Whirlpool Selects Warner Norcross Judd

December 3, 2007
| By Pete Daly |
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Whirlpool Corp., the largest home appliance manufacturer in the world, has retained Warner Norcross & Judd as its national business litigation legal counsel. The law firm's willingness to accept flat fees over a billable-hours fee structure was one of the reasons Whirlpool selected it.

Warner Norcross was chosen after a seven-month review process that focused on 24 law firms from across the country, which David Grumbine described as "the best of the best."

Each of the competing firms was evaluated on the strength of its litigation team, subject matter expertise, commitment to diversity and international business experience.

Grumbine, senior staff counsel at Whirlpool and the head of its corporate Dispute Resolution Group, said the selection of Warner Norcross also reflects the firm's "willingness to partner with Whirlpool in a value-added legal service arrangement." He said the Whirlpool legal staff will be meeting with the law firm in December to work out what the flat fees should be for various types of cases and legal processes.

Grumbine said this isn't the first time Whirlpool has had a flat-fee arrangement with legal firms.

"We've been working on this for 10 years," he said, noting that Whirlpool has long tracked all the details of its legal costs in a database. "We know what something generally costs. We know what the range is."

"Here's the problem with billable hours: Do you think there is a conflict between the client and the firm? Of course there is," he said. "The problem with hourly fees is, they don't really provide incentive for an outside firm to maximize efficiency."

"This is one of those statements where people say 'duh,'" said Grumbine, "but did you know that the longer a (legal) case is open, the more expensive it is?"

But the amount of time billed doesn't necessarily prove the amount paid was worth it, he said.

"You, the consumer, don't ask how many hours it took Whirlpool to build a refrigerator. You don't care," said Grumbine, emphasizing that the buyer and seller really only need to agree on the value of the service or product.

But "it's not completely about saving money" on a given legal matter, he said. "Another factor is predictability, and people underestimate that.

“If I tell the business side (of Whirlpool) that this commercial deal will take $100,000 to put through the legal process, it's like a commodity. They can (determine) from here what's worth it and what isn't."

Grumbine said Whirlpool builds incentives into its flat fee agreements: If a law firm bills for less than the agreed amount for a case, Whirlpool will share some of the cost savings with the firm.

Grumbine could not divulge the company's annual legal costs but confirmed it is in the millions of dollars.

Warner Norcross will handle Whirlpool’s business litigation in North America, including supplier disputes, distributor conflicts and related issues. It will not deal with product liability, which has been handled for Whirlpool for more than 10 years by three firms: Barnes and Thornburg, Nelson Mullins Riley & Scarborough, and Nall & Miller. None of those firms are based in Michigan. The firms are compensated through fixed fees, not hourly, said Grumbine.

Grumbine said Whirlpool does not enter into contracts for legal services: Its agreements with law firms "are based on mutual trust." Whirlpool does have an annual performance review of its legal services, and either party can end the relationship at any time.

“We are both pleased and honored to have been selected as Whirlpool Corp.’s national business litigation counsel,” said Douglas E. Wagner, managing partner of Warner Norcross. He noted the firm has done legal work for Whirlpool going back 25 years.

Whirlpool has annual sales of more than $18 billion and more than 73,000 employees at more than 70 manufacturing and technology research centers around the world. Headquartered in Benton Harbor, Whirlpool’s global portfolio of brands includes Whirlpool, Maytag, KitchenAid, Jenn-Air and Amana.

Wagner was asked if there is a growing trend toward alternatives to the traditional hourly billing system for legal services. "I think there is, especially among sophisticated business clients who are heavy users of legal services," said Wagner.

"One of the difficulties (large corporations) face is budgeting their legal expenses. They need a way to be able to predict costs," he said. He added that most large clients "are willing to pay for value but … they'd like to get away from the billable hour" system.

"They're more interested in the value of what you provide than how long it took you to provide it," he added.

Wagner said a flat fee arrangement with Whirlpool "creates incentives for us to get good results and get them quickly, without expending unnecessary time."

"I think it's still pretty new. I think Whirlpool is a bit of a pioneer," he said.

According to the National Law Journal, Warner Norcross used flat fee billing when defending Consumers Energy in stray voltage cases. Other major corporations, including Cisco Systems Inc. and Pitney Bowes Inc., have adopted flat fee legal service arrangements. But many of the largest law firms will not accept work on a flat fee basis. The National Law Journal also reported that a study by an association of corporate attorneys revealed about 95 percent of corporations still pay standard hourly rates for about 75 percent of their legal work.

"The difficulty is coming up with what a fair fee is for a given project," said Wagner. "Especially in litigation, the amount of effort it may take is quite variable."

"This only works if we are guaranteed some significant number of cases or some significant volume. Some cases become more complicated. … On the other hand, there will be cases where we will be able to resolve it early on," said Wagner.

Another reason that led to Warner Norcross getting the nod from Whirlpool is a software module developed specifically for the opportunity at Whirlpool, called Case Tracker.

"One of the criteria in that RFP (from Whirlpool) was the ability to take advantage of technology to better manage their case load," said Wagner. "With that in mind, we began to work on that concept."

Wagner said Case Tracker will allow Warner and Whirlpool's legal officials to securely access information about any of the company's pending cases via the Internet, from any place in the world, "to determine at a glance what the status is of any individual case."

The software module was developed by Warner's IT staff, led by one attorney.

While Case Tracker was created to satisfy Whirlpool's requirements, Wagner said the firm realizes it will have applications for other clients.

"We were up against some of the largest silk stocking firms in the country and also some high-end litigation boutique firms, one out of Denver and one out of New York City," said Wagner. "We were the only Michigan firm to make the finals. We're very pleased to beat out these other firms."

Warner employs about 200 attorneys at five offices in Michigan. Their headquarters is in Grand Rapids. LQX

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