Make More Rain : blog, ethics

Georgia Proposes Flat Rates For Representing Indigents In Capital Cases

Admin — Fri, 22 Feb 2008 08:00:25 GMT

Legislation has been introduced in Georgia to provide more cost accountability to state-funded defense of capital cases. What has caused the uproar?

In March of 2005, Brian Nichols was awaiting trial for rape in Fulton County, Ga. While changing clothes to prepare for his court appearance, Nichols overpowered a deputy, walked into Judge Rowland Barne's courtroom through the judge's chambers and shot both Judge Barnes and a court reporter. During his escape, he injured several and killed two others. The manhunt that ensured culminated in an unlikely ending: Nichols in the apartment of a drug user who was soul-searching and through an 11 hour conversation softened Nichols enough to let her leave. She called 911 and Nichols eventually surrendered without further violence.

Since then, Georgia has seen one of the longest murder trials in state history take place. Since Nichols qualifies as an indigent under Georgia law, the taxpayers are footing the bill for his defense. The Atlanta Journal Constitution reported that the cost of the trial has exceeded $2 million in defense costs alone. That has outraged the Georgia Legislature enough to change the law regarding representation of indigents in capital cases. According to the AJC:

The bill . . . could reduce the financial burden on the Georgia Public Defender Standards Council, which oversees the statewide indigent defense system. Under the bill, the council would pay for the first $150,000 paid to private lawyers defending an indigent capital case and 75 percent of the next $100,000, with the county paying the other 25 percent. Beyond $250,000, the state and the county would split defense costs.

Here's the kicker: The measure recommends that the council set contracts with flat rates for attorneys' fees and expenses in death cases. Sound like a good idea?

Perhaps if defending capital cases were akin to filing Chapter 7 Bankruptcy. However, for private sector attorneys who represent indigents in capital cases, does it remove the incentive to take on these difficult matters? Would a criminal defense attorney zealously defend a suspect for a flat rate for both fees and expenses when you have Judges saying things such as"[e]veryone in the world knows he did it" (as the New York Times reported Judge Fuller said before having to recuse himself from the case)?

Is Georgia trying to limit the representation of indigents in capital cases? Or are they only limiting the financial incentive to defend them? If it is the latter, then ostensibly an attorney may lose the zeal to defend a client once the money runs out - unless they believe that the defendant is innocent. And that might be the point of the legislation. [poll=8]

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Lawyer Professionalism Tied To Value Billing?

Admin — Tue, 19 Feb 2008 08:00:01 GMT

It's not that I am against value billing. I am just against the proposition that the hourly billing model is an inherent source of evil. When reading Ed Poll's post on Professionalism versus Competence, a sentence caught my eye that appears to be another slam against the billable hour.

The post is about a recent USA Today poll asking whether co-worker's rude or unprofessional behavior should be tolerated if they otherwise do a good job. Thankfully the answer was overwhelmingly no. No one wants to work with rude people.

Poll notes the new firm Patrick Lamb co-founded this year that focuses on value billing. There is much positive press when law firms move to this model so the marketing upside is a good thing. But then came this:

As more lawyers succeed in this business model, perhaps others will follow. Then, perhaps, will civility in the profession be achieved.

Am I to conclude that without this business model (value billing), civility can't be achieved in the legal profession? First, I don't want to mistake Poll's point: that providing value to clients and a team mentality within the firm adds civility to the profession. Agreed. However, how is this at odds with hourly billing? Is it because some (and unfortunately many) are sloppy in their billing process? Or worse, unfairly padding their hours?

Assuming this is a widespread problem, does value billing fix it? Maybe, but not by its presence alone. If you sell services at a fixed fee, you had better know the price of your services or you won't be in business long. Tom Kane explains in a recent post the importance of tracking time even if you bill at a fixed fee.

