Bye Bye Bartleby – What the Future Holds

February 28, 2011

Death of the Hourly Fee as the “Lodestar” of Reasonable Billing.

I recall an anecdote about Clark Clifford in a book written in the 1970’s, apocryphal perhaps, but telling nonetheless about that bygone time.   Among his many accomplishments Clifford was White House Counsel to President Truman, an advisor to Presidents Kennedy and Johnson, and Secretary of Defense under Johnson.   In this period he was considered by many the most powerful lawyer in America.  In the anecdote a major corporate client was very concerned about proposed tax legislation that might negatively impact his business, and wrote to Clifford asking what he should do.  Clifford wrote him, “Do nothing,” and  included a bill  for $5,000.  The client was enraged and wrote back to Clifford, saying that for $5,000 he deserved more of an explanation than that. Clifford wrote him again and replied, “Because I said so”, and included another bill for $5,000.

That story, and the zeitgeist it represented for our profession in the 1970’s, is as irrelevant to our future now as the buggy whip in the age of the automobile.    Hourly fees as the “lodestar” of reasonable billing are being assigned to the scrap heap of history, not by lawyers naturally, who benefit disproportionately from this inefficient work and pricing model; but by the consumers of our services who will no longer tolerate legal work and fees divorced from the true productive value of  achieving their desired results.  It is being replaced with client demands for alternative fee arrangements (e.g., fixed fees; capped fees; contingent fees based on specific results) where the client has some assurance that the sky is not the limit. “Regardless of billing structure, one certainty is the movement of risk toward lawyers.” R.  Zahorsky, supra at 1.

Small Crafts Advisories

“One morning Jem and I found a load of stovewood in the back yard…  ‘Why does he pay you like that?’ I asked. Because that’s the only way he can pay me.  He has no money.  ‘Are we poor Atticus?’ Atticus nodded. ‘We are indeed’.”

Harper Lee, To Kill a Mockingbird (Harper Perennial Modern Classics 2002) at 23.

The hyperbaric pressures of the current economic recession, combined with greater scrutiny by clients themselves concerning productivity and cost-effectiveness of legal services, will continue to exert downward pressure on legal fees and costs that can be passed on to the clients across all practices, large and small.  However, these trends will impact solo and small practices most heavily because of the diseconomies of scale in smaller practices, which preclude cutting into the marrow of  essential overhead expenses while still being able to function; and the greater competing demands for a solo or small firm lawyer’s daily time (e.g., office administration, rainmaking, etc.) in managing a legal practice with few hands on deck.  But large firms will no longer be immune from these economic realities either, as evidenced by the massive layoffs taking place and cut backs in hiring.  See David Segal, Is Law School a Losing Game? (NY Times January 8, 2011) (“If you are a law student hoping to land a job at a large law firm, good luck to you.  About 53% of firms reduced or discontinued hiring first years in 2009 and 38% plan to do so in 2010…. This will exacerbate the problem of new graduates being able to find positions in law firms.” …”Overall the need for inexperienced assoicates has decreased and may never rebound.” David Lat, Law Firm Survey Confirms All the Depressing Stuff You Alread Knew About the Business of Biglaw (June 25, 2010) at 1;  R. Zahorsky at 1 (“You just don’t need the bodies and man hours to get answers anymore”… E-Discovery tools have eliminated he need to have junior associates review boxes of documents, which is why you are seeing thousands of junior associates being laid off.”); Lisa Van Der Pool, Job Market for lawyers in 2011 is favorable but don’t expect a hiring ‘frenzy’ (Boston Business Journal, January 10, 2011). The exclusion and exodus from large firms will force ever greater numbers, out of necessity, into small firm practice, swelling still the ranks of solos and small firms, and creating greater competition for an ever-shrinking piece of the professional pie.

