A Client’s Worst Nightmare: When Your Attorney Becomes a Bigger Foe Than Your Adversary
Back in 2013, when the NY Times ran the now infamous DLA Piper “Churn that bill, baby!” article, I wrote a post asking for a client to provide me with some actual DLA Piper bills and I would offer up some proof of “actual excessive billing.” Well, lo and behold, I didn’t get any DLA Piper bills, but I did recently get the next best thing–bills from a litigation case that involves the Big Law firm of Lowenstein & Sandler, in a no-holds-barred cage fight with none other than DLA Piper. Trust me, you don’t want to be the paying client when these two law firms get into the ring…
In early 2009, Donn Rappaport was on top of the world. He was a world-renowned data marketing expert, as well as the Chairman and CEO of ALC in Princeton, New Jersey, a highly profitable data marketing company. He had just served a successful term as the Chairman of the Direct Marketing Association, the largest marketing association in the world, and still served on its Board. During this time, he was approached by the start-up Zumbox Inc., for his advice and counsel on bringing a new product to market. Zumbox had developed a proprietary digital mail system, and was looking for experienced advisors and potential investors. Rappaport was impressed, and in May of 2009, Rappaport agreed to not only invest in Zumbox, but to serve on the Board and become the interim CEO. In addition, the parties agreed that ALC would provide Zumbox with necessary sales, marketing and strategic planning services. The future looked bright for both companies.
Unfortunately, Rappaport and other Zumbox Board Members began to have serious philosophical differences about the best course of action for Zumbox’s future. These differences eventually led to the Board terminating Rappaport from his positions in January of 2010. Like many once-promising marriages, a messy divorce was looming. Although the parties had entered into an Executive Employment Agreement (EEA) that included clear severance and arbitration clauses, they could not reach an amicable resolution on those issues or the alleged breach of the ALC services agreement.
No problem. Rappaport was a battle-tested CEO who was ready for any contingency. For over fifteen years he had almost exclusively used the prestigious law firm of Lowenstein Sandler LLP for all of ALC’s corporate legal needs.
Rappaport knew Lowenstein was expensive, but as an experienced business leader, he believed “you get what you pay for, and I wanted the best.” While that may be a good rule to live by in the business world, such trust in the legal world of litigation can lead to a client’s worst nightmare – runaway and uncontrollable legal bills.
The danger lies in the inherent conflict of interest an attorney or firm faces when billing by the hour. A fundamental precept of the attorney-client relationship is that the attorney acts as the trusted fiduciary of the client.
This is NOT a relationship of equals. The client’s interests must always come before the attorney’s. This is true even when the client is a sophisticated businessperson like Rappaport. Balanced against these lofty fiduciary duties, however, are the real world economics and pressures of the modern law firm. The average partner at an Am Law 100 firm made $1.5 million in 2013, which is also the same amount the average Lowenstein partner made (Lowenstein has been listed as either the first or second highest grossing law firm in New Jersey every year since 2009) . These huge numbers are brought in by requiring the firm’s attorneys to meet increasingly high billable hour quotas, now averaging between 1900 to 2400 hours annually at most large firms. By contrast, in the 1950’s, the American Bar Association determined that 1300 hours was the most an attorney could reasonably be expected to bill in a year. Because of the laws of physics, we know that time has not expanded since the 1950’s. Rather, this massive increase in required billable hours quotas has made large law firm partners wealthy. Far too often, however, this unquenchable thirst for more profit by firms has unethically put their financial interests ahead of their fiduciary duty to their clients. Rather than encourage efficiency and effectiveness, billable hour quotas encourage inefficiency and conflict.
