Clients are demanding alternative fee arrangements from their law firms – freelancers can help

Dramatic changes in the relationships between law firms and their clients offer the “perfect storm” of opportunity for legal freelancers.

The Wall Street Journal has cited Pfizer, Cisco, and American Express as just a few companies intent on reducing the amount of legal fees it pays to its outside law firms. “’Billable Hour’ Under Attack,” August 24, 2009, Nathan Koppel and Ashby Jones.

Rio Tinto, a leading international mining group, is reportedly bypassing its external counsel and working directly with a legal outsourcing company to outsource some of its legal work, saving $1M in legal fees by paying lower rates than its main external counsel Linklaters and Baker & McKenzie. “Outsourcing is taking hold,” Financial Post, August 26, 2009.

In order to stay competitive and keep their clients, U.S. law firms are being forced to reevaluate their staffing arrangements, and onshore outsourcing should be the first place they look. U.S. legal freelancers can provide the same quality work product that the client expects (and often an even higher quality product), at a much lower cost than a salaried associate. Reducing overhead costs without sacrificing service quality will allow a reduction in billable hourly rates to the client, without reducing profits to law firms.

May I say "I told you so?" The following is a quote from this NAFLP blog - ”Quality vs. Quantity – the billable hour mousetrap,” published January 28, 2009.

Corporate clients – the “surging demand for high-end legal services” is you, accepting the definition of “high-end” as being on the AmLaw 100 list. The “unrelenting annual rate hikes” is the price you are paying for accepting this criteria and rate hikes will keep increasing at these firms until you, the client, say "no." You are choosing “pedigree” and "prestige" over “quality” in legal services and have only yourself to blame for the outrageous legal bills on your desk.

Apparently a number of corporate clients came to the same realization. U.S. legal freelancers can provide the same quality work product that the client expects (and often an even higher quality product), at a much lower cost than a salaried associate. Reducing overhead costs without sacrificing service quality will allow a reduction in billable hourly rates to the client, without reducing profits to law firms. The legal industry is long overdue for changes.

Freelancers, go out there and make change work for you!

Pedigree vs quality revisited - dogs and lawyer resumes have a lot in common

I recently watched a dog show and found myself intrigued by the pomp and circumstance of the entire process. Dogs combed and brushed and primped within an inch of their lives are trotted out by very serious owners adjusting stance, tail, ears, holding snacks at just the right distance and angle to optimize the dog's profile. A judge feels up the dog from head to toe before dog and owner take a trot around the ring.

The dog looks majestic and beautiful in a very controlled trot. The owner looks a tad silly running in a suit (forgive me, all dog lovers; I have a point to make). This is when I feel very sorry for the dog. When did he last get to run with reckless abandon, chase squirrels, get muddy, be a dog? Did he ever get to? Did he ever get to exercise his dog skills? Can't you see his owner yelling "get out of that mud, Fido, we'll never get that mud out of your fur!"

Lawyers resumes are managed just like show dogs. Go to the most prestigious school (get brushed and primped). Join every possible organization to make yourself look busy and important (have your stance, tails, ears properly adjusted). Have law firms hold high enough "standards" as to who they will interview (holding dog treats almost out of reach). Don't work as a contract or temporary lawyer (don't play in the mud) because, says Gary Sedlik of the Lateral Attorney Report (www.lateralattorneyreport.com) article "To Temp or Not to Temp" (www.lateralattorneyreport.com/2009/02/to-temp-or-not-to-temp/)

The Stigma: The truth is that some firms simply will not consider hiring a lawyer if her resume reflects one or more stints as a contract lawyer. Whether this is fair or not is beside the point. Some firms and lawyers have this bias.

When did putting in an honest day's work create a stigma that would impair your ability to obtain another job? When did working on a temporary or freelance basis disqualify legal professionals for permanent positions?

What does it say about a law firm that ranks "not working" as a superior job qualification to "working"?

Primped show dog or qualified legal professional? Which do you want to be?