Stephen M. Winnick, Esq. is the founder and senior partner of Winnick & Sullivan LLP (www.winnlaw.com); and the developer of Summary Judgment™(www.summjudg.com), a comprehensive case and practice management software tool built on Eastgate Systems’s Tinderbox data platform (www.eastgate.com/Tinderbox).  Additional information about Summary Judgment’s features and operation is available in his prior blog series entitledWinvictus’s Summary Judgment – the Romero Case(www.winvictus.wordpress.com).

Copyright © 2011 Stephen M. Winnick, Esq.  All rights reserved.

Advertisements

Bye Bye Bartleby

February 24, 2011

Storm Warnings

However,  as the Galley Slave Ship model has led to inflated hourly rates and billings across all practices while ignoring productivity and cost-effectiveness, that premise is now being widely challenged by the corporate and other wealthy clients which large law firms cater to, especially in the wake of the current deep econonic recession.  Corporations and wealthy individuals who have seen their own business revenues and personal income slashed by the effects of the deep recession, and have been forced themselves to make painful cuts in staffing and overhead and personal lifestyle,  no longer are willing to simply pay the legal bills that are submitted to them without question; or to agree to pay them in the first place without searching discussion.  They are questioning the why, what, how and by whom their legal work is being performed; the billing rates being charged; and, most importantly,  whether all of it is rationally tied to achieving their desired end result in the most cost-efficient manner. They are also demanding alternative fee arrangments such as flat fees or capped fees, or contingent fees based on specific results, which will guarantee that they get real value for their money, or at least limit their risk.  M. Fleming, supra at  31-39. “They are asking for the specific reasons someone is charging $150 per hour and why another is charging $495.  ‘Because that’s what the market will bear is no longer a viable response’.” Jessica Ferm, The Billable Hour Zombie: Why You Need to Act now to Avoid an Attack on Your Business (ABA Law Practice Today, July 2010) at 1 [hereinafter cited as J. Ferm].

Moreover, lawyers across all practices must cater to  independent-minded younger generations of clients raised with instant access to the limitless information which the Internet provides, and who believe they are capable of  making better decisions than their  lawyers once the underlying material facts and applicable legal principles are explained to them.  These Gen X and Gen Y clients as they are sometimes called, tend to be purely result-oriented.  They are focused solely on the bottom line, unclouded by sentimental notions of professional relationship or loyalty.   Consequently,  “[s]ending a message about paying for your ‘time’ rather than ‘the result’ will not resonate (with them), and you may find yourself with a slowly dissipating pipeline.”  J. Ferm, supra at 1-2.

The corrollary effects of the Galley Slave Ship model on lawyer morale are equally troubling. “General surveys reveal a grim picture of an unhappy profession, with a high rate of burnout, job dissatisfaction, divorce, depression, suicide, and drug and alcohol addiction.  Job stress runs high, with unrealistic demands for billable hours, narrow specialization, inadequate opportunities for creativity, and intense competition for jobs, clients, and partnerships among the top laments.  Many lawyers regret having entered law at all and contemplate leaving for another field.  Every year, about forty thousand actually do.”  Jean Stefancic  & Richard Delgado, supra at 51.

Stephen M. Winnick, Esq. is the founder and senior partner of Winnick & Sullivan LLP (www.winnlaw.com); and the developer of Summary Judgment™(www.summjudg.com), a comprehensive case and practice management software tool built on Eastgate Systems’s Tinderbox data platform (www.eastgate.com/Tinderbox).  Additional information about Summary Judgment’s features and operation is available in his prior blog series entitledWinvictus’s Summary Judgment – the Romero Case(www.winvictus.wordpress.com).

Copyright © 2011 Stephen M. Winnick, Esq.  All rights reserved.



