August 2015

This just caught my eye.

The data – some $18 billion in legal invoices – suggests the largest law firms have modified staffing models and reassigned IP litigation work to more junior partners in an effort at cost control.

Are we to believe that more junior partners are better lawyers than more senior lawyers?  This appears to be cost trumps outcome and experience.

The real question is why clients are willing to tolerate this deflection of work to less-experienced lawyers. Is this planned or an “after the fact” recognition of the increased role of more junior partners?  Better options exist, and my bet is clients will not accept the Hobson’s choice presented to lower legal spend.

The other critical question is whether work done by those with lower hourly rates actually lowers the client’s total spend.  Data historically shows this does not occur. Is same cost but work done by less experienced lawyers a good thing?

There are certain mistakes made by doctors or other healthcare professionals that result in the need for further treatment. An example is sponge that is left behind during surgery, which generally necessitates further surgery.  Insurance companies and government payors have determined that mistakes like these are easily avoided and refuse to pay for the second surgery.  This places tremendous pressure on hospitals to get it right the first time, every time.  Technology now can prevent these “left behinds.”

Fast forward.  I was just reading the case history of a matter where the plaintiff’s attorney improperly pleaded the jurisdictional basis for diversity jurisdiction because it failed to plead the citizenship and residence of the members of an LLC.  Pretty fundamental stuff.

Why should a client have to pay for this kind of avoidable error? It shouldn’t, and firms should have quality control processes in place to deal with these types of avoidable problems.

One of the most-watched TED talks is by Simon Sinek. Called “Start with Why,” Sinek compellingly argues that why an organization exists is more important to its success that what it does or how. Sinek offers Apple as an example, demonstrating its ability to enter and remake markets including music, MP3 players, cell phones and tablets, as well as desktops and laptops, is a function of the “us against the status quo” culture and brand that Apple thrived on since its inception. To follow Sinek’s “Golden Circle,” after you figure out why, you can focus on how and what.

Start with Why


(©Simon Sinek)  While this concept may not be familiar to many lawyers, many businesses embrace this concept. So do we.

My colleagues and I have spent a lot of time over the years talking through some of the layers of our why, but we recently delved to the core of the issue. It was the criminal trial of the leaders of the former Dewey LeBoeuf law firm and the commentary around it that finally helped us crystallize our collective thinking.

The criminal trial of the leaders of the failed Dewey firm has pulled back the curtain to reveal a profound level of corruption in one large law firm. The corruption may not be criminal, but the evidence is crystal clear that the firm was run to benefit a chosen few. While the trial is about a single firm, it is naïve to believe this level of self-centered-ness occurred in but one law firm. The commentary from informed observers and other former BigLaw leaders makes a compelling case that some degree of similar behavior pervades most large law firms in varying degrees. Some cases may not be as starkly selfish as Dewey, but  large law firms have become big businesses in their own right, and like other big businesses, the  success of the business is the paramount objective of those who run it. On limited occasions, the powerful may share benefits with others, though their motives for doing so are frequently selfish, not due to altruism or institutional devotion. But, by and large, firms are run by an elite club of insiders for their own benefit. Other partners are carried along for the ride, unable to alter the firm’s course or behavior.

To be fair, there are exceptions to this characterization, but, sadly, they appear to be rare exceptions. One lesson learned from this state of affairs is that, lip service aside, client well-being is irrelevant in most law firms. Clients are relevant insofar as they pay their bills on time and the firm may be able to extract more fees, but as between the firm’s business and the client’s business, the powerful managers in large firms have proven again and again their own business is the priority. The priorities are not in doubt.

Law firms’ institutional rejection of any semblance of client service is so embedded in the DNA of the legal establishment that no one even questions it. Clients don’t question it. They often are like passive victims, caught in a teller line during a bank hold-up. They may know exactly what is happening and they certainly don’t like it, but they feel like there isn’t anything they can do about it. They certainly don’t exercise the power of their wallet, except, perhaps, in the most egregious of cases.

Firms do not question their institutional abandonment of client service. It would be bad business to publicly admit this truth. So they don’t. They talk about “client focus” and “client service,” tossing around buzz words like loose change. The rhetoric was been so colored that firms do not see the problem even when trying to be candid. But when one focuses on behavior instead of rhetoric, the firms’ claims are revealed as mere hyperbole.