While clients remain largely in the dark about this very real danger to their bank accounts and bottom lines, this conflict of interest is no secret in the legal industry. A 2002 report on billable hours by the ABA recognized the “corrosive impact of [the] emphasis on billable hours” on the legal profession. That report noted at least 15 intended and unintended negative consequences from this “overreliance on billable hours,” including but not limited, to:
- Puts client’s interests in conflict with lawyer’s interests
- Does not encourage project or case planning
- Provides no predictability of cost for client
- Discourages communication between lawyer and client
- Fails to discourage excessive lawyering and duplication of effort
- Client, not attorney, is at risk for inefficiencies, training, and bill padding
- Fails to promote a risk/benefit analysis
Equally disturbing for clients, a 2007 survey by the noted professor and billing ethics expert William G. Ross, revealed that 67% of responding lawyers had “specific knowledge” of bill padding, and a further 55% of those lawyers admitted that they themselves had performed unnecessary tasks to increase their billable output.
So, beginning in early 2010 and continuing through at least May of 2012, Rappaport and ALC received a firsthand and costly education on dangers of the billable hour, as their “trusted” attorneys at Lowenstein put their financial interests ahead of the efficient and effective resolution of their client’s legal issues.
- Lowenstein failed to develop a strategy, case plan, or budget, and immediately engaged in excessive lawyering and overstaffing:
The disputes between Rappaport, ALC and Zumbox were relatively straightforward: a breach of employment contract case between Rappaport and Zumbox, and a collection case between ALC and Zumbox. The total amount of damages involved in the employment case was around $200,000, and $495,000 for the collection case. Rappaport, being a savvy businessman, assumed that Lowenstein would expertly analyze the problem and develop a comprehensive strategy and budget to most cost-effectively solve the problem.
Lowenstein, however, saw a “golden goose” and started the billable stopwatch – six stopwatches to be more accurate. In the first two months alone, Lowenstein had 6 different partners bill significant time on the matter, for a total of 178.1 billable hours, or $95,810. The average billable rate for all of this work was a staggering $538 per hour. During this time, Lowenstein partners spent significant time billing for preparation of a Complaint in the employment breach of contract case, even though the EEA had a clear arbitration clause, a preliminary issue that any fresh-out-of-law-school associate would be able to easily identify with a cursory review. Equally troubling, only two of the six partners billing that time had any real litigation experience. The other four partners were corporate and/or bankruptcy lawyers, and while Rappaport had trust in these lawyers’ corporate work, they would be no one’s objective choice to lead a tightly run litigation matter.
The next two months brought another 66.5 hours, bringing the billing frenzy after the first four months to 244.6 hours, or $129,878 of legal bills.
Those are massive numbers and Rappaport might have accepted those billings had the resultant work been carried out with a cohesive strategy and/or achieved results. But, other than pad all of those partner’s billing timesheets, almost nothing had been accomplished at this point
- Lowenstein failed to communicate a cost risk/benefit analysis to allow Rappaport and ALC to a properly make key settlement decisions:
Not surprisingly, Rappaport complained about the mounting costs and lack of strategy, and demanded change. In response, Lowenstein put the cases on a 5-month holding pattern, billing only 35.3 hours on the cases from May through September of 2010. Thankfully, someone at Lowenstein also finally discovered the Arbitration Clause in the EEA, and the California firm of Margolis & Tisman was brought in to handle the employment case, which was clearly required to be arbitrated in Los Angeles.
Much to Rappaport and ALC’s relief, in late 2010, the parties reached a tentative global settlement that would pay Rappaport and ALC $555,000 to resolve the cases. However, the Zumbox offer was for an initial payment of $255,000, with the balance being paid over time. Concerned with a potential default, Rappaport wanted the settlement to include a stipulated judgment provision, which would provide him and ALC with more protection in the case of any default. Lowenstein claims that Zumbox would not agree to the stipulated judgment provision and that it advised Rappaport and ALC to accept the settlement regardless. Rappaport could not understand why Lowenstein was unable to obtain the security of a Stipulated Judgment, and the settlement negotiations fell apart.
The bigger issue is again Lowenstein’s inherent conflict of interest and lack of transparency with their client. Up until this point in the litigation, Rappaport’s exposure was less than $150,000 in legal fees. He had legitimate concerns about a potential default by a still struggling company and obtaining further protection. But, because Rappaport was not given any reasonable estimate of further litigation costs, which eventually included another $400,000 in fees, he was unable to make an educated cost/benefit risk analysis of whether to accept or deny the settlement offer on the table.