Bye Bye Bartleby

February 22, 2011

The Galley Slave Ship Model

But more than any other factor for the benighted image of our profession, is an entrenched model for the delivery of legal services, particularly at the largest law firms, that rewards and perpetuates hourly fees and billings with disregard for productivity and cost-efficiency in achieving clients’ reasonable goals and expectations.   This model is intentionally designed to maximize or “leverage” such billings in a giant pyramid scheme, at the expense of true value to the client of the legal services being provided.  I call this the Galley Slave Ship model. It is characterized  by senior equity partners at the helm of a galley slave ship, serving as task masters over multiple junior attorneys and support staff, all yoked to the ship’s oars.  The senior partner is motivated by his economic self-interest and that of the firm as a whole, to beat out a rhythm of work designed for comfort and not speed (i.e., to ensure maximum leveraging of billable hours by all subordinate members whose own advancement from junior associate to equity partner is directly tied to high billable hours).  The galley slaves serve as cash cows for the generation of high fees inuring to the benefit of the senior partner and, collectively, the firm’s bottom line.

In its least objectionable form the Galley Slave Ship model encourages wasteful, dilatory legal work masquerading as “zealous advocacy” (e.g., needless depositions and other voluminous discovery disproportionate to the money or other matters at stake, or the information reasonably necessary to handle the case).  Because of the subjective, intangible nature of what lawyers may need to perform to achieve a proper outcome,  in all but the most routine transactions honest lawyers can fairly differ on what should be done to represent the client’s best interests. But it is self-evident that a system which will pay the most money for the most work done on every case regardless of its size or significance; or of the utility of the tasks performed in achieving the end result; will foster maximum churning of the case file instead of cost-effectiveness.

Worst yet, the wastefulness which the Galley Slave Ship model fosters is sometimes accompanied by outright meretricious billing practices (e.g., billing out senior attorneys at top rates for routine or perfunctory tasks; putting more junior associates or paralegal staff on a matter than reasonably required; marking up for court appearances perfunctory matters which could easily be handled by a phone call or correspondence or negotiation; exaggerating hours or otherwise fraudulently overcharging for work actually performed). M. Fleming, supra at 31-39.

In solo and small practices, apart from ethical considerations the meager size of the typical client’s wallet acts as a natural governor on any sharp billing practices. You cannot get blood out of a stone, and many clients will have shot their wad in coming up with the initial retainer.  So sending out exorbitant follow-up bills will not increase the likelihood of seeing further payment; it is likely to have the opposite effect.  Therefore, as a practical necessity solo and small firm lawyers routinely do not bill for all of their actual time, and often must cut their bills further with courtesy discounts to get them paid.

But in large law firms with highly specialized departments catering to large corporations and wealthy individuals (e.g., corporate, tax, patent and trademark, labor law, mergers and acquisitions, and trusts and estates) clients have traditionally believed they were paying “premium fees” for the highest caliber representation which could not be obtained under one roof, or possibly at all, in a small practice. Therefore they were content or resigned to do so without quarrel.  M. Fleming, supra at 4-6.

Stephen M. Winnick, Esq. is the founder and senior partner of Winnick & Sullivan LLP (www.winnlaw.com); and the developer of Summary Judgment™ (www.summjudg.com), a comprehensive case and practice management software tool built on Eastgate Systems’s Tinderbox data platform (www.eastgate.com/Tinderbox).  Additional information about Summary Judgment’s features and operation is available in his prior blog series entitled Winvictus’s Summary Judgment – the Romero Case (www.winvictus.wordpress.com).

Copyright © 2011 Stephen M. Winnick, Esq.  All rights reserved.


Bye Bye Bartleby

February 17, 2011

The Mythic Lawyer

In an earlier era closer to when I started, sadly now seemingly quaint, the iconic images of a lawyer included Abraham Lincoln, and Atticus Finch, the hero of Harper Lee’s To Kill a Mockingbird— trusted legal advisors working tirelessly for  underdog clients, with little regard for how or when they would be paid.  Honest, fair-dealing and beyond reproach, this mythic lawyer was justifiably respected by his entire community, and by the lawyers with whom he worked, even the opposing lawyers with whom he crossed professional swords.  It was this image of a lawyer which led me, and I believe most members of our profession, to go to law school and become lawyers.

