In-house counsel say boutique approach fosters familiarity and specialized knowledge of business.
When Harpreet Sidhu began her role as general counsel at Pethealth Inc. three years ago, the company was using one large law firm for all of its legal work. In such a large company and without a legal department, the default approach was to send the work out to one trusted provider.
“Before I was in this role, there was no in-house counsel, everything was sent to one Bay Street firm and they handled it all for us — litigation, trademarks, insurance defence — everything, and it was by default,” she says.
She started to look at the options available. “There are so many options, I thought, ‘why are we using one firm for everything?’”
After exploring all the options and the demands of the work her company had, she realized a mix of big national firms, boutiques and sole practitioners was a better formula.
“Boutiques provide cost effectiveness and variety of knowledge around what they know about different areas of the law,” she says.
“I think a lot [of big firms] didn’t have time to learn our business and the boutiques had more time to come in and learn our business and see how we run our call centre, how we sell insurance and how we market to our customers,” she says. “It’s all about personalized service and, if you have a good relationship, it’s going to go a long way.”
Pethealth, which is a Fairfax Financial company, is unique in that pet insurance is so different — it doesn’t fall into home and auto, it actually falls into property insurance, so in every province and every state in the U.S., it’s classified in a different way. The company doesn’t just sell pet insurance, it also has RFID microchip identification and database services for pets.
“Big firms weren’t interested in what we were all about. We don’t just do insurance, we cover the whole life of the pet, so you adopt the pet, microchip the pet, then buy insurance for the pet. We’re like the entire pet parent and insurance is one aspect of that, but I found the smaller firms have become our business partners and are so keen to learn what we’re doing,” she says. “We have different lawyers in every state and province and we use smaller boutiques.”
The reason is specialized knowledge, reliability and they are “committed.”
“I can call their cellphone and they pick it up, and cost is a factor — if you compare the bills, they are so much smaller. That’s what it comes down to,” she says. “I’m working on my budget for 2018 and it comes down to the dollars. Executive-level people don’t care where you are getting the legal work from. They say you spent this much in legal fees but still have the same result when [you] could have got it from someone else?”
There are areas in which she still turns to large firms for assistance such as large litigation or regulatory matters. “I wouldn’t use boutiques on one-shot matters. With matters related to regulators, I would look to see if they have worked with the regulator before and what’s their reputation. With regulators, there is no course of appeal; it’s very difficult to get them to change their mind. If I had an insurance investigation or complaint against the company, I would have a good reputable firm that has worked with regulators in the past.”
At Allstate Canada, general counsel Martha Binks also uses boutique firms for insurance defence and privacy work, and she says large national firms are often not interested in insurance defence work due to the lower rates associated with the work and they often don’t have the expertise. “They don’t do it all the time so they don’t know what’s relevant or the quickest way to deal with it, it’s just not their thing.”
“For an insurance company the claims are a signficant liability so they have to be tracked closely and so there are very strict requirements you have to follow when you first get a file. It’s not that they aren’t doable, but there are a lot of lawyers who don’t do it well. If a firm provides a reasonable service, reports on time and prepares you for what’s going to happen on the file, then they are likely to get more files.”
For a global engineering company such as Golder Associates, professional liability can be an issue, so Tony Linardi, general counsel for Canada, uses boutiques for that kind of insurance defence work.
“When you use a small firm, you get the personalized service and build the relationship and that builds familiarity around what I expect on reporting and billing and what they can expect from my payment cycle, as well as how I expect them to interact with my internal clients,” says Linardi.
Much like Sidhu, Linardi made the switch to smaller firms when he joined Golder in 2002 and says he hasn’t looked back, due largely to cost, responsiveness and expertise provided by boutiques. “At larger firms, you tend to get bounced around to who has time to do the work and you sometimes have to bring associates up to speed on engineering and construction concepts, whereas at the boutique firms I know the person I use understands drilling and dirt and all that goes with it, so I don’t have to educate the lawyer as to the type of business I run.”
Linardi retains boutique firms in Alberta, Ontario and B.C. “We used to use a large firm in Alberta and when I saw the bills I felt we weren’t getting value so moved to the smaller firm.
“We have arbitration work as well — it’s one of the dispute resolution mechanisms we have in our contracts — instead of going to litigation we can go to arbitration. We’ve only had one file go to arbitration in the last 15 years, but we use boutiques for the understanding of our business,” he says.
Arbitration is an area Alexander Gay, litigation counsel at the Department of Justice in Ottawa, says is largely underused in Canada. He maintains a broad civil litigation practice, with an emphasis on commercial and trade disputes.
“It is a problem in that the practice of arbitration is very poorly developed in this jurisdiction,” he says. “We have the lowest usage rates in the Commonwealth.”
He has represented clients in arbitrations, mediations and before regulatory tribunals and boards, including the Ontario Energy Board, the Canadian Human Rights Tribunal, the Canadian International Trade Tribunal, the Alberta Securities Commission, the Environment Canada Board of Review, the Public Service Labour Relations Board and the Competition Tribunal. He is also the author of the Annotated Arbitration Act of Ontario, 1991, the Annotated Ontario Arbitration Legislation-Arbitration Act, 1991 and International Commercial Arbitration Act, 2017 and numerous articles.
Gay is trying to elevate it for a number of reasons. Firstly, he says it generates economic activity when litigants come to Ontario to conduct an arbitration; and secondly, it is a good alternative to the courts. “It is far more flexible and far easier to tailor a process that meets the needs of a file.”
Despite all the tax expertise that exists inside Allstate, Binks says compliance has also hired a tax boutique firm for an assessment the company disputed. “It was extremely successful in a real niche service. We have corporate law firms we go to for most of our corporate work, but respondng to an assessment was seen as one that was appropriate for a niche firm.” In that instance, the hourly rate was not cheaper but they were sought out because of their expertise. “I think that’s how to approach it; for the very specialized work, and for insurance defence it’s really transactional, but if you do it you get really good at doing it quickly,” says Binks. “The more predicting you can do on those files the more value you add.”