Understanding that in all but a few routine transactions there are variations in the time it takes to provide a service depending on the variables surrounding the case, you will need to account for differences in the price of particular tasks. So while on the surface everyone may be paying the same for a service, some will be paying more for a task while others pay less. It depends on how difficult the task is and how efficient the attorney.

In fact, if anything, value billing helps budgeting for lawyers since you can set goals on how many tasks you sell clients. Crafty firms can then weed out the difficult cases through case assessment to maximize profit. Finally, marketing efforts can sway those who would buy into the "value" concept unaware of the higher price they are paying for a simple legal task.

Am I saying this is how firms who "value bill" operate? No. Can they operate this way? Yes. Is that a better value to clients? No. And to answer the presumptive rebuttal, "with value-billing, if the client doesn't like the fee, we will adjust it for them" I would answer, "and how is this different from hourly billing?" I've yet to meet a lawyer that is unfamiliar with post-bill adjustments. Some attorneys have a chronic habit of reducing their fees prior to billing as well. The biggest attraction to the value billing model isn't the savings to clients (marketing notwithstanding), it's the potential for higher revenues for well-managed law firms who price margin into the fee. The value of value billing to the client is nothing more than trading actual cost for pre-performance cost certainty - that apparently can still be negotiated after the service is provided (at least when firms open the door for negotiating fees after performance).

Once again, it comes down to trust. If there is a trusted relationship between attorney and client, then attorneys shouldn't overbill their clients and clients shouldn't question attorneys' fees (after-the-fact) - regardless of the method. As Poll states in an earlier post, "there is a very small percentage of 'bad apples' in the legal profession." The devil isn't in the billable hour. It's in those bad apples.

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NY Judge Laments "Economic Focus" of Law Practice

Admin — Mon, 17 Dec 2007 14:00:00 GMT

The Wall Street Journal Law Blog quotes New York federal judge Harold Baer in a post on November 30th, who in an opinion over a violation of a protective order, stepped out and decided to take the opportunity to voice his opinion on the state of the legal profession. Judge Baer particularly took issue with lawyers' "economic focus of the market place . . . infiltrat[ing] the practice of law, subordinating the high standards of service, collegiality and professionalism as a result."

He goes on:

"[P]artners are at times made and retained for their rainmaking skills and not for their legal skill, that the number of billable hours is not only the alpha and omega of bonuses but that these hours — or at least the ones that count — often exclude pro bono hours, or that who gets credit for originating a piece of business can throw a firm into turmoil and prompt internecine struggles, or that the bottom line has eclipsed most everything else for which the practice of law stands or stood to the extent that the practice of law is now frequently described as a business rather than a profession."

The judge certainly wouldn't like the news from San Francisco, where the firms Howard, Rice, Nemerovski, Canady, Falk & Rabkin and Heller Erhman are trimming their support staffs due to economic concerns.

You can surmise that the point the judge is making relates to making the business more of a priority than the practice (ie, using your practice to shield a patent troll business). However, I can't help but wonder if the judge is lamenting the loss of the bartering system and the handshake agreement as legal tools for payment and contract as well. He suggests that a "focus on the marketplace" is incompatible with a professional practice. I believe the criticism is unwarranted.

I agree with the judge to the extent that the lack of focus on client needs over firm policies hurts the profession (ie, threatening to discontinue direct deposit if billable hours not recorded within time frame). Perhaps there are some firms who do not allow or encourage pro bono work, but the vast majority of firms actively provide free legal services and encourage it for their associates. However, a firm cannot base its financial model on providing free services. The judge assumes both are incompatible, as if running a firm like a business necessarily means that attorneys cede their status as professionals. Judge Baer all but states this in his quote, "[a] profession is not a business".

Does the judge think that law is the only profession? Does he assume doctors are not professionals because they choose not to work with an insurance company and thus limit the choice of patients, based on a (gasp) business decision that the insurance company is not favorable to the business needs of the doctor's practice?