Rappaport told me that had he been told that their overall litigation costs would likely have surpassed any award of damages at trial, he “almost certainly” would have accepted Zumbox’s offer even without the protection of a stipulated judgment in the event of a default.
Ironically, the ultimate settlement reached between Rappaport/ALC and Zumbox, more than 2 years later—and less than 6 months after Rappaport retained new counsel to represent him and ALC—did include a Stipulated Judgment. But it was a costly 2-year delay: During that time, (a) Rappaport and ALC were forced to incur an additional $200,000 in legal costs and fees; and (b) Zumbox ran out of money and funding, and no longer had liquid assets upon which the stipulated judgment could be collected.
- Lowenstein discovery tactics were inefficient, ineffective and designed more for the profit of Lowenstein than to effectively move the case forward:
Around May of 2011, Zumbox retained DLA Piper, one of the largest law firms in the world, and an epic “clash of the titans” discovery battle ensued. Or as Kathryn Kirmayer, a partner at Crowell & Moring, and a leader in flat fee pricing for complex litigation, notes: “Discovery in the United States has to be the single most inefficient process ever devised,” and is the direct “progeny of the billable hour.” But, as any big firm lawyer knows, those inefficient processes also liberally grease the profit wheels of large (and small) law firms.
Between May and September of 2011, Lowenstein billed Rappaport and ALC a total of 316 hours for over $97,000, a majority of which was spent on discovery, and more specifically, e-discovery. In July, an additional $21,000 was billed as expenses for “document conversion and scanning services.” Margolis & Tisman, the California firm engaged by Lowenstein billed an additional 49.2 hours for another $19,000, during this same time frame, and in November, billed an additional 89 hours for over $34,000, almost all of which was for document production. In January and February of 2012, Lowenstein added another 76 hours or almost $25,000 of billing, again related mostly to email discovery. Before Rappaport and ALC knew what hit them, Lowenstein and their compatriots had racked up 530 hours of total billing in this time period, or almost $200,000 of fees and expenses – this in addition to the approximately $200,000 previously billed by Lowenstein for these matters. A significant part of this billing was associated with repeated shuffling over tens of thousands of mostly irrelevant emails.
So what did all of this highly expensive work on the email production and review produce? Absolutely nothing. When Rappaport and ALC demanded a status report on the email findings, Lowenstein informed them that its team had reviewed approximately 500 emails and found nothing of value in them, thus there was nothing of substance to report on.
There can be little doubt as to which side was to blame for the all out email war, given what one telling internal Lowenstein email noted in November of 2011: “Zumbox halfheartedly asked for our documents . . . [so] I made a soft commitment to produce ‘some’ documents by the end of the month.”
That certainly does not sound like sufficient justification for Lowenstein’s massive e-discovery billings.
- Lowenstein abandons its client and pushes through a procedurally flawed motion to withdraw
By November of 2011, with almost $400,000 having already been billed and no end in sight, Rappaport realized that he had been placing far too much trust in the two lead attorneys on the matter, Peter Ehrenberg and Sharon Levine, both of whom he had worked with over the years on corporate matters. Unfortunately, he was now learning the hard way, that while Ehrenberg and Levine might be good corporate attorneys, they were the wrong persons to be leading his litigation matters. Rappaport knew he had to step in because the ever-escalating legal bills would soon be greater than any damages award or settlement he could obtain. So he demanded a hard budget. Lowenstein scrambled to put one together, and unbelievably, as revealed in internal emails, their chief motivation in providing a budget, appeared designed to convince Rappaport to “shut down” the case, and “that this may go away if the budget costs start to approach the maximum recovery.” Again, and in a blatant disregard of their fiduciary duty to their clients, Lowenstein lawyers put their financial interests ahead of their clients. Realizing they had a client who was extremely unhappy with their lack of strategy and performance, and increasingly likely to stop paying their bloated bills, they disingenuously attempted to convince him to give up his valid claims by finally providing a budget deep into the litigation.