Quality vs. Quantity - the billable hour mousetrap

Billable hours have become a vicious task master hanging over lawyers’ heads, encouraging them to abandon all life outside of the office in quest of squeezing the most hours, and thus the most money, out of the day. It discourages efficiency of work by definition (why finish a project in 8 hours if you can stretch it out to a 20-hour billable project?) and has no correlation to the “quality” of the work product. “Quality” is defined here as something of value or use to a client. Is the 20-hour brief a “higher quality” than the 8-hour brief? At best, the client will never know. At worst, it is blatant fee gouging.

These facts seem self-evident to many, including veteran attorney Evan R. Chesler in the Forbes article "Kill the Billable Hour":

The billable hour makes no sense, not even for lawyers. If you are successful and win a case early on, you put yourself out of work. If you get bogged down in a land war in Asia, you make more money. That is frankly nuts.

Of course it is nuts, but these self-evident facts are still lost on far too many involved in the legal profession. In the January 2009 issue of the California Bar Journal, the article "Will a bad economy force more changes in the profession?", cites Richard Gary of Gary Advisors, a former chair of Thelen, Reid and Priest, as thinking the billable hour isn’t going to disappear.

“We’ve been thinking about going to a different model for 20 years and it’s never happened. Maybe young people will come up with a different mousetrap.” However, [Mr. Gary] added, “I still think it’s the best way to measure value because it is a mechanism of measuring the amount of work that a lawyer did for a client on a particular matter.”

With all due respect, hogwash! The amount of time spent on a project is not an accurate reflection of the end product’s value. Lawyers have forgotten that basic truth.

Early in my career I found myself as plaintiff’s counsel in a small civil matter against a defendant who was a part-time lawyer who seemed to revel in the opportunity to “practice” law. I vividly recall receiving a 25-page, single-spaced motion to dismiss the case. I can only describe reading the verbose brief as exceedingly painful on the eyes and brain. My opposition brief was one page, double-spaced, setting forth the statute supporting my position. I won the motion. Which brief was more “valuable”? The one that took at least 25 hours to write or the one that successfully convinced the judge?

In a more recent example of overkill, a federal judge in New York City found a $100,000-a-day fee application from law firm Dewey & LeBeouf for receivership work to be excessive. U.S. District Judge Denny Chin said that the fee request was “excessive in the context of a securities receivership where hundreds of victims of fraud have suffered substantial losses” and he questioned the firm’s billing rates which were as high as $950/hr for some partners, $605/hr for some associates, and $285/hr for summer associates.

Billing rates that high deserve far more than "questioning" and partial and temporary reduction in fee allowances (Judge Chin said they could reapply for the fees later in the case). Billing $285/hr for work done by law students (remember, summer associates have not even completed law school) is unconscionable by any standard.

Clients who pay such excessive fees, however, especially large corporate clients, need to acknowledge their own role in encouraging outrageous billing by lawyers. Law firm prestige, and thus the law firms that tend to attract higher net-value clients, has for too long been measured on the same scale as Fortune 500 companies – by annual revenue. Not cost efficiency. Not creative thinking. Not being able to demonstrate insightful legal opinions. Not being successful in any other arena than extracting the most money out of their clients.

Every year the American Lawyer magazine publishes AmLaw 100 and AmLaw 200 lists of supposed top law firms in the country. These lists have become the Fortune 500 equivalent for law firms. I verified AmLaw’s criteria for choosing the top law firms on their website; it was disturbing. AmLaw describes “revenue per lawyer” as being “the key measure of law firm financial success, and profits per partner [as] the metric that has turned law firm managers into contortionists.” They go on to credit increases in these metrics by “surging demand for high-end legal services and unrelenting annual rate hikes” and a continuing slowdown in naming equity partners (the top echelon of law firms) and increase in the number of non-equity associates. (see the referenced article at "Lessons of the Am Law 100 2008").

Corporate clients – the “surging demand for high-end legal services” is you, accepting the definition of “high-end” as being on the AmLaw 100 list. The “unrelenting annual rate hikes” is the price you are paying for accepting this criteria and rate hikes will keep increasing at these firms until you, the client, say "no." You are choosing “pedigree” and "prestige" over “quality” in legal services and have only yourself to blame for the outrageous legal bills on your desk.

