Biglaw Trouble: Big client fee savings are bad for biglaw

Big savings in legal fees for big clients is really bad news for “biglaw.”  There are perhaps revenue drop50 US law firms grossing over $1 billion per year and the gross legal product, last time I checked, was a little under $400 billion. Just from the natural downturn in big cases (given a downward shove by recent changes in patent law, declining big bankruptcy work, etc.), and other legal breadwinners (like merger activity or serious government regulation), there’s going to be billable hours trouble, especially for big firms that need to gross millions per day just to survive. Continue reading

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Human Experimentation: Lawyers may “moonlight” outside expertise

Full-MoonMost lawyers must have a bachelor’s degree (in any subject), plus an advanced degree from an accredited law school (usually a Juris Doctor, with some exceptions), then they must satisfy various state licensing requirements and pass a bar exam (with some exceptions) to become a “practicing” lawyer.  After obtaining the initial license, a lawyer has to keep up the license, usually by paying annual fees and, in most places, taking some continuing legal education courses, which are generally not demanding.  The phrase “practicing” law is more than ironic:  There’s no testing of actual legal skills or experience.  The only serious test after law school is the two or three day bar exam, which is normally a once in a lifetime requirement.  There’s no internship, apprenticeship, practical training, follow up testing, or other close supervision of new lawyers — though some law firms, corporations, and government agencies provide their own combination of supervision and on the job training.  Some lawyers get great supervision and on the job training before they are turned loose on the general public, others do not.

The main post-licensing checks on lawyers require some sort of regulatory trigger, like a complaint to the state or local bar, or perhaps a malpractice claim.  Lawyers may be pressured to bill lots of hours, but many of the hours may be for routine, even clerical (non-lawyer) work.  Hourly billing discourages efficiency and billing more time rarely equates to greater skill. Continue reading

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Eyeballing It: The eyewitness myth

Our legal system regularly runs over the rights, and lives, of criminal defendants who are eyeballslegally innocent until found guilty.  In addition to faulty verdicts and unsupported charges, common issues include the scarcity of competent, affordable legal representation for the poor and middle class, slow dockets, and using the unreliability of the system perversely, to extort guilty pleas from the innocent who cannot expect or afford justice.  Other issues include mandatory minimum sentences, restrictions on appeals and habeas corpus, criminalizing mental health and addiction issues, and truncating pretrial disclosures to facilitate ambushing of defendants.

Ambitious politicians (judges, prosecutors, and legislators) are forever sucker-punching the poor and politically weak to demonstrate how tough they are on crime, even as they look the other way, and sometimes actively benefit from, scofflaws with bigger wallets and paler complexions.  Recently it seems some “conservatives” even wish to fiddle with the burden of proof to make it harder to convict in cases that are brought against corporations — like environmental crimes — while looking the other way at the flaws when human defendants are wrongly incarcerated.  Fiddling with the absurdly ambiguous semantics of legal burdens is just a game to undermine the law itself, and becomes nothing more than a windfall for lawyers. Continue reading

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Peer Review: Florida juries, not judges, must find death penalty facts

imagesThanks to TV and the occasional real-life experience, most Americans know that juries consisting of ordinary citizens are involved in many trials.  What the jury actually does, and how that works in conjunction with judges, is a bit of a mystery.  Basically, juries “of your peers” listen to evidence, receive instructions from the judge on the applicable legal rules, and decide the facts, like sorting out conflicting documentation and testimony.

Juries don’t sit in all court cases, and the rules of how juries work are different in serious criminal cases versus civil cases.  (For example, civil cases tend to have smaller juries and do not require a unanimous verdict as criminal cases often, but not always, do.)  There is a constitutional right to trial by jury in many criminal case under the Sixth Amendment and some civil cases under the Seventh Amendment, but the parties can stipulate to a trial by judge, without the jury. Continue reading

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Year In Review: “Sophisticated” clients missing the point of legal fee review

data printoutMy firm has been reviewing legal bills for over 23 years, including over $1 billion in fees from thousands of firms.  (We review both “for” and “against” the law firms — we’re on the side of the reasonable fee.)  For us, legal bill review is just one tool used to manage legal fees and the lawyers who bill them.  Other tools are careful selection of a firm, planning and budgeting for fees and strategy, fee dispute resolution, reasonable fee agreements, and so on.  For example, picking an experienced firm that’s grateful for your business avoids most billing problems even before you receive the first bill.

Here’s an article intended for in-house counsel at client companies who are trying to manage their legal fees.  Everyone’s hip to the current jargon, but they’re working from out of date theories and inadequate tools.  Some are doing manual reviews, others claim they have software to help — though their descriptions of what they review for are primitive.  (We haven’t seen a truly sophisticated software package that really does a competent review without substantial human involvement — you have to know how litigation works to spot the good and bad work.)  The result is that law firms trying to evade fee management are able to game the system — manual or software or both.  Usually it’s more important to find trustworthy, experienced, and reasonable counsel living within their financial means — fighting to upgrade sneaky or second class counsel won’t make them first class, just angry. Continue reading

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Fee Forfeiture: “Deceptive” legal bills backfire on lawyer in arbitration

keep calmCan a lawyer bill one or more clients twice (or more) for the same hours of work?  No.  (You can only bill each particular hour one time when you bill by the hour.  We’re not talking about doing similar work that happens to be done at two different times for the same amount of time — this is charging twice for the very same hour of the same day.) Can a lawyer bill time at his or her higher rate for work done by someone else, like a paralegal or cheaper lawyer?  No.  Can a lawyer bill a client for “attorney fees” for the work of a non-lawyer?  No.