Further, assuming that the "high standards of service, collegiality and professionalism" are subordinated solely based on things such as providing credit for bringing in new business, requiring that attorneys place a value on their work performed, and looking at revenue numbers makes the judge look antiquated and naïve.

By his quote that "[a] profession is not a business" judge Baer places a line in the sand in a way not so different than an owner of a steam locomotive might relative to the impracticalities of building a freeway system to support vehicles powered by internal combustion engines. If "economic focus" is truly his lament, there's a better way to make his point. Mark Herrmann, in his book The Curmudgeon's Guide to Practicing Law (ABA Publishing, 2006), addresses the associate who asks "They want me to bill a lot of hours, so why not?" To the curmudgeon, billing time is compared to an unwilling child taking piano lessons: if you are focusing on the time rather than the objective, then you may as well not participate in the activity at all.

If you do good work, you'll always have plenty to do; "billing hours" will be irrelevant. If you ever feel the need to bill long hours, then please find another law firm to employ you. Your only obligation at this firm is to pursue the client's cause; "billing hours" is not on the agenda. (Herrmann 14-15)

Attorneys who focus on the needs of the client realize that recording your time is a chore (a necessary chore) secondary to the act of practicing law. From a management standpoint, it is imperative that the habit of recording your time is automatic; from a practicing standpoint, it is the way to "approximate, however crudely, the value given to each client" and "know who is busy and who is available to work on new projects." (Herrmann 15)

For anyone who hasn't already read this book, I highly recommend it. Although I suspect that most attorneys who have have been in private practice for more than 10 years will already be familiar with its tenets. The judge doesn't qualify (although he does have a stellar career as a public servant) and that may explain the generalization.

It is the responsibility of the equity partners (ie, owners) to ensure that the firm survives and its non-equity attorneys and support staff are paid. That means making decisions to retain talent, reward marketing efforts, and pay attention to the firm's finances. Now, if the judge is advocating that law firms not be held to the same standards as other businesses (ie, no payroll taxes, benefit requirements, compliance with other federal and state employment laws, etc) then perhaps his criticism may have some merit.

Maybe we will see the judge make another manifesto in opinio, this time railing against the application of business requirements to law firms. Otherwise, the judge will appear as a curmudgeon of a different type than Herrmann chronicled: one who is ignorant of the realities of running a business, regardless of profession.

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Sarbanes/Oxley - How It Affects Global Competition And Privately Held Law Firms

Admin — Mon, 03 Dec 2007 14:00:00 GMT

Bruce MacEwen (Adam Smith, Esq.) in a recent post notes the negative effects of the Sarbanes/Oxley Act of 2002 (SOX) on the global competitiveness of America (specifically New York City). Some of the complaints regarding SOX:

It encourages highly risk-averse management, the antithesis of American entrepreneurialism and innovation.
Ironically enough—along with Regulation FD—it discourages corporate disclosure and communication with analysts and other commentators and observers since the statement not made cannot later be labeled misleading.
The requirements for independent directors operate to disqualify anyone with actual experience in the industry and, perhaps, judgment, perspective, or insight.
Worst of all, of course, the potential criminalization of accounting judgments—touching not just the corporation but senior executives—operates, as one managing partner put it to me, to make every publicly US-listed company long for the day when all they had to worry about were the quarterly earnings expectations of Wall Street: "Today, it's not the stock analysts you've got potentially looking over your shoulder, it's the US Attorney."
Finally, there is universal consensus that had SOX been in place before the parade of the Enron, Tyco, and Worldcom horribles, they still would have happened. Why? Because one cannot legislate common sense or integrity. More than one person pointedly observed that fraud and misrepresentation have always been illegal and we've always known quite well how to deal with them. Piling SOX on top had the same practical effect as "making it illegal to break the law" (that would be zero).

