

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GCs Starting to Bring the Work Back Home

Leslie A. Gordon
GC California Magazine
December 18, 2008

Like many in-house lawyers, Shannon Dwyer, general counsel at St. Joseph Health System in the Southern California city of Orange, has been gearing up for the 2010 budgeting cycle. The $4 billion, nonprofit organization, which runs 14 hospitals in three states, has a “responsibility to be a good steward of the assets,” says Dwyer. But in the current economy, she’s finding that using seasoned attorneys at large law firms is quickly becoming “cost-prohibitive.”

As a result, she’s been looking to hire a new lawyer — bringing her legal department to nine attorneys — to help handle even more of St. Joseph’s legal work in house. “It’s a basic cost-benefit analysis,” says Dwyer. “Although there’s some convincing of management to be done whenever you increase [employee staffing] at the corporate level, it’s not difficult to make the business case” that adding in-house lawyers is cheaper in the long run than paying increasingly rising outside attorney fees.

Demonstrating a trend that has significant implications for law firms, a growing number of California companies are under pressure to control costs and handle more work in house, where they can come closer to paying wholesale rather than retail for legal services. According to a 2008 survey of chief legal officers, conducted by consulting firm Altman Weil, GCs like Dwyer are planning to decrease their use of outside firms, which typically constitute the largest expense of any corporate legal department. Correspondingly, chief legal officers plan to increase law department staffing over the next 12 months, according to the survey, which was conducted this past May and June.

Specifically, the survey reports that 49 percent of legal departments plan to hire additional lawyers in the next year, up from the 40 percent who said they planned on new hiring in the last survey. At the same time, 26 percent of law departments will decrease their outside counsel, up significantly from 16 percent in last year’s survey. Only eight percent of CLOs plan to increase their use of outside counsel, down from 18 percent. Not surprisingly, CLOs cited cost control as their top concern over the next three to five years.

Hildebrandt International, another legal consulting firm, conducted a similar survey, which supports the Altman Weil conclusions. Hildebrandt’s 2008 law department survey found that inside legal spending rose by five percent in the United States while spending on outside counsel increased by just two percent. Nearly a third — 29 percent — of the 223 responding companies anticipate a decrease in the number of law firms they will use.

For more see law.com.