January 2010

I have a new matter on which I inherited local counsel.  I send emails asking simple questions, like "did you do a choice of law analysis before saying State A’s law applies."  Days later, I’m still waiting for a response.  I am waiting for, literally, a one word response.  The fact that I haven’t gotten

I can change things I have control over.  I cannot force others to change things that others control.  I cannot force clients to forsake their rule that lawyers must submit timesheets.  I cannot force every court I practice before to abandon their practice of relying on heavily on timesheets when reviewing fee issues.  I can discuss

Yesterday on Twitter, a query was made as to whether there were any truly new law firm business models.  A highly regarded legal consultant identified Valorem, Bartlit Beck, Traverse Legal and Shepherd Law Group as examples.  There ensued a debate whether any of these firms other than Shepherd Law Group were different.  According to the protagonist in this dialog, if a firm used time sheets, it was not "different."

At one point, I was laughing so hard that I started to cry.  The idea that your business model is different and acceptable if you eschew timesheets but not different or acceptable if you use timesheets is  lawyer-centric (or consultant-centric or accountant-centric) in the extreme.  The debate on Twitter (perhaps owing to the 140 character limit) seemed to devolve into a "my way is better than your way" argument where there was precious little recognition of the business realities driving the choice of whether timesheets are used or not. 

Let me begin by acknowledging that my preference is for a world without time sheets.  If I am ever a buyer of legal services, I won’t have my lawyers use them.  But right now, I live in a world where I serve clients.  Our clients are sophisticated buyers of legal services.  If they tell me they want to see time records with a bill, even if the bill is not hourly based, I provide them.  For many clients making the transition to non-hourly billing, the hourly records are important as they gauge value.  It would be nice if they all believed as Ron Baker does, but that’s not my world.  I suppose I could refuse to take on such clients, but I have mouths at home that clamor for food.  I can just hear the voices out there telling me I am a coward for not abandoning time sheets completely in the hope that clients will come as they have to others.  With due respect to these voices, I do not see enough clients willing to go that road that I am willing to write-off the chance to represent 99% of corporate America. If I had a practice dealing with smaller matters or individuals or a more local clientele, maybe things might be different.

Beyond this point, both the expectation that courts have that any fee requiring court approval have time records to support it and the need to internally know who is available make time records important or useful.  One person on Twitter wrote "since time records are an inherently inaccurate tool, how can they be used in court?"  I have not debated the wisdom of this eons-old practice with any judges.  But since I expect to be asking several to approve fees, I don’t want to run the risk that I come across a judge who chooses to follow lines of authority basing approval of fees on time records.  The visual of spitting into the wind comes to mind.

I’ve never told another lawyer that he or she should or should not use time records.  I couldn’t care less.  I have spoken and written at length about aligning economic interests with clients.  I know that this has to be done in a competitive marketplace and even those who don’t use time sheets compete on price, at least to a degree.  If they are more expensive than a comparable lawyer, the odds are many clients will chose the lower priced alternative.  So if the lawyer factors into his or her pricing what a competitor is likely to charge, they have created a fee based, to some degree, on time. 

If the debate is whether use of time sheets is relevant evidence of employing a different business model, I will pass on that debate as useless and a waste of, dare I say it, time.  If the discussion is about how lawyers are aligning their economic interests with their clients, how workflow is different, how people are engaging in practices that deliver better results by eschewing use of baby lawyers, how lawyers are creating "wow" customer experiences and whether a model that is based on those things is different, I’ll spend some time on that discussion because its about what the customer gets out of the relationship.  But even these kinds of discussions are like talking about which team is going to win the Superbowl before the game is played.  The conversation might be fun, but it really doesn’t matter all that much, does it?  The game still has to be played.

Instead of criticizing those who dare to change for not changing enough, it seems more prudent to be applauding anyone who tries something that’s even a little bit different.  A bunch of little changes will eventually beget big change.  A larger scale change will benefit our clients, and that, to me, should be the focus of discussions.

 


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It is amazing how one well-written sentence can communicate volumes and engage the reader to think beyond the sentence.  My friend Dan Hull writes my favorite blog, What About Clients?.  He had a post the other day with the simple title, Storytelling.  The entirety of the post was this quote from Anton Chekhov:

Don’t tell me the moon is shining; show me the glint of light on broken glass.

One sentence.  Huge imagery.  Huge.

I immediately posted a comment to the effect that Dan must be one hell of a trial lawyer.  But I continued to marvel at the sentence, and I started wondering about my dealings with clients and colleagues.  Do I tell them the moon is shining or do I show them the glint of light on broken glass?  Do my clients see in their mind’s eye the reflection of moonlight on a shimmering lake or do they hear my voice declaring that they must believe the moon is shining.  Am I creating the image, the feeling, that I want or am I simply passing along information.  Imagine one client telling a friend, "my lawyer shows me the glint of light on broken class."  That lawyer is who I want to be.

 


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 My partner Mark Sayre spent a lot of years trying cases on behalf of insurance companies.  Turns out, all that work for insurance companies not only helped him become a great trial lawyer, but it also gave him loads of insights into the netherworld of insurance coverage.  Mark has written a paper on how businesses can maximize their coverage, and wanted to share it.  Here it is.