However, Lowenstein’s ploy backfired. Rather than convince Rappaport to “walk away” from the litigation, he instead demanded that they reimburse him for much of their work, which he considered “seriously lacking.” He demanded that the firm write off half of their Zumbox legal bills, and moving forward, work at a reduced cost. Lowenstein now had a full-scale fee dispute on their hands, and Rappaport now had to simultaneously do battle with his own firm as well as with Zumbox. When these negotiations broke down, Lowenstein filed a motion to withdraw from the cases, essentially abandoning their clients in the middle of the cases, and after billing and collecting close to $400,000 in legal fees and costs.
Incredibly, Lowenstein tried to limit its abandonment of ALC and Rappaport to the Zumbox matters only, arrogantly intending to continue to represent ALC as general corporate counsel, even as it accused ALC and Rappaport of being uncooperative, recalcitrant, nonpaying clients in the motion to withdraw.
Rappaport and ALC strenuously objected to the attempted withdrawal, but were summarily rebuffed by the firm. Because Rappaport and ALC had exclusively used Lowenstein for almost all of their legal matters for 15 years, they had no other firm to readily turn to. As a last resort, they requested a continuance of the motion to withdraw, which was set to be heard on June 4, 2012. Lowenstein again denied this request and informed them to immediately get other counsel, as any opposition to the withdrawal motion was due by May 21.
Unbelievably, Lowenstein’s motion to withdraw was granted prematurely on May 21, 2012, without Rappaport and ALC being heard or their position represented, because Lowenstein, again acting solely in its own interests, failed to inform the court of the fact that their clients intended to oppose the motion and were scrambling to engage new counsel. Lowenstein then refused to even notify the court of its error in prematurely ruling on the motion and failed to have the matter filed under seal as promised.
- A Silver Lining?
Although it was hard to foresee any positive coming from Lowenstein’s withdrawal at the time, its withdrawal did lead to Rappaport and ALC engaging new and effective counsel, Princeton-based Taylor Colicchio, who were able, after picking up the pieces, to resurrect the prior failed settlement. In less than 6 months from Lowenstein’s withdrawal, the employment case was arbitrated in Los Angeles by Taylor Colicchio (without the need of additional expense of “ local counsel”) and ultimately settled for the same $555,000 amount, including a Stipulated Judgment provision in the event of a Zumbox default.
As happens far too often when business disputes end in litigation, the only winners are the attorneys. Or, as Steven J. Harper, former Am Law 100 partner, and author of the “Lawyer Bubble,” noted in a New York Times’ Op-Ed:
“The billable hour system is the way most lawyers in big firms charge clients, but it serves no one. Well, almost no one. It brings most equity partners in those firms great wealth.”
Unfortunately, as shown above, it is unwary clients that are paying for all those summerhouses and country club memberships.
Is there a moral to this story? Yes, and it is one that Rappaport, ALC, and far too many other abused clients and businesses have learned the hard way. Clients must demand that their attorneys be held to the same professional standards they require in any other business situation. Litigation is almost always expensive, even with honest and transparent firms. It becomes a no-win situation if clients – even long-term clients – are left in the dark or are too trusting. Clients need to stay informed of their costs at every stage of the proceedings in order to make the right business decisions. The billable hour is not your friend, but rather a very dangerous foe.
“Co-sourcing” – a Much Needed Lifeline for BigLaw?
The legal world becomes a far better place when you take deep breaths and surrender to the BetterLaw mantra:
Right people. Right skills. Right place. Right price.
Those four very short sentences are your path to legal enlightenment, i.e., getting the most bang for your legal buck. Better yet, and a sign that the universe is vibrating in oneness, the mantra works equally well for BigClient AND BigLaw – when done right. When done wrong, or out of balance, your legal experience will be similar to to that of an inexperienced yogi pulling a hamstring on a poorly-executed Downward Facing Dog.
But sensei, the new legal world is so confusing, what path should we follow: BigLaw, MidLaw, NewLaw, Outsourcing, Insourcing, Offshore, Onshore, Captive, etc., etc.? And if we go with Offshore, do we choose India, South Africa, Ireland, Argentina, or Timbuktu? How is this in any way better, or more simple?!?! Sounds more like a recipe to add new layers of cost to an already incredibly expensive system. Patience, grasshoppers, let’s not get too ahead of ourselves on our search for nirvana. The answer for most BigClients and BigLaw, at least in the near-term, is the emergence of “co-sourcing.”