Sadly, this shining image of lawyers, and the profession at large, is now firmly replaced in the public’s mind with that of land sharks, gouging their clients with exorbitant fees, chewing off their own tails in feeding frenzies of greed and rapaciousness.    “Surveys show that the public feels about lawyers about as fondly as they do towards automobile repossessors or bill collectors, considering them ambulance chasers who feed off the misfortunes of others and are more interested in money than justice.” Jean Stefancic  & Richard Delgado, How Lawyers Lose Their Way (Duke University Press 2005) at 51 [hereinafter cited as J. Stefancic & R. Delgado].  In a 2006 Gallop poll survey of  Americans’ opinions about the levels of honesty and ethical standards in twenty-three professions, only 18 percent of respondents gave lawyers a ‘very high’ or  ‘high’ ethics rating. Lawyers ranked far below nurses, doctors and policemen, and only just ahead of members of Congress, insurance and car salesmen. Nancy Levit & Douglas Linder, The Happy Lawyer.  Making a Good Life in the Law (Oxford Univ. Press 2010) at 64.

The Bates Motel

Much blame for the degradation of  lawyers in society’s eyes is attributed to the landmark Supreme Court decision in Bates v. State Bar of Arizona, 433 U.S. 350 (1977).  Bates held that lawyers are entitled generally to the same First Amendment rights of commercial speeech to advertise their services as any other commercial business.  The holding in Bates overturned centuries of tradition which maintained that lawyer advertising demeans the profession as a whole and must be prohibited. Bates let the genie out of the bottle, and stripped the bar of its ability to effectively regulate lawyer advertising.  It has opened the floodgates to the sleazy advertising and shameless pandering for legal business seen and heard everywhere the public turns — on billboards, television, radio and the Internet — causing all lawyers to be lumped in the same ethical class as used car salesmen.

Stephen M. Winnick, Esq. is the founder and senior partner of Winnick & Sullivan LLP (www.winnlaw.com); and the developer of Summary Judgment™ (www.summjudg.com), a comprehensive case and practice management software tool built on Eastgate Systems’s Tinderbox data platform (www.eastgate.com/Tinderbox).  Additional information about Summary Judgment’s features and operation is available in his prior blog series entitledWinvictus’s Summary Judgment – the Romero Case (www.winvictus.wordpress.com).

Copyright © 2011 Stephen M. Winnick, Esq.  All rights reserved.


Bye Bye Bartleby

February 16, 2011

Sea Changes

“It was on the third day, I think, of his being with me….being much hurried to complete a small affair I had in hand, I abruptly called to Bartleby.  … I called to him rapidly stating what it was I wanted him to do- namely to examine a small paper with me.  Imagine my surprise, nay, my consternation, when, without moving from his privacy, Bartleby, in a singularly mild, firm voice, replied, ‘I would prefer not to.'”

Herman Melville, Bartleby (the Scrivener) (Penguin Books 1995) at 11 [hereinafter cited as Bartleby].

Countless books and articles on modern law practice chronicle the  massive sea changes that have occurred in the past 35 years, profoundly disturbing changes that are transforming the future of our profession.  See e.g.,  Macklin Fleming, Lawyers, Money, and Success. The Consequences of Dollar Obsession (Quorum Books 1997) [hereinafter cited as M. Fleming]; Rachel Zahorsky, Majority Say Law Practice is Undergoing a Sweeping Evolution, Survey Says (ABA Journal, March 26, 2010) [hereinafter cited as R. Zahorsky]. I have been a practicing trial lawyer for 35 years, since I passed the bar in 1975 and hung out my own shingle.   I can testify.

Stephen M. Winnick, Esq. is the founder and senior partner of Winnick & Sullivan LLP (www.winnlaw.com); and the developer of Summary Judgment™(www.summjudg.com), a comprehensive case and practice management software tool built on Eastgate Systems’s Tinderbox data platform (www.eastgate.com/Tinderbox).  Additional information about Summary Judgment’s features and operation is available in his prior blog series entitledWinvictus’s Summary Judgment – the Romero Case (www.winvictus.wordpress.com).

Copyright © 2011 Stephen M. Winnick, Esq.  All rights reserved.