March 2010

Imagine this scenario: 

Bill, the General Counsel, walks into the CEO’s office.  "Jane, I have great news.  You know our problem with ABC Widget?  I have figured out a great way to get rid of those problems.  I am going to walk out on the street and find a stranger walking by and have her decide whether we’re right or ABC is right.  OK?"

Or, the same characters, Bill speaking: "Jane, I have an even better idea on how to get rid of our problem with ABC Widget.  I am going to go out on the street and find 12 random people and put them in the room to discuss our problem while we’re not there and then vote on whether we’re right or ABC is right."

How many of you believe Jane would be impressed with Bill’s approach to dispute resolution?  Of course, Bill would be using the words "judge" and "jury," but the thought’s the same.

With the caveat that I love trying cases more than anything else I do, let me say that it is a good tool for resolving business disputes only as a last resort.  With my caveat out of the way…

1.    Almost 99% of all cases settle.  The percentage is increasing.

2.    A very high percentage of the cases that settle do so after all the discovery is taken.

3.    Law.com article: Life in the Doldrums Continues for Civil Litigators

4.   Commercial verdicts down in 2009 from $1.4 billion to $420 million.

These points raise two questions:

Are in-house lawyers learning that litigation may not be the best tool to resolve business disputes?

If they are learning this lesson, how do you help them?

 


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I just saw an article from my rebel buddy Rachel Zahorsky in the ABA Journal reporting on an event featuring Chief Legal Officers at Foley & Lardner.   The article states:

The pressure to reduce costs has also pushed general counsel to become more assertive when voicing billing and staffing concerns to their outside lawyers.

It seems that many in-house lawyers are realizing what I have been saying for a while: The acquisition of legal services is inherently a buyers’ market.  There are so many competitors and movement from one to another is relatively easy compared to most movement in most other industries.  If your law firm isn’t responsive to your pricing needs, move the work.  You will, in the end, be able to get what you want.  And if you try even a bit, you can get more than you want.

 


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Above The Law is reporting that my old firm, Katten Muchin, has made an announcement on associate salaries.  Apparently the firm has decided that for an associate to advance a pay level, the associate must have met the firm’s target hours requirement.

Unimaginative management in action.  Defaulting to an hours standard only reaffirms the premium of hours over quality and efficiency.  I wonder how long before clients realize how badly they lose out when firms employ these discredited systems.

 


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In the opening paragraph of its 2010 Client Advisory, the joint Hildebrandt-Citi advisory ominously notes:

While the year ended with some hopeful signs, we enter 2010 with little prospect of a robust recovery and with mounting evidence that the profession is entering an era in which the fundamental economics of legal practice are likely

"Don’t write anything you can phone.  Don’t phone anything you can talk.  Don’t talk anything you can whisper.  Don’t whisper anything you can smile.  Don’t smile anything you can nod. Don’t nod anything you can wink."

Former Louisiana Governor and legendary scoundrel Earl Long.

Normally, one does not turn to scoundrels for lessons in client

"You have to decrease the size of your law department by 40%. I know it’s at a time when the demand for in-house legal services will be going way up, but such is life."

"You have to reduce your spend on litigation by 50% with no drop-off in quality."

How would you like to be

Once again, the real world provides wonderful lessons.

My wife calls to tell me to cancel a credit card–the bank had raised our interest rate to 30% "because we didn’t carry a balance."  Our primary card is at 9%, so 30% isn’t going to cut it.  I call the bank (which I won’t identify , but if you guess Citibank, well, let me just say you’re an incredibly good guesser) and they tell me they are sorry to lose me as a "terribly valuable" customer after 20 years.  Would I consider staying if they lowered the  rate to 7.9% for six months?

Put aside the financial aspects of this decision.  How should I feel knowing that I am a "terribly valuable" customer but they were raising my rates to 30%?  They could have offered me the Taj Mahal and I would not remain a customer. 

This is the world of credit card companies, cable companies and phone companies.  Never treat your best customers like your best customers.  Give your new customers better rates and keep milking your loyal customers for all you can get.

Sad way to run a business.   But then again, when law firms seek new business, how many of them do the very same thing?

At some point loyal customers are going to respond like I did: if my loyalty only matters when I complain, "cancel the damn account."

 


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