Co-sourcing relies on [outside] service providers creating dedicated teams within their own organisation to undertake the work for each specific client, working as an extension of the firm’s remaining office function, rather than as a completely outsourced substitute, with little or no contact.
Firms considering adopting this innovative approach, will often have accepted the benefits of outsourcing business processes, but may worry the quality and level of service delivered will not match that of the in-house support services, despite the potentially significant cost savings.
– Maxine Park, “Co-sourcing and the quest for greater profitability,” in The Global Legal Post
Ms. Park was specifically talking about back-office functions, but the same concept can, and is, being implemented on front-of-the-house legal work. Successful co-sourcing is based on developing long-term relationships and emphasizes values traditionally associated with “partnering” rather than with “vending.” Co-sourcing mixes internal and external sources to deliver services more efficiently, effectively, and at a lower price to the client, while at the same time allowing everyone to make a profit. Win-Win-Win.
Of course, for BigLaw, this means facing the new normal reality. The days of wine and roses are over. The glory
years decades of pillaging and plundering BigClients’ coffers are over. You can no longer have teams of associates running amok on mundane tasks at whatever spine tingling price you deem sufficient to support your grotesque AmLaw PPP numbers. You’ll now have to compete on the open market with hungry NewLaw players. You’ll now have to deliver quality outcomes at a fair price. No more blank checks. Sit down, because this one will really be a gut punch, but you’ll actually have to put your clients’ interests first. No, really. No more lip service.
Now, I realize that most of you won’t be able to do this because of greed, arrogance, selfishness, inability to adapt, short-sightedness, infirmity, panic, etc. You know who you are – all those firms in real decline, but who are desperately “cooking the books” to keep those falling profits appear the same. But, de-equitizing partners, cutting support staff, raising rack rates to counter discounts, and freezing summer associate programs do nothing to address the underlying problem that the old legal model is in it’s final death throes.
All is not lost, however, and instead of going down with the ship, a few BigLaw firms are grasping the co-sourcing lifeline as a way to transition from the old model to the brave new legal world. These intrepid and innovative few realize that co-sourcing allows them to utilize one of BigLaw’s core strengths, providing an end-to-end solution to BigClients’ legal needs, but now doing so at a fair market price. Of course, to deliver at this competitive price, they have no choice but to partner with one or more NewLaw providers. Done right, that co-sourcing, or strategic partnership, can, take a deep breath, and repeat after me, provide the right people, with the right skills, in the right place, at the right price. BigLaw wins, NewLaw wins, Client wins. Namaste. Heck, now that I’ve essentially solved the legal industry’s biggest problem, maybe it’s time to move on to global warming or bringing about world peace.
While I’m off doing research on climate change and communes, some of you may want to take a deeper look at some of the following real-world examples of legal co-sourcing, including:
- Akin Gump teaming up with Novus Law for Fireman’s Fund Insurance
- Elevate Services and Sky Analytics’ work helping NetApp with their outside counsel
- McCarthy Tetrault’s use of Cognition LLP & Exigent in the Great White North
- LeClair Ryan’s collaboration with United Lex
- Riverview Law and DMH Stallard combining forces for M&A Deals
- Valorem Law’s strategic alliance with Novus Law (NewLaw-NewLaw co-sourcing)
Please feel free to add more examples of co-sourcing in the comments below.
My earlier post in the “21st Century Law Series” is:
“Welcome to the Future – the BetterLaw Mantra.”
Welcome to the Future – the BetterLaw Mantra
It’s a brave new legal world out there in 2014. The massive comet called the Great Recession wreaked grievous harm on the traditional legal model. Sure, you can still find a few Tyrannosaurus Rex firms feasting on a couple of ostrich-head-in-the-sand clients, but you’ll soon find more petrified dinosaur bones than living, breathing, traditional firms billing by the hour. This is all incredibly good news for ye battered clients, because once this new legal ecosystem shakes out, the focus will be back where it was always supposed to be, on you, the paying client.