Countless examples prove that firms placing their own interests above clients’ interests has become part of the firms’ DNA: they just can’t change it without killing themselves. In no particular order, here are just a few:

1. Hourly billing
2. Bonuses based on hours
3. Compensation guarantees.
4. Compensation based on revenue rather than profit.
5. Compensation that ignores client satisfaction.
6. Large partner offices and high downtown rents.
7. Expensive artwork.
8. Mergers. And then justifying them by saying it helps clients.
9. Annual fee increases that have become self-righteous expectations.
10. High turnover of associates and income partners.
11. Putting all risk of failure on the client side.
12. A business model as unfriendly to clients as one can imagine.
13. Pressure to collect at year end for the firm’s benefit with no regard to how that practice helps or hurts the client.
14. Massive infrastructure and expansive numbers of offices that provide no value to most clients, but are paid for by all clients.

It is impossible to escape the conclusion that those who run large law firms have become “the Man,” doing things for themselves and the other powerful elite in their firms. In most firms, any semblance of equal treatment of partners has faded along with bygone eras. Even in the “good old days,” clients were merely a means to comfort and success.

My partners and I all practiced at firms run by one version or another of “the Man.” The challenge for each of us was what to do about it. Separately and without knowing it, we all had the same epiphany. We could not work for the Man any longer. Indeed, we had to challenge The Man and everything he stood for.

Although we did not rely on it for guidance, the Declaration of Independence provides this time-honored explanation that fits:

But when a long train of abuses and usurptations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

“It is their duty.” Powerful words. Those who are victims of the King had a duty to “throw off such Government.” While it would be silly to in any way equate the founding of the country with what goes on in law firms, the same general sentiment applies to those who wish to challenge “the Man.”

A Declaration of Law Firm Independence can lead to a civil war within firms, or it can yield the creation of new firms. Some new creations are smaller, kinder, gentler versions of the partners’ former firm. Others seek to make a new mark, to blaze a new trail. My partners and I believed the civil war could not be won, that the entrenched power in large law firm was so self-perpetuating that real change was not possible. So we opted to declare our independence, throw off such “Government,” and blaze a different trail and create something totally new, something totally focused on our clients.

The sole guiding principle for our creation was whether the design feature would work to our clients’ benefit. Only those features that passed this test became part of the Valorem foundation. We began with the 800 lb gorilla in every law firm: compensation. The “what’s in it for me?” question does more injury to clients than most can fathom. Highly skilled partners won’t work together to benefit the client because of the fight for credit. To avoid this, we agreed everyone would earn the same amount. There is nothing magical about this formula, but it entirely eliminates the “what’s in it for me” concern and replaces it with a how do we do more for our client so we can earn more for all of us. We call it the “rising tide (raises all boats)” compensation system. We’ve used this formula for seven years and it has cemented the culture of collaboration, of realizing that what’s best for us is what’s best for our clients. If we ever adopt a new system, it will have to sustain these underlying values.

Inexperienced lawyers do not add value for clients. We eliminated the concept of a large base of new associates. We hire a new associate every several years. We also did away with the notion of “up or out” so we can retain incredibly valuable colleagues who do great work for clients.

We focus on experience. Experienced lawyers are far more likely to get better results and do so efficiently, both of which are important to clients.

We stopped measuring hours.

We stopped using hours as a surrogate means of calculating an alternative fee.

We give our clients the right to change the amount due on a bill, in their total discretion, if they don’t think we delivered value. Not hours, value.

There is no “billing” or “origination” credit. We don’t debate about who gets credit for what. In an elite corps of lawyers, every job is critical

We have a portion of our fee held back on most matters to share risk in the outcome with our clients.

We provide exceptional service.

Clients must come first. Every aspect of a firm must be designed with this a guiding principle. If you compromise in any area, you will, sooner or later, become the Man. Clients deserve better.

So if you want to know our “why,” it is this:

We reject “the Man” and everything about the model he represents. We stand together to serve our clients and help them avoid any problem that can be prevented, successfully handle any problem that cannot, and learn from every encounter so we inspire continuous improvement.

It is that simple.

There is nothing about what we have done that any other group of lawyers could not do. But, so far, we’re not aware of others who have organized their business to institutionalize value for the firm’s clients. There is a reason that is so: it is not easy to believe that focusing on value for clients first and only will pay off as a business model.

