Monday, December 31, 2012

An Early Sighting of the In-House Counsel III

[This is the third and final 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.]

At a more pretentious desk near the entrance sat the chief of the department, issuing instructions like a general of the forces.  Before him lay a mass of correspondence which he was busy assigning to his aides.

            “I just received your communication about that trouble at the new warehouse,” said the chief lawyer to the head of the business.  Mr. Smith will attend to it at once.”

           It turned out that the trouble was a complication over the terms of the purchase of a new warehouse.  The man to whom the matter was referred for adjustment formerly was an assistant to the superintendent of the store building.  Later he was given charge of the firm’s real estate and renting deals, and when he was graduated into the law was an expert on titles and conveyances. 

            Then the merchant drew his chief legal aide into a discourse on his branch of the business.

            “Last year we handled litigation over property valued at more than $2,000,000,” he said.  “We did it with a force of twelve attorneys and three investigators.  The records show that before the organization of the department fifteen lawyers were retained on different cases by the house in a single year, though the volume of litigation was much less than now.

            “Every man in the department was trained up in the business.  The attorney for the collection department started as a salesman at a linen counter.  He is the most successful man we ever have had in handling litigation over bad accounts.  The attorney who looks after the personal injury suits brought against us was at one time the engineer of the store.  What he doesn’t know about the ways a person can and cannot be injured by our engines, elevators, wagons, etc., isn’t worth knowing.

            “Then we have a lot of adjustments and sometimes litigation between ourselves and the railroads over the shipping of goods.  The man who handles that sort of diplomacy worked up from a bundle-wrapper to superintendent of one of the warehouses.  He knows all the railroad officials, all the railroad excuses for wrong shipments, damaged goods, etc.  He makes satisfactory settlements with the carriers and, once or twice, he has succeeded in forcing a surrender from the powerful legal department of an entire railroad system.”

            It came out during the talk that the principal policy of the modern legal department is that of settlement—quiet compromise wherever possible.  Litigation is about the most expensive pursuit that may be indulged in, even with a trained and economical law department.  The mills and the railroads and the big stores have come to that realization.  Law departments nowadays are instructed to keep their firms out of the litigation into which they once were plunged by reckless and self-seeking attorneys.

            “Yes, we settle wherever we can,” said the chief of the legal staff with a smile at his employer.  “It’s cheaper in the long run.  Legal triumphs are alluring to the young lawyer who doesn’t have to foot the bills, but they are not exactly appreciated by the president of the Company when he looks over the monthly reports of receipts and expenses.  So we settle as quickly and as cheaply as we can.

            “We handle several hundred thousands of dollars worth of business for the credit department, but you would be surprised how few cases ever get before a jury.  Last year we collected some 350 odd bad accounts, and out of these only two were collected on judgments.  Our policy in collecting bad debts is always conciliatory and reasonable.  We lose no time in getting into action as soon as an account is turned over to us, but we go at it in a diplomatic way.  If a man is hard up and frankly says so we agree to give him all the time he wants to square up his account.  We even assist him in his business in every way we can.  We keep on good terms with him, and in the end we win him.  In nine cases out of ten this policy succeeds and we get our money with nothing expended but our time.  Of course some fellows refuse out and out to pay a cent, and with these more strenuous measures must be taken.

            “It’s the same way with the personal injury claims against us.  If a person is injured in our store or by one of our wagons, we investigate thoroughly and, if the claim is justified, we come to an agreement at once on the amount of damages.  But if the claim is fraudulent—and we have had several—we fight it out to the last ditch.

            “A high order of legal ability is called for by litigation involving deeds and leases to property and dealings with the city government.  Three of our most expert attorneys attend to all of these matters on the principle of quiet settlement instead of expensive lawsuits.”