All of this crazy change, however, tends to be very confusing and stressful to clients. Pre-recession, you had one flavor – vanilla – and you only had to decide which brand to choose. Expensive, or super-expensive. Now, there’s a whole cornucopia of flavors, many of them exotic and untested. BigLaw, NewLaw, MicroLaw, TinyLaw, VirtualLaw, Onshore LPO, Offshore LPO, LPM, etc., etc. For most clients, these 31 flavors of new choices are overwhelming, and perhaps helps explain the slower than expected demise of traditional BigLaw. Clients know BigLaw has BigProblems, but at least they know what they are going to get, albeit at a really BigPrice.
Enough already. It’s the 21st Century, for pete’s sake. There’s a better way, and it doesn’t take a rocket scientist, or a Harvard Law grad, to figure this new legal ecosystem out. You just need to take a few deep breaths, channel your inner Dalai Lama, and repeat the following mantra over and over…
Right people. Right skills. Right place. Right Price.
Done. Just solved all your legal problems and saved you anywhere from 30-50% on your next year’s legal bills. Time to order one of those cocktails with an umbrella in it and mosey on over to the nearest hammock.
Okay, I can’t take full credit for my shockingly insightful mantra. I might have heard something similar from Liam Brown of Elevate Services here. No wonder he named his company Elevate. I can just see him in the lotus position, levitating in enlightenment, as he chants this mantra to needy clients. Hey, who wouldn’t willingly follow this yogi to India and become one with the legal universe.
Maybe this is all too touchy-feely for the majority of buttoned-down GC’s, so let me translate the mantra into “business-speak”:
The key to the new legal ecosystem will be the disaggregation of steps in the legal system and it’s frictionless reintegration.
Does that help? That’s the kind of language you can take to the C-suite. Just make sure you give me credit for the big words. Wait, what? Liam said that too, in the same book? Who is this guy? Professor by day, yogi by night?
Yeah, but don’t BigClients need really BigLaw to handle really BigProblems? Aren’t all these upstarts too small and green to handle this type of work? Not according to Mark Harris, the founder of the dinosaur-eating Axiom Law, who has this to say about handling end-to-end sophisticated legal work:
The work [Axiom does] covers a spectrum of sophistication: at the high-end, we are displacing the use of law firms in a given area; at the mid-high/medium point on the spectrum, we are doing work that used to be done by senior company lawyers; and we will also handle the lower-end work if it is a part of the same value chain. The bigger picture here is that we control and deliver on the ‘end-to-end’ value chain…
The sophistication of what we take on is limited only by a client’s willingness to outsource, rather than by our capabilities.
There you go, your roadmap to 21st Century BetterLaw from a couple of the NewLaw mystics. Every night before bed, be sure to chant the BetterLaw mantra: Right people. Right skills. Right place. Right price. Repeat. Sweet dreams.
*** The book that both Liam Brown and Mark Harris (and many others) are quoted in is “The Rise of Legal Services Outsourcing, Risk and Opportunity,” by Mary Lacity, Andrew Burgess & Leslie Willcocks.
The Myth of BigLaw Quality
BigLaw has a Big Problem. Really Big. Big Big. Pull the plug Big. End of an era Big. Okay, enough already, we get it. Just tell us what the problem is. Sure. It’s simple really, but oh-so-unsolvable. Ready? BigLaw can’t compete on price. A five word death sentence.
The Golden Era of BigLaw is el finito. The cat is out of the bag. Informed clients now know (and this news is spreading exponentially) that the lion’s share of BigLaw work can be, and currently is, being competently done by NewLaw for $60 an hour or less. There’s no amount of secretary buy-outs, back office outsourcing, summer associate program cutting, or partner de-equitizing that will get BigLaw’s billing rate anywhere near that “new normal” market rate.
