Sunday, December 30, 2012

An Early Sighting of the In-House Counsel II

[This is the second post in a series serializing Arthur Sears Henning, “What a Legal Department Does,” American Business Man 1 (October 1907): 185-88.  The series begins here.]

No fact more significant of the cause of this trend in the development of modern legal guidance could be deduced than the source from which the working force of the department is obtained and constantly recruited.  No longer are the legal experts drawn from the big law firms of the city.  In these days the lawyers of a big commercial house or industrial concern are drafted from the ranks of the employees in other departments of the business.  They step out of the companies of clerks, salesmen, mechanics, foremen, etc.  For the most part they are young men—self-made men who have toiled at humble occupations in the great concern by day and attended law school at night till finally, winning admission to the bar, they have been chosen to remain with their employers in a new capacity.

            Such is the history of hundreds of lawyers now identified with the legal departments of big Chicago corporations. The chief patent lawyer of one of the largest harvester companies once was a $1.50-a-day mechanic.  Now he has a salary of $25,000 a year and handles the far-reaching litigation and negotiations relating to patent rights in which the corporation is interested.  The head of the legal department of a certain big retail store started as a cash-boy twenty years ago.  He worked up to salesman, then to department head, and all the time he was reading law outside of business hours.  When he was admitted to the bar he was promoted to the legal department of the company where, by successive stages, he rose to become its directing officer.

            These legal experts who have risen from the ranks are experts in every sense of the term.  They know their business—the business with all its peculiar ins and outs which they are called upon to handle.  Unlike the outside lawyer, retained by a strange client to handle a strange case, the “house attorney” has no unfamiliar ground to acquaint himself with before he finds his bearings.  He knows every peculiarity of the conduct of the business and the conduct of the competitor’s business—it is a part of him, for he was brought up in it.

            The patent attorney who once baked the moulds of the castings that go to make up the machine has, as the company’s patent attorney, nothing to learn of the intrinsic merits of the device, the infringement on which he is called upon to assail.  The credit attorney who once sold goods over the counter has no need to educate himself on the methods of modern mechanizing and accounting.

            It falls out, therefore, that the new way scores in the matter both of efficiency and economy in the long run.  In having at its command attorneys who are thoroughly familiar with every angle of the business the firm saves just what it would cost an outside attorney to educate himself in the business before going into action.  The greater efficiency has been demonstrated by experience.  Attorneys who have grown up with the house are more loyal to its interests, more careful in the advisement of grave measures, more desirous of bringing about ultimate results that will be more beneficial than temporary victories. 

            “The time has arrived when every one of our responsible representatives will be educated under our own roof,” said the head of a big retail store, in discussing the question.  “Even our lawyers without an exception are men who have grown up in our employ.  They know our business; they know what we want and how to get it at the minimum of cost and endeavor.  I woke up to these facts about ten years ago.  I saw the railroads and the big factories maintaining expensive legal departments.  Our own litigation was increasing, and I came to the conclusion that the origination of a law department for our own needs would be the logical conclusion of the trend of things.  I decided that the sooner it was organized the greater would be the economy.

            “I ordered a canvass made of our employees to ascertain if there were any among them with the qualifications of an attorney.  The general manager reported the names of three young men who were studying law at night school.  One of them was about to take the bar examination.  As soon as he was admitted I sent him to the credit department with instructions to take charge of all litigation growing out of that department.  A few months later the other two young men became his assistants.

            “These men kept in touch with the working force and on the lookout for others who were inclined toward the law, with the result that the department grew to its present proportions.

            “The result is that last year I relieved one big law firm of the last piece of litigation that it or any outside attorneys ever will handle for us.  Our legal department now is so well organized that we are able to cope with every difficult situation under our own roof.

            “When I recall the big fees we have paid outside law firms in big cases, and the countless stream of small fees that flowed out in small cases, I am confident that we are saving full $25,000 a year on litigation alone.  And our lawyers are well paid, too.

            “When you reckon in the efficiency of the work performed you can figure that we are saving several hundred thousand dollars a year over the old policy.  The outside attorneys had a habit of getting us mixed up with long-drawn-out and expensive litigation.  Nowadays the cases are settled or cleared up in one way or another with incredible dispatch.”

            The merchant, as he concluded his exposition, led the way to the elevator which transported us to the office of the legal department.  In a spacious room, where typewriters were clicking and boys scurrying hither and thither with baskets of documents, a dozen men were seated in a hollow square before as many roll-top desks.  They were the attorneys for the mercantile institution.

            No department of the great store could boast of more animation than was exhibited here.  Some of the attorneys were engaged in dictating letters to stenographers, some were holding long conversations over the telephone, some consulting the law books which were being brought to them from the adjoining library.