Mark Chandler of Cisco Systems. Mark Chandler of Cisco Systems.

Mark Chandler, senior vice president, general counsel and chief compliance officer of San Jose-based Cisco Systems Inc., was talking with a Big Law firm attorney in New York one recent morning about a project they were working on. Chandler wanted the attorney to see the project from his business standpoint and quipped, “General counsel are from Saturn and outside counsel are from Jupiter.”

The attorney thought the riff on the 1992 book “Men Are From Mars, Women Are From Venus” was funny. “But I was serious,” says Chandler, who wants his outside counsel to have a “business alignment.”

Business alignment, Chandler explains, means seeing the big picture—stepping back and understanding the business purpose of a legal action. It means not turning over an endless number of stones in a case to run up costs, but knowing which ones are necessary to turn over regardless of the cost.

“Some law firms, no matter how long you try to articulate the whole picture from a business standpoint, they still don't get it,” he says.

Business alignment also means a focus on the predictability of costs and the timing of those costs. “Even if it's a fixed fee, it is critical that I have alignment on where my budget is and where their costs are, and knowing when it is going to cost is really critical,” Chandler says.

But Chandler's first test for whether to engage an outside law firm is whether the substantive capability of the firm matches the requirements of the work. It could be a large volume of relatively routine work, he says, or it could be a small case requiring a highly specialized skill set.
And the best scenario for Chandler is when both the substantive qualities and the business alignment come together in the same outside counsel.

Chandler explains, “We have a matter before the U.S. International Trade Commission right now, and I am working with Deanna Tanner Okun of Adduci Mastriani & Schaumberg,” a small Washington, D.C., firm that specializes in international trade matters. Okun served 12 years on the ITC, including two terms as its chairwoman.

“The reason she is so fantastic isn't just that she knows the agency so well,” Chandler says, “but because she is so good at understanding what we want to accomplish and predicting what we have to work on to get there. She is incredibly knowledgeable, sensitive to our business goals, and targeted in her approach.”

The GC says he has about 20 main law firms that handle over 80 percent of Cisco's outside legal work. The firms include:

• Fenwick & West for corporate, securities and M&A work.

• Duane Morris for a large volume of intellectual property cases.

• Kirkland & Ellis, Quinn Emanuel Urquhart & Sullivan, and Wilmer Cutler Pickering Hale and Dorr on more specialized IP work.

•Winston & Strawn for general commercial litigation.

• Orrick, Herrington & Sutcliffe for employment and compensation-related matters.

None of the work occurs on a billable-hour basis, Chandler says. Instead, he uses flexible arrangements, depending on the matter. For example, M&A work is entirely fixed fee, with possible bonuses at Cisco's discretion; while litigation matters are usually fixed fee through the motion stage. Some other cases might be billed at a sharply discounted rate tied to bonuses for different resolutions.

The efficiencies in selecting and paying outside counsel have allowed his budget to shrink, “but not because I'm substituting work by inside counsel,” he adds. Cisco's legal department employs about 240 in-house counsel.

Chandler also has flexibility in his selection process, with price as a consideration but not the main one. “Sometimes we know who we want to work with, and we simply negotiate with them,” he says.

Other times it holds the traditional “bake-off,” with requests for proposals.

At the most recent bake-off, Chandler says two large and two boutique law firms competed. Cisco went into the process thinking it wanted one of the smaller firms, he says. But it was persuaded to hire a large one.

“It wasn't the lowest price,” Chandler explains. “They had a superior strategy, and we didn't think we could export that strategy to anybody else.”