Wal-Mart is known for its willingness to use its buying power and market share as leverage when it negotiates. And now apparently, Wal-Mart is extending its approach to its relationships with outside counsel.
As reported in The Wall Street Journal Law Blog today, Miguel R. Rivera, Jr., Wal-Mart’s associate general counsel for outside counsel management, issued a memo yesterday to "relationship partners" in Wal-Mart’s outside counsel network, in which he announced that Wal-Mart was declaring a moratorium on across-the-board rate increases by its outside counsel, due to its belief that those rate increases are being driven by the "steady, nationwide increases in junior associate salaries." Of course, in the memo’s preceding paragraph, Rivera had asserted that, "[t]he salaries that law firms choose to pay their junior associates are none of our concern," which seems to be inconsistent with linking the associates’ salaries to the need to freeze rates.
All is not lost for Wal-Mart’s outside counsel, however. Although the moratorium will continue "until further notice," Wal-Mart will consider "reasonable, individual requests for rate increases for those attorneys in your firm who are performing at an exceptional level and whose experience and knowledge is adding substantial value toward meeting Wal-Mart’s legal objectives." Those requests must be submitted to Rivera on or before December 15.
But I think the most telling part of the memo is at the end. Remember, Rivera stated in the memo’s second paragraph that associates’ salaries are none of Wal-Mart’s concern. In the memo’s last couple of paragraphs, Rivera asks outside counsel to provide information for their associates, from the class of 2004 through the class of 2007, who have worked on Wal-Mart matters, and then for the associates in each class, their names, their locations, the Wal-Mart matters they worked on, their billing rates, and the number of hours they billed for each year. This information is due in spreadsheet format by November 30.
For any firm that objects to providing the information, Rivera wants, by November 12, the specific reasons for the objection. And if a firm needs more time? Also by November 12, Rivera wants to know the steps the firm is taking "to gather and provided the requested information in a timely fashion as well as a commitment to provide the information on a date certain."
Should Wal-Mart (or any client) treat legal services the same as any other commodity, such as appliances or tires? I would like to think the nature of the attorney-client relationship is inherently different than Wal-Mart’s relationship with any one of a thousand vendors, but maybe it’s not. In any event, I would view the memo as being less heavy-handed if it had not included the seemingly gratuitous language about associates’ salaries being none of Wal-Mart’s concern, but then imposing the rate freeze precisely because of the effect of increasing associates’ salaries.