Valorem Law Group recently surveyed in-house counsel.  A huge thank-you to the 42 in-house lawyers who responded.

The question we asked was:

When making a decision to hire a law firm to handle a litigation matter that is NOT bet-the-company, which of the following values are the most important to you? (Please rank in order of importance, with and 13 being the least important).

Here are the results:

Survey Results













(double click on the image for a larger view)



We also received a number of helpful comments:

Since I’m in the patent space, the technical competence of the attorneys assigned. Additionally, firm diversity in the leadership is a consideration. Both are of high importance.

The ability to control costs or enter into alternative fee arrangements and the importance placed on those are case dependent. More important in smaller matters and less important in bet the company matters.

High – ensuring that in-house counsel is aware of any concerns that employees may bring to the attention of outside

The firm’s historical relationship with the company. (middle)

Just a comment. It strikes me that the order of importance changes depending on the case. Geography, for example, may be important in one case and not another.

I struggled to rank all of these items, because I have several “1’s” — and all of them are essential to a firm selection decision and I’d not want to compromise on any.

Language abilities would be high depending on client and geography

Diversity of the firm and the team proposed to handle the matter

Whether the lawyer/team is “known” to us–either through a first-hand recommendation/review by someone we trust, or through our prior dealings with the lawyer/team. (High) 2. The lawyer’s/team’s experience on a particular claim or legal issue–moving through the bulk of the learning curve, knowing the “market” for settlement values, understanding the underlying issues that become a fulcrum for settlement, etc. I suppose it’s a combination of “reputation” and “ability to achieve desired results” and “experience/quality”. (High)

I like to hire lawyers not firms

Quality of work product (high)

Once again, thank you to all who participated.

Words matter. I have chosen mine poorly. I am here to correct my ways.

For the longest time, I have written critically of “BigLaw,” as if size itself was the problem. To be sure, most large law firms suffer from the problem, but so do many smaller law firms. The problem goes beyond size. The problem is about refusal to change. Some resist actively. Some resist passively. For others, resistance is passive-aggressive.   Jeff Carr has referred to the problem as “MPR—massive passive resistance.”

The resistance to change, however characterized, manifests itself in so many ways that even attempting to summarize them takes massive amounts of time, energy and space on the page. Doing so is not the point of this post. This post is just about words.

While BigLaw has developed the defacto meaning of being resistant to change, I think there is a better word. Paleolithic is defined as “denoting the early phase of the Stone Age, lasting about 2.5 million years, when primitive stone implements were used.” Paleo “is a combining form meaning ‘old’ or ‘ancient,’ …used in the formation of compound words.”

Introducing PaleoLaw. Regardless of size, firms and lawyers that refuse to acknowledge the amount and pace of change clients are experiencing and the robust impact change is having and, more importantly, should have on law are just stuck in the Stone Age.

PaleoLaw. Spread the word.

I can’t even make stuff like this up. Lawyers and invoices are a toxic combination, but the AmLaw 200 firms that are responsible for these examples have people who are supposed to prevent the lawyers from revealing their invoicing stupidity.  Here a couple of my favorite illustrations from an article too good to pass up:

• Submitting a series of bills that, together, resulted in one lawyer charging 42 hours in a single day. A lawyer at another firm billed just over 500 hours over 15 days—an average of more than 33 hours per day.

• Chartering a jet (and billing the client) to send New York lawyers to review documents in Virginia, rather than having them take a shuttle that flew every half hour.

• Billing a client 32 hours for a paralegal’s paid time off.

• Charging a client for document review work handled by a third-party vendor at a 320 percent markup. The firm also added the document review hours to its own bill, again at a 320 percent markup, resulting in a total overbilling of $6.3 million.

The lawyers who charged these expenses are corrupt. The firm that marked up the document review should be sued for fraud.  And all of the examples certainly suggest a lack of institutional values at the responsible firms. Sad.

When it comes to assessment, this is what most people think of themselves:











But the reality is this:

i want the truth 2








So people delude themselves.

When the makers of a product win some trials and lose some trials, how many of the defendants bring in a fresh set of eyes with no loyalty to or ownership of the strategies and tactics that failed and ask for the brutal truth.  Maybe it was “just the jury.”  But maybe there was something else.

Whether there is a huge amount on the line or not, the ability to identify possible brutal truths and assess them is one that should be prized and sought.