MacEwen argues that the above have created unintended consequences that may "help dislodge New York from its pre-eminent role as a center of global capital formation". There is little question that SOX has reduced the number of firms filing for an Initial Public Offering. The risks involved in going public are worry enough - with SOX, the added costs for compliance plus the potential criminalization of executives is a tipping point in favor of staying closely-held.

It isn't just MacEwen who questions the benefits Sarbanes/Oxley. The negative effects of SOX certainly merit consideration, and perhaps "knee-capping its provisions" might be in order. However, let's go in the other direction for a moment: Could SOX be expanded to include privately-held corporations and find its way into the management of law firms?

Currently, only two provisions apply to closely held corporations: whistleblower protections and prohibition against destroying, altering, or falsifying documents that could be used in a legal proceeding.

As law firms start to restructure and operate more like corporations (ie, hiring C level management, moving from partnerships to limited liability companies or professional corporations, etc) some argue that best practices dictate that companies begin to implement at least the basic mandates of SOX (particularly when revenues approach $50 million). An interesting discussion of this by Stephen Bainbridge (with an alternative view by Jennifer Johnson) can be read here on the Business Associations Blog.

As ridiculous as it sounds on its face, lawyers know that the expansion of Congressional Acts knows no boundaries. Congress has a habit of creating short-sighted Acts that have long-term unintended negative consequences; the application of RICO to abortion protesters - though short-lived - comes to mind. This could be a new area of law - defending law firm managing partners from causes of action brought by non-managing equity partners over the mismanagement of their books! Lawyers suing lawyers requiring lawyers to represent the lawyers sued. A self-sustaining marketplace!

All kidding aside, the purposes of SOX shouldn't be lost to law firm managers. A large purpose of SOX is to ensure fiduciaries are properly overseeing the management of their corporation's books. Managing partners (or their equivalent) are the fiduciaries of their firm and are responsible for the accounting of their firm's finances. Embezzlement is a real concern for law firms. The accounting of the law firm should not be without oversight.

That said, do you think SOX should be cut at the knees? Or, since the purpose overlaps existing law (relative to fraud and misrepresentation), is SOX just reactive bad law that should be repealed altogether? What would be a better way to address the purposes of SOX?

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A New Host for morepartnerincome.com

Admin — Fri, 30 Nov 2007 19:37:12 GMT

An Attorney, a prolific writer and an experienced advisor to law firms, Brian Ritchey was selected to succeed the retiring Tom Collins as the host and Chief Contributing Editor for morepartnerincome.com. He also takes over as the Editor in Chief of the Managing Partner Advocate, a bi-monthly publication focused on issues affecting law firm managers.

Brian Ritchey, previously a Regional Vice President for Juris, Inc., became part of the Practice Management Division of LexisNexis upon the purchase of Juris by LexisNexis in July 2007. He actively practiced law for 7 years in a firm in Birmingham Alabama. Brian was recruited away from his practice early in his career to join a leading case management company and spent a year working as a liaison between attorneys and software developers to provide customized case management solutions to clients. He went back to private practice in 2000, but was lured away again to join the Juris team in 2005 where Brian used his knowledge of law firm dynamics to help partners, directors, shareholders and legal administrators manage their firms’ practice through the utilization of technology, strategy and process.

Brian obtained his J.D. from Cumberland School of Law after attending the University of Alabama for his undergraduate degree in English. He was admitted to the Alabama Bar in 1997, is licensed and in good standing with the Alabama Bar, the U.S. District Courts of Alabama for the Northern, Middle and Southern Districts as well as the 11th Circuit Court of Appeals.

Brian will transition into his new role over the next six weeks. Readers can expect to continue to see posts of Tom Collins and other authors as well as those of its new host. The blog’s mission continues to be providing information to law firm leaders that will enhance partner income. That objective is achieved by doing the right things right. When you do everyone wins including clients and non-partner members of the firm.

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center: 877/377-3740, e-mail info@juris.com or go to www.Juris.com.