In this time of economic downturn, with companies failing right and left, only the strong and flexible companies will survive. Finally, a substantial incentive to reinvent the antiquated mousetrap of billable hours has emerged. Corporate clients, stop paying outrageous hourly rates and look for quality legal counsel that will provide cost-efficient and useful services. Your company's survival may depend on it. Lawyers, law firms, and freelance legal professionals, take the lead in offering cost-effective, solution-based services to your clients at a price that is a good value for the money.

Here's to building a better mousetrap in 2009!

Breaking the quality code, Part 1 - review work product, not law school diplomas

Last week, Bruce MacEwan, at the Adam Smith, Esq. blog, joined NAFLP in tackling the question of what constitutes a good attorney – "How High Quality Are Your Lawyers? (How Can You Tell?). He submits that there is “an inability, or at least a failure, of clients to measure quality of legal services. With no real handle on what’s extraordinary work, what’s acceptable work, and what’s unacceptable work, client’s buy the ‘proxy’ of prestige firm, law school pedigree, and yes, high hourly billing rates. . . .” Citing a “core market information failure, which is clients’ consistent and nearly universal inability to assay quality of their lawyers . . .” he challenges BigLaw and Fortune 500 firms to “start thinking creative . . . about what ‘quality’ in legal services really means.”

At least one new company is thinking of some new ways. JD Supra) is an online directory of lawyers with samples of their work product for any client or attorney to view. Aviva Cuyler, a San Francisco-based attorney who founded JD Supra, is cited a recent article as hoping to create “a central hub for information about the law and the people behind it” ("A Revoluation in Online Legal Content", July 7, 2008. http://www.law.com/). I see it as something far more – it is at least one place where potential clients and other lawyers can see and evaluate one’s work.

Mitch Matorin, a solo practitioner in Massachusetts, was cited in the same article as “see[ing] JD Supra as one way to help level the playing field between small and large firms. . . . a tool for potential clients to find qualified solo or small firm attorneys with the experience to handle matters that they otherwise would direct to large firms simply out of familiarity. JD Supra permits them to see examples of his actual work product and make a reasoned hiring decision.” Before you think that this is limited to showing off legal writing skills alone, think again. You can also post transcripts of court hearings and depositions to show off your verbal skills too.

On the flip side, looking at law school diplomas is not creative. Out of curiosity, I did a little research regarding the tiering of law schools. My brief research was so disturbing that I will be returning to the subject in later posts. Here’s the short history. The most widely known ranking of law schools is published by U.S. News & World Report. Their criteria can be found here - http://www.usnews.com/articles/education/best-graduate-schools/2008/03/26/law-methodology.html.

This ranking system has been widely criticized and is not endorsed by the American Bar Association or the Law School Admission Council. The Association of American Law Schools, via its executive director Carl Monk, is cited as saying that "these rankings are a misleading and deceptive, profit-generating commercial enterprise that compromises U.S. News and World Report's journalistic integrity.” I absolutely agree.

Now it seems that new games are afoot in the ranking system. ("Change Ahead for Law School Rankings"). It seems that US News wants to include part-time students in its ranking process, which could prompt some law schools to drop such programs in order to keep up their rankings because part-time students don't fit into the same profile as full-time students. According to Daniel D. Polsby, dean of George Mason University School of Law in Arlington, Virginia, cited in the article,

"At every law school I know with a part-time program you are talking about [students who are] older, racial or ethnic minorities, people with jobs and families, people with interesting life experience that kids who are just past adolescence can't be expected to have," he said. ‘Their college records are many years in their past [part of US News ranking criteria] and a less impressive measure of the law student he or she will be. Shutting them out will damage the profession.’”

We have now come full circle, haven’t we? If you don’t have a proper “pedigree” you can’t get into the high ranked school, if you can’t get into the high ranked school, you can’t get the mega-bucks BigLaw job, thus lowering your school's ranking . . .

Enough already!