There are a lot of lawyers that would not share this information with the world at large.  But it’s a web 2.0 world, and Mark is a Valorem 2.0 lawyer!

 


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I don’t know why I didn’t see this article before, but I just read Inside Counsel’s September 2009 article on game-changing law departments.  CN, a multinational transportation company, shifted work from large firms to smaller firms.  How has that worked out?  Well, it seems.

The results have been surprising.

"I was expecting to pay X per hour, for Y number of hours," he explains. "So according to my calculations, we should have achieved a 25 to 50 percent reduction in legal spend."

But what Rudnikoff didn’t expect was that the work at these small firms would be handled by more experienced lawyers than the large-firm associates who previously handled the company’s less sophisticated work. As a result, they complete the work much faster at a smaller hourly rate, generating closer to a 75 percent reduction in cost.

And the risk of not having the work done by big firms?  Not a risk at all, as it turns out.

He adds that there is less risk in this approach than many companies may think. "Because we can afford to go with the most experienced lawyers in the small towns, the risk is lower," he says.

In this day and age, with so many big firm lawyers having left those firms, it is easier than ever to have the same lawyer you would have had at a big firm just a few years ago now doing your work at a fraction of the cost.  It’s not like lawyers have their brains siphoned when they leave the halls of BigLaw, after all.  But BigLaw alums aside, lawyers who have run their own firm, who have dealt with the issues of meeting payroll and paying health care costs, have had an infusion of business experience that  counts for something as well.  Brand counts sometimes, but too often it is just an excuse.

 


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Not every alternative fee creates the same incentives.  Check this one out, as reported in the AmLaw Daily:

Drinker took on a patent case for a company called AgriZap and signed an agreement under which the firm would be paid its full fees over an 18-month period if AgriZap lost at trial. But if Drinker were to win the case for AgriZap, the agreement called for the company to pay the firm triple its hourly fees (plus costs)–and to pay it immediately.

This creates a strong incentive to win the trial.  But is there any incentive to control the cost of doing so?  It appears not.

Check out the outcome:

When AgriZap did win, Drinker submitted a bill for about $5 million—about double the $2.7 million the jury awarded AgriZap in the patent case.

Drinker won the ensuing lawsuit, so it was good for the firm, but I think it is safe to say that this is not an alternative fee arrangement that should be emulated.

 


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Consider this simple fact: because of the way duplicate electronic documents are handled (or, more appropriately, mishandled), clients overpaid or grossly overpaid for their documents review nearly half of all productions.  This comes from a survey that is discussed at length in a terrific article, Ethics and Ediscovery Review, published in the ACC Docket.  The article is authored by Patrick Oot, Anne Kershaw and Joe Howie. 
 
Some lawyers agree to have each person’s email "de-duped," but do not have the entire population of documents "de-duped."  This means that each person on an email will have one copy of that email in his or her population of documents.  Multiply that by scores of people and thousands of emails and pretty soon you’re talking about real money.
 
The authors discuss this from the point of view of lawyers’ ethical obligations.  I invite you to think about this from the standpoint of efficiency.  Are you more or less likely to experience this problem with lawyers working on a value fee or by the hour? 
 
The ways, whether intentional or utterly inadvertent, that clients lose while lawyers win, and many and varied, and frequently not even on an in-house lawyer’s radar screen, particularly in companies that do not have the litigation bandwidth to have an in-house lawyer specializing in the nuances of electronic discovery.


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One of the great battles law firms have fought with their clients is over e-discovery.  Law firms have wanted to have their people do the document review because they then capture the profit associated with that review.  Smaller law firms that do not have the manpower to conduct internal reviews have urged use of outside resources, and clients generally push for the approach that is the cheapest while still being effective.  My partner Hugh Totten just shared with me a study, Document Categorization in Legal Electronic Discovery: Computer Classification vs. Manual Reviewpublished in the Journal of the American Society For Information Science and Technology (January 2010).  The study concludes:

This study is an empirical assessment of two methods for
identifying responsive documents. It set out to answer the question of whether there was a benefit to engaging a traditional human review or whether computer systems could be relied on to produce comparable results.

On every measure, the performance of the two computer
systems was at least as accurate (measured against the original
review) as that of a human re-review. Redoing the same
review with more traditional methods as was done during the
re-review had no discernible benefit.

There may be other factors at play in determining legal reasonableness,
but all other things being equal, it would appear that employing a system like one of the two systems employed in this task will yield results that are comparable to the traditional practice in discovery and would therefore appear to
be reasonable.

The use of the kind of processes employed by the two
systems in the present study can help attorneys to meet
the requirements of Rule 1 of the Federal Rules of Civil
Procedure: “to secure the just, speedy, and inexpensive
determination of every action and proceeding.”

If we are not there already, we will soon be at a point were determinations of which must be produced will largely be handled via computers.  Indeed, given the error rate reported for human production, it is easy to envision a motion attacking that manner of selecting documents for production, at least in large cases.

 


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