These things happen in some legal bills.  Not all of them in every bill, but now and then.  Lots of other problems come up even more often, like vague entries or time wasted on duplicated effort.  So how do you tell if this is happening in your bills?  Since this is something my firm has been doing over 20 years, and counting, I know how these problems can be spotted (as well as how to spot the false positives that really aren’t a problem).  But even experienced lawyers, especially in-house lawyers whose responsibilities include monitoring fees, are easily fooled by typical legal bills.  What I tell most clients to do, at least initially, is to follow their gut reaction and, wherever possible, compare the bill against the firm’s own budget, ask the firm questions, and decide whether you can accept the firm’s response. Continue reading

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Peace Breaks Out: Litigation mega-clients give peace a chance, at lawyers’ expense

peace signWhat would happen if some of the largest, most litigious clients in the country suddenly decided to settle their differences?  This isn’t a hypothetical:  It’s an actual trend.  Google and Microsoft recently settled a basket of their US and European cases, mostly intellectual property cases.  Apple and Samsung settled a batch (outside the US) last year.  These litigants account for hundreds of millions — probably billions — in legal fees and related expenses each year.

Perhaps the cumulative cost, as well as long term futility, of using massive, but typically unproductive and distracting, litigation has finally sunk in.  Or they realized the folly of spending money on lawyers to gamble in a court on a cranky judge or a jury of no one’s peers.  Or management of these companies matured.  Or they stopped putting so much faith in their lawyers, many of whom talked a good game, but killed the golden goose with piles of billable drones.  Once companies go this route, they are likely to stay the course unless some new threat changes their litigation calculus. Continue reading

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Flying Blind: Law firms grasping analytics straws instead of self-awareness

data matrixSome law firms apparently have trouble knowing their own internal costs, typical path of their legal projects, and potential outcomes to be able to quote fees and then meet the quote. Instead of studying what they do, they just “analyze” what they, and other firms, bill.  This seems to mean that they assume they can model how lawyers work without ever understanding it — they just look at the dollars coming out.

In this online article, vendors for “data analytics” and the law firm “pricing” staff they sell to and gather data from are talking about the importance of convincing clients to accept higher fees (whether they know it or not) based on the holy grail of legal fees marketing:  “value.”  These folks aspire to “restructure” how firms bill their clients.  But they are just studying small pools of unreliable data, looking for a magic way to make more money, without understanding the process involved.  How can you estimate or make money from litigation, for example, if you don’t actually understand how it works, or fails?

The idea is to push higher rates or net fees on the client by suggesting, with little actual evidence, that your firm is worth more than others and somehow rationalizing bad results or picking out the silver lining in every litigation cloud.  Since most of this law firm data comes from the most expensive law firms, finding some “metrics” to dress up with your “analytics” can make for a good sales pitch, or maybe excuses if worse comes to worse.  Shockingly, this cutting edge thinking is designed to make sure firms are profitable because many of them can’t tell. Continue reading

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Voodoo Economics: Firm replaces billable hours quotas with revenue tracking

voodoo-dollBillable hours certainly create some problematic incentives for lawyers and law firms.  They put all the risk on the client and can reward delay and complication, encouraging lawyers not to solve problems but to see imaginary problems or avoid efficient solutions.  Firms anxious to curry favor with potential and existing clients, have been talking about alternative fees, like flat fees or hybrids with a contingent bonus potential.  Law firms talking about their fees are much like politicians talking about the economy — they promise to change everything for the better while changing nothing much at all.  Somehow they expect to make more money while charging clients less, while taking the pressure off their associates, so nothing seems to change.

There is no perfect or magic alternative fee — from the clients’ and lawyers’ perspectives — all create good and bad side effects.  This is true for the lawyer and the client.  Lawyers espousing alternatives are typically trying to exploit a potential upside even as they push more risk onto the client. A good alternative rewards the lawyer who does well and meets the client’s objectives, which often means the lawyer has to shoulder some of the client’s risk, as with contingent fees.

Many of these battlefield conversions to alternative fees are not improvements so much as attempts to increase the bottom line through misdirection — assuming the firm ever understood the issue in the first place.  Unless firms cut their waste and strive for cost-effective quality, nothing will improve from the client’s perspective.  If you cut out billable hours and really save clients money, the firm can only increase profits by lowering costs — mostly the cost of the people who used to generate income by running in billable circles.  Fixing firms fattened on inefficiency is not a painless process. Continue reading

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Bad Guess: Law firm charging six times its fee estimate escapes fraud claim

We always suggest that clients request and law firms provide estimates for their legal fees estimateand expenses.  The first estimate needs to come as part of the firm selection process, but then it needs to be updated regularly, especially when events change the estimate substantially.  This is a litmus test that clients can use to sort out the reliable firms from the ones to avoid.

This isn’t as crucial for non-hourly fees, like flat fees and contingent fees, though estimates for expenses, likelihood of winning, and the timeline are still important.

Law firms are conditioned to make excuses for being unable to budget.  Many will simply ignore the request or fuss if pressed — that’s a good time to consider replacing the firm.  Others will give a grossly inflated estimate with lots of excuses and footnoted exceptions built in, designed to make the estimate worthless.  Clients should shop around and read the estimates, and footnotes, closely.  Firms refusing to estimate are either unreliable or inexperienced — look somewhere else.  An experienced, trustworthy lawyer can give you an estimate and reasonable explanations when the estimate is off. Continue reading

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