Unlike many companies, Dynegy did not have a
full-time staffer dedicated to overseeing legal department administration and budgeting. And, Huron noted,
Dynegy was using up to 120 different outside firms, which
it needed to scale back.
Blodgett quickly began addressing those suggestions.
In 2007 he hired William Young, a former regional opera-
tions manager at JP Morgan Chase & Co., as Dynegy’s new
director of legal administration. Young immediately set
management and a wide range of alternative fee arrange-
ments and rate discounts.
During Peak PerioDs, Dynegy’s Defense team
was racking uP monthly six-figure bills.
about researching options for an electronic billing system,
ultimately choosing Bridgeway Software.
Then Young helped lead a systematic review of all the
department’s matters, with the goal of assessing the types
of work that could be most efficiently handled in-house
and which it made sense to send to outside firms. The
conclusion: Relatively routine, high-volume matters, such
as human resources and benefits-related issues, could be
handled by staff attorneys, while high-complexity work,
especially high-risk litigation, should be farmed out.
WITH THoSe gUIDelIneS In PlACe, DYneg Y THen
began working to drastically reduce the number of outside
firms it deploys.
“We were diluting our buying power,” says Young,
who notes that divvying up Dynegy’s work among so
many firms had undermined its ability to bargain for
steeper rate discounts. “We needed to find a way to get
much more leverage.”
It ultimately decided to send the bulk of its matters to a
handful of “panel firms,” as Dynegy calls them, including
Houston’s locke, lord, Bissell & liddell and Dallas-based
Jackson Walker.
As a result, just six firms accounted for roughly 80 percent of Dynegy’s outside counsel expenditures last year,
according to Young, compared to more than two dozen
firms in 2007.
The rest of Dynegy’s legal work, and much of its litigation, is spread among roughly two dozen law firms
around the country. And the vast majority of them tend
to be smaller regional players, who tend to offer better
service, says litigation chief Buchman, as well as more
competitive rates.
Buchman and other department lawyers get a good
share of the credit for keeping outside litigation costs
down, thanks to a combination of active, hands-on case
number of class and individual actions, are currently
being coordinated in a multidistrict litigation proceeding in nevada federal district court and have been among
Dynegy’s most expensive litigation in recent years.
In fact, Buchman says that during peak periods,
Dynegy’s defense team at Pillsbury Winthrop Shaw was
racking up monthly legal bills in the low to mid six fig-
ures. “There was a very high burn rate,” says Buchman,
who adds that another problem was the unpredictability
of those costs: “It was really cycling up and down.”
Pillsbury Winthrop had already handled one discrete
piece of the litigation—a motion for summary judgment—
on a flat fee basis. In early 2009 Buchman struck another deal
with Pillsbury, under which it agreed to a monthly fixed
fee covering all legal services and firm expenses related
to the natural gas price-fixing cases for the remainder of
the year. Shortly before 2010, Buchman renegotiated for a
lower monthly fee when the litigation was stayed pending
a ruling on a new defendants’ motion to dismiss.
“We wanted to give the company some certainty,” says
Buchman.
The good news? Dynegy wound up spending 20–30
percent less on the litigation than it would have under a
straight hourly and expenses arrangement, according to
Buchman, and received the same quality of work. Plus, he
notes, getting a monthly single-line invoice (per its agreement with Pillsbury) was much simpler to deal with.
Pillsbury partner Douglas Tribble says the firm also
appreciates the certainty of the fixed-fee arrangement.
While the flat fee meant that Pillsbury earned less some
months than it otherwise might have, Tribble contends
that the firm was convinced that Dynegy wasn’t simply
trying to squeeze them for a cut-rate deal. “They recognize
the purpose is to keep costs at a reasonable and predictable
level,” says Tribble. “They’re operating in good faith.”
Dynegy has been striking similar arrangements with
other firms, and on a wide range of matters. According to
