ACC Value Challenge Resource Library - GC Value Insights 2012

§;Flat-fee for ‘lost or damaged’ package litigation portfolio – We have implemented alternative fee arrangements in several employment litigation matters. In one instance, a wage and hour class action that we successfully defeated in 2008, the matter spawned 54 individual cases. For a significant number of these cases, fixed fees were negotiated for various phases of the litigation. For example, fixed fees were established to manage discovery, summary judgment and trial phases. Each successful defense verdict included a success fee, an amount negotiated at the outset of the litigation.

§;Fixed fees for phases of employment litigation matters, plus success fees for results – We have implemented alternative fee arrangements in several employment litigation matters. In one instance, a wage and hour class action that we successfully defeated in 2008, the matter spawned 54 individual cases. For a significant number of these cases, fixed fees were negotiated for various phases of the litigation. For example, fixed fees were established to manage discovery, summary judgment and trial phases. This fixed fee approach helped us cost-effectively manage a considerable trial schedule throughout 2010. Each successful defense verdict included a success fee, an amount negotiated at the outset of the litigation.

§;Fixed fees for global trademark portfolio – Several years ago, we initiated a very successful fixed fee program with a US-based firm to manage global work related to our trademark portfolio. The work has been done effectively with reductions in cost year-over-year, without a drop-off in quality.

§;Fixed fees and budget estimates for patent-related work – For patent-related work, we pay a pre-determined price each time a specific patent-related activity is performed. The firm estimates the number of times each activity will occur and reports regularly throughout the year on performance against that estimate.

§;Fixed fee arrangements for work that supports technology deployment, technology procurement and sponsorships – We also have initiated a fixed fee arrangement for legal work that supports technology deployment (e.g., licensing in connection with customer-facing shipping systems, billing systems and communications), technology procurement (e.g., procurement of software, technology-enabled equipment and telecommunications equipment) and domestic sponsorships.

§;RFP process for patent cases with value-based fee structures – We have used a traditional RFP process for patent cases over the last few years with good results. The cases have been awarded to firms that presented aggressive fixed-fee proposals that incorporated phased budgets with caps and incentive kickers for coming in below cost for particular phases of the cases.

OTHER VALUE PRACTICES IMPLEMENTED BY THE LAW DEPARTMENT

§;In 2010, we initiated a full review of the global work related to this portfolio, and reconfirmed its value relative to alternative models, while identifying several specific areas in which we can become more efficient, including allocation of internal resources and techniques for managing non US matters. UPS utilized a law firm that does not currently do the work to perform the review. We identified some improvements internally through a process mapping exercise; refreshed the training of our lawyers and paralegals; and also identified some work currently being managed under our flat fee program that we may move in house to further reduce cost and more directly manage our IP assets.

§;UPS must review and produce millions of documents to meet its discovery demands. Traditionally, we used outside case counsel to perform document reviews on an hourly basis, using partner-track associates, but we recognized this was not a sustainable model. We have successfully used staffing agencies, both in the United States and abroad, using document reviewers with radically reduced hourly rates. These techniques resulted in millions of dollars of savings by attacking the hourly billing rate of the more traditional law firm associates and paralegals.

§;We have selected national ediscovery counsel to provide the highest quality legal services while achieving cost savings and budget predictability. In 2009, we conducted a competitive proposal process among leading firms in the ediscovery field. We negotiated with the winning firm a novel fee arrangement with a bundled per-document fee that combined the costs of document review and the document review tool. We avoid paying hourly fees for document review and project management, and we also avoid paying additional fees to a litigation support vendor for processing, de-duplication, filtering and hosting of electronic data. The bundled rate also includes all charges associated with preparing documents for production, such as IT services, load file fees, and document numbering and branding. The program maintains flexibility to permit document reviews to be conducted by attorneys at the law firm, its offsite document facility or by alternative staffing agencies depending on the needs of a particular case.

ESTIMATED COST SAVINGS

§;Over the last four years, we have saved around 37 percent in fees relating to our global trademark portfolio.

§;In the first six months of the document review and litigation support arrangement, we had more than 50 percent in cost savings, and the savings continued as the program matured. In addition, we now know how much we will spend on document review at the time data is collected. Additional value-add: we have greater confidence in the work product, have decreased production times and have increased consistency across our litigation portfolio.

§;Annual fees for “lost or damaged” package litigation matters have declined by $1 million since inception of our new value-based fee structures — with no reduction in quality of work; we will also maintain 2010 fee structures in 2011 for this work.