Ethics in Billing

Admin — Tue, 05 Jul 2005 17:54:00 GMT

I spoke to a group of managing partners last week on the subject of ethics in billing, particularly as it relates to mobile technology.

Most of us know the ABA pronouncements regarding reasonableness, etc. But, did you know there is a growing body of decisions and rulings that indicate that time worked must be measured and recorded contemporaneously to meet the ethical test?

Consider the Washington State Supreme Court's decision: In re Discipline of Dann, 136 Wn.2nd 67 (1998). Barrie Althoff, WSBA Chief Disciplinary Counsel writes “The Court's opinion in Dann also makes it clear that if you bill on a time-spent basis, you must keep contemporaneous and accurate time records. It is not acceptable to attempt to reconstruct your actual time by relying on memory, on miscellaneous unorganized scraps of paper, on comparisons to the time expended by others working on the project, or by evaluating the complexity or extent of the work-product ("I usually take one-half hour to write a letter," or "This is an excellent brief, it must have taken me at least eight hours to write.") to jog your memory.

This need for accurate and contemporaneous records may be most important to lawyers who traditionally bill on a time-spent basis, but it can also be important to others. For example, lawyers who enter a contingent-fee agreement with clients may find that, for whatever reason, they do not complete the representation, yet believe they are entitled to some compensation. If they seek compensation, it will likely be on a quantum merit basis and they will likely need to be able to prove the time they actually spent on the matter. Unless they have kept accurate contemporaneous time records, they are unlikely to be able to do so.

Is Your Firm a Clan or Just a Group of Hunters?

Admin — Fri, 01 Jul 2005 17:58:12 GMT

Beth Keno, Beth@jurismidwest.com, the Juris person in Chicago, covers the Midwest area including Illinois, Michigan and Wisconsin. I often point out that the Juris team works with more law firms than any specialized consulting firm. Beth is one of the Juris-best when it comes to helping a firm work smarter rather than harder to increase owner income, i.e., per-partner income. She is often disappointed by the lack of a team culture in many law firms. To illustrate the impact, she sent me the following:

"As I spend time meeting with attorneys from various law firms in the Midwest, I continue to run across the primitive belief that the best way to build a law firm is to 'eat what you kill'. In other words, you bring in only what you can work. In many ways, this plays to the posting regarding relative deprivation (see June 15, 2005). These attorneys feel this is the fairest and best way to run and build a firm. But is it? Let’s look at how successfully this thought process would have worked for the caveman.

John Caveman from the X Clan had really scored. He killed the biggest antelope on the plain. Now, John is a talented hunter, and very successful. Obviously, this is exactly what any clan needs, someone who can bring in the meat. But, John doesn’t believe in sharing. So, although he had plenty of meat from the previous three days' kill, he hoards his latest conquest. John faces a major problem. There are no freezers or storage systems to help him keep his meat fresh until he has time to eat it. And he just can’t eat it all. The meat is going to spoil. In the meantime, Clan X, who takes care of keeping the clan together, protected and functioning, is going hungry.

Now, over the past few months, John’s hunting skills have deteriorated; he has been too busy eating his kill. He has become out of shape and, more significantly, has not spent any time looking for his next big kill. The seasons are changing and John’s food source is becoming scarce. Soon, John will be hungry.

In the meantime, John’s clan has been successful in planting and bringing in new food. The clan realizes that for them to be strong and successful, they need a healthy clan. They all need to eat.

There are good reasons why every attorney is not a solo practitioner. They need the clan. Firms don’t achieve long lasting success and growth with the 'eat what you kill' growth mentality. For survivability, they need successful hunters who share with the clan. By sharing, hunters can be back on the plain, looking for the next kill sooner, bringing more food back to the clan.

The challenge for law firms is not only to find those hunters, but to reward the hunters for sharing. Firms can’t achieve growth by the eat-what-you-kill mentality. There is a limit to how much one can eat. For partners to increase their income, they need to bring work in for the clan—and be rewarded for it."