Start building the gallows and find me some rope, because if you can’t compete on price, the party is over, right? One would think, but let’s not forget who we are dealing with. Burying BigLaw is harder than trying to get my wife’s cat into the crate for her annual vet visit. The old coots just won’t give up! Heck, I wouldn’t either if I had a bunch of Fortune 50’s writing me open-ended blank checks to keep my armies of associates churning away. Who’s gonna willingly walk away from that money tree?
So, if you can’t compete on price, you’re left with your old tried-and-true trump card (trumpets blaring) QUALITY! (voice-over by James Earl Jones). The standard pitch invariably goes like this:
- The best we can do is a blended rate of $650 per hour (after discounting our inflated rack rates to make you feel like we care), but our work is of clearly of superior QUALITY compared to that of our competition, who use a bunch of non-Ivy League lawyers, or worse yet <wink-wink>, foreigners for their work. Heck, some of these law factories might even be using non-lawyers (!) on some of their projects. What else can we say, you get what you pay for.
Dang. Maybe we all got a little overexcited with this New Normal Coronation Ball. Maybe Law is different than the rest of the world, maybe only BigLaw can do all this important stuff, and we’ll just have to suck it up when we get those sphincter-puckering bills. Sure, we can keep the C-suite off our back by handing out some non-essential work to a couple of these cheap shops, but we better keep the important stuff with the guys who provide QUALITY, no matter what the cost.
Deal. But before we hand over the keys to the company coffers, it couldn’t hurt to take a look at the objective proof BigLaw has for substantiating their QUALITY claim. No problem, this should be a piece of cake.
Great! Let’s start with the AmLaw 100 rankings? What better way to prove QUALITY than key metrics like gross revenue, revenue per lawyer, and profits per partner. Wait, I’m a little confused here. How do metrics focused on law firms’ bottom lines, rather than any outcome or value provided to clients, have any reflection on quality? It seems that these metrics actually measure how successful firms are at maximizing hourly billing, rather than meeting their clients’ needs. I get it. The firms that turn the screws the hardest on billable hours deliver the best QUALITY to the client? Big means best? Under this theory, Walmart would clearly be the highest quality retailer. Tough luck, Nordstrom’s and Bloomingdale’s.
Perhaps then, it’s that BigLaw attracts and develops only the “best of the best” talent? Yet, there is almost universal agreement that the first few years of BigLaw lawyering is occupied by incredibly long hours on the most mundane and mind-numbing of tasks. Very few young BigLaw associates ever get near meaningful work or a plum assignment. Most leave from exhaustion before ever gaining any real lawyering experience. Do we really need summa cum laude Harvard Law grads on due diligence and document review? Does mundane work magically become QUALITY work when billed out at $300-800 per hour. Even if you buy into this elitist blather, how then does BigLaw differentiate itself from many of the New Law providers that are run by, and staffed with, those same Harvard Law and Stanford Law grads? Must be that those newbies had poor GPA’s and graduated near the bottom of their class? Or maybe they could only get into lower-ranked law schools, like Michigan State or UCLA. Slackers. We all know that Ivy League credentials and high GPA are prerequisites to QUALITY; how else can you explain the genius of Steve Jobs, Bill Gates, Richard Branson, and my personal favorite, Abe Lincoln. Oops, the first two never graduated and the latter two never went to college. If these four went into law, they couldn’t sniff a BigLaw job. The rest are screwed. Book a ticket to India and hope for the best. Maybe Gates, having Harvard on his resume, could get a job at a regional firm back in Boston. So much for the “best of the best.”
But . . . then . . . uh . . . what objective proof is there to back BigLaw’s boast that only it can deliver QUALITY?
There isn’t any. Zip. Nada. Zero. Or as Daniel Katz, professor at MSU and co-founder of ReInvent Law, summed it up here:
To say that our ability to assess the quality of a lawyer is noisy is the understatement of the century. We have very fuzzy notions of who’s good and who’s bad. If you can’t choose on that point, other factors become your point of differentiation, and a lot of times they’re much easier to detect.
Those other factors include better technology and well-designed processes. Hmmm, who does those better, NewLaw or BigLaw?
