Saturday, December 29, 2012

An Early Sighting of the In-House Counsel I

[Every year, I assign to my legal history students an article that appeared in a long-defunct business magazine from the first decade of the twentieth century, Arthur Sears Henning, “What a Legal Department Does,” American Business Man 1 (October 1907): 185-88.  It should be read with some skepticism, as the author is, in effect, selling a product here, and his biggest selling point for business executives is the prospect of acquiring needed professional expertise without the inconvenience of professional autonomy.  Still, I know of no other reportage of the emergence of in-house counsel comparable to that on the contemporaneous rise of the corporate law firm.  While your Legal History Bloggers take an end-of-the-year break, I'll serialize the article today and the next two days.]

“Referred to the legal department.”

            So runs the cryptic legend that spells the way of modern business.  It threads the maze of operations between department and department of the great corporation, it broods over the relations between competitors, between employer and employee, between seller and buyer, between the governing people and the company governed. It is the meat in the courteous letter of reply you receive in relation to your complaint; it is the burden of the newspaper interview in which the magnate comments on a policy that has been called in question. 

            It becomes at once the apotheosis of modern business caution, of modern business sagacity and economy and foresightedness.

            The general manager of the great industrial or commercial concern inscribes the notation on the documentary exhibits of a big transaction, dictates a letter explaining the situation with which he is confronted and dispatches the whole matter to the department of law experts.  In due course of time the documents return to the desk of the general manager with one more paper attached—an opinion defining the rights of all the parties concerned, laying down the law and advising the policy that may with good judgment be pursued.

            In the complex state of twentieth-century commercial operations no transaction is too insignificant to receive, at some stage of its history, the attention of the law department; no new step too sure and confident to be taken without the support and guidance of the preceptors of legal rights and usage.

            The statistics compiled by the Chicago Bar Association show that about 1,000 attorneys in this city alone are attached to the law department of big mercantile and manufacturing concerns. More than one hundred business houses have fully organized legal bureaus that handle all litigation and legal negotiations from colossal contracts down to garnishment proceedings.

            A law department is as necessary to a properly organized business to-day as is its credit department or its army of foreign buyers.  The volume of business that passes through its hands is proportioned to the volume of business of the house. Transactions valued at millions of dollars in the year’s aggregate stand or fall on the decisions that are called forth by: “Referred to the legal department.”

            The rise and development of the legal department as a recognized entity in the conduct of a concern is a chapter in the history of the systematic specialization of up-to-date business.  Time was when it sufficed a merchant or a manufacturer to consult a general practitioner of the law for the cure of his legal troubles—a general practitioner who, at the same time, served many merchants and manufacturers and other individuals.

            But the times have changed.  Now, instead of the lawyer who serves the many clients, it is the one client served by the many lawyers.  And, by the same token, are the lawyers no longer the general practitioners of old, but highly specialized experts, each in one particular field relating to the needs of the concern by which he is employed.  Likewise are legal fees passing out of the dealings of the commercial world.  Nowadays a lawyer is on the pay-roll of a company at the regular salary, working for his raise and promotion like each of the other employees.