For those who are still hung up on law school rankings, however, you may find it interesting to learn that many members of NAFLP come from Tier 1 law schools such as Columbia, University of Virginia, UCLA, George Washington, Boston College, Notre Dame, Washington and Lee, Seton Hall, UC Hastings, Indiana University, and Brooklyn Law School. We even have two members from No. 1 ranked Yale Law School. Yours truly graduated from No. 73, University of Nebraska-Lincoln, also Tier 1.

"Pedigree" vs. "Quality" - Part 2

The Wall Street Journal Law Blog article that prompted my last post (there were actually two inter-related articles on the Blog - "New Comer Law Firms Are Creating Niches with Blue Chip Clients" and "The Model Seemed Broken To Me - Looking At a Law Firm Alternative") have been commented on extensively in the past day and the same issues keep rearing their ugly heads. What constitutes “an elite firm”? Why is there a heavily promoted theory that if one does not land a job in a BigLaw they are a lesser lawyer?

On a corresponding note, Jeff Bleich, President of the California State Bar, wrote "Reflections on our Reflection" in the California Bar Journal, July 2008 issue, about how the makeup of the legal profession is a poor reflection on the diversity of our society as a whole. Looking at the portraits of prior presidents of the state bar, primarily white males, caused him to reflect on the legal profession.

“You can’t look at that wall for long without wondering what the bar and what this profession lost decade after decade. All of the talented men and women who were excluded from practicing law, or from the bar, or from leadership because of their race, their gender, their orientation, their disability. Decade after decade, our profession was deprived of their talents because of a culture of narrow-mindedness and bigotry.

“While the portraits in the last few rows change a little, it is only a little. Outside the building, on the sidewalks and in the stores and restaurants nearby, men and women of every race, ethnicity and physical disability are doing every sort of job. But when we go to meetings of lawyers — whether it is local bar meeting, or a court calendar, or to see the next class of bar members sworn in, our group looks different. We have not come close to reflecting the sort of diversity that exists everywhere else in our society. . . . White males constitute only 44 percent of California’s population, yet they are 81 percent of the lawyers here. . . . "

I think Axiom (cited in "New Comer Law Firms Are Creating Niches with Blue Chip Clients") summed up the legal industry’s pervasive bigotry in its choice of words – “pedigreed” lawyers. The definition of “pedigree” is a line of ancestors, a lineage, or a list of ancestors of a purebred animal. The word is most often used by dog and horse breeders, as well as other geneticists.

“Quality” on the other hand, is defined as superiority of kind, degree or grade of excellence, and having a high degree of excellence.

Am I missing something? Is it really true that for Axiom to place its lawyers with blue chip clients (corporate America), the lawyers in its stable (pun intended) need to demonstrate “pedigree” rather than “quality”?

I came across a blog article from 2003 (which could have been written yesterday in that its contents are equally applicable today as then) entitled "Why are Lawyers Such Snobs?" The article is worth reading in its entirety, but a few quotes are cited here:

“Any conversation about the future of the profession is incomplete if it doesn't acknowledge how pervasive and influential our profession's snobbery about pedigree is. . . .

“[O]ur profession worships credentials. We assume people from big, fancy law firms are smarter, and we assume people from fancy expensive law schools are better. You're a big liar if you pretend it's not true. . . .

“People, this is crap! Let's think about this. Is this really a good way to discern among people in our profession? I thought the Harvard summer associates in my class were the worst of the bunch -- not good writers, not especially impressive thinkers, and with an air of entitlement that was really ugly. The guy in my class who will be the best lawyer is a former merchant marine who didn't have the interest or inclination to go anywhere but UMaine, but he's got a fantastic mind, a real-world practicality and a great work ethic. . . .

“[T]he gist of it is, our profession exerts a nearly irresistible pressure on talented young people to climb to the highest rung of a specific and extremely narrow ladder. To do so, they incur big big debt, and take on impossibly demanding schedules, at school and in the beginnings of their professional career. And then the golden handcuffs kick in (and the professional snobbery sinks deeper) and making a different choice means admitting you can't "hack it". It's a real trap for the unwary.”

I wholeheartedly agree!