Let’s see. BigLaw gets smoked on technology and process. It gets blown away on cost. It has no objective proof that it provides better quality. For exactly how much longer can BigLaw count on BigClient to keep paying a huge premium for it’s “fuzzy notion” that it does higher quality work than NewLaw?
My answer. Not much longer. The bread and butter of their dizzying success – hordes of leveraged associates grinding away on grunt work at premium prices – is a thing of the past. Their last bastion – truly high level work – keeps getting chipped away at with every success racked up by the NewLaw providers.
Yep, BigLaw, those buzzards eyeing you and your clients aren’t mirages, they’re your real NewLaw competition, and more and more of them are on the way.
Quality or Value? If You Can’t Beat ‘Em . . .
Many have heard the old adage, “If you can’t beat them, join ’em.” Makes sense. If your adversaries are stronger than you, it’s probably better to join ’em. But that kind of rational response isn’t something that Big, Bad, BigLaw is going to swallow anytime soon. BigLaw marches to its own macho beat, much like Lil Wayne in “A Milli” (paraphrased very loosely because of the incredibly explicit lyrics):
If you can’t beat them, then you aren’t fighting dirty enough!
So, instead of accepting the inevitable rise of NewLaw (or BetterLaw as suggested by Ken Grady), Adam Smith, Esq. channels his inner rapper, with a spoken word stanza in his recent post/rap “How much how fast?“:
Nowadays, when I observe client behavior, I see two thoroughly opposed, but quite consistent, trends: A flight to quality and a flight to value. No single law firm can durably respond to both sets of client demand, which means many who aren’t already at one pole or the other will need to choose, and to change.
A little less explicit than Lil Wayne, but equally incendiary when you think about it. Quality OR Value. BigLaw equals quality. NewLaw is the thrift store. Sure you can get a deal and save some money, but you do realize, BigClient, that you-get-what-you-pay-for, i.e., allegedly lower-quality services from these bargain-basement providers. But not so fast, MackleMacEwen, what your rap lacks in rhyme, it also lacks in truth. Your little “Quality OR Value” riff, which I’m sure is a big hit on the BigLaw Oldies station, is what logicians call a false dilemma, or black-or-white thinking, or an either-or fallacy, or the fallacy of the excluded middle. Whatever you want to call it, a false dilemma is:
A type of informal fallacy that involves a situation in which limited alternatives are considered, when in fact there is at least one additional option.
The presentation of a “false choice” often reflects a deliberate attempt to eliminate the middle ground on an issue.
Uh, Big Boi Bruce, there’s a HUGE middle ground here that you are slyly trying to hip hop past: how about Quality AND Value. Think Tesla. Or my Neuhaus Labs T-1 integrated tube amp. For $495, it makes my iPhone sound better than most esoteric hi-fi systems (priced 10 to 20 times as much) and it can do it wirelessly. I’ll take Novus Law for document review over any of your Tier 1 first-year associates at $800 an hour. So would you:
The founder and head of one of these firms, which is in the business of applying Six Sigma processes to document review, and which has demonstrated consistently and convincingly that their quality is immensely superior to that produced by BigLaw associates working on the same document sets, remarked fairly casually to me not long ago that “for every dollar of revenue we gain, BigLaw loses three.
Before you tell me that Novus can’t do the sophisticated, high-level work that is needed, I’d recommend you read a couple of the recent profiles (here and here) that highlight how clients now are now requiring that their BigLaw firms use Novus, or Axiom, or Clearspire, for all their meat-and-potatoes work. Sounds like a whole lotta BigLaw firms are actually having to join ’em, rather than fight ’em. Need more examples? How about Riverview Law and DMH Stallard doing M & A deals together at 30% less than traditional BigLaw. Or the new deals between LeClair Ryan and UnitedLex, and Seyfarth Shaw and Neota Logic. Quality AND Value. Win AND Win. BetterLaw.
Or, as the real Macklemore sings:
We press play, don’t press pause. Progress, march on!
The good ol’ days are over, Bruce. It’s a new century. BigClient finally got their groove back, and they’re increasingly marching on to the BetterLaw beat of quality and value.