Category: Professionalism

BillingBusiness PlanningClient relationsGeneralLaw Practice Management

Economics of Law Practice

image   by Sheila Blackford   ©2016   Another law school year is drawing to a close. 3Ls are looking anxiously in the career center for lists of law firm recruiters and scheduled interviews.  “What is their billable hour requirement?”  1,800 hours? 2,100 hours? 

Wait a minute.  How many hours do you have to work in order to bill that many hours? A typical work week is 40 hours a week. 52 weeks in a year. 40 x 52 = 2,080 hours. What about vacation time? Holidays off? How can you have New Year’s Day, Marin Luther King Jr. Day, Presidents Day, Memorial Day, Independence Day, Labor Day, Veteran’s Day, Thanksgiving Day, and Christmas or Winter Holiday. And what about two weeks off to go skiing or camping, or to Disneyland with the kids?

New associates churn the hours and come back late at night to get more billable hours clocked for the month.  “Have I met the quota? Have I hit the bonus level?”

Wait a minute. Billables are measured in hours. The pressure to bill hours in six-minute increments leads to logging six minutes but speeding to actually spend four minutes which starts to add up. For example, 60 minutes in an hour, 480 minutes in eight hours billed but in actual time of four minutes worked for six minutes billed would be 40 minutes or 320 minutes worked to generate 480 minutes billed. I know it sounds far-fetched, because we’d usually work on a client matter for 30 minutes and Bill .5 hours. I’m talking about those quick little client tasks, calling and leaving a voice mail message, reading a court notice, spending a quick email.

Senior partners call associates in and tell them their collectible rate is abysmal and their billables again needed to be written down significantly. “Improvement is mandatory or your future at this firm is unlikely.” 

Wait a minute. Collectibles are measured in dollars. The senior partner isn’t reluctant to alienate a client with a bill that looks inflated. So hours are written down to match client budgets or the senior lawyer’s awareness of how longish reasonable to spend on preparing a client letter versus a pleading. And then that $1,000 bill goes to the client who may pick up the phone to announce he isn’t paying a dime above $950. So another $50 is written off. The client pays the $950. The associate is dismayed to learn that his six hours billed turned into four hours collected. When he stops to consider he skipped lunch and spent ten hours in the office, things are looking grim. Let’s look at these numbers as ratios.  The lawyer worked ten hours, billed for six hours, and collected for four hours. 10:6 billable ratio means he works 1.67 hours for every hour billed. 10:4 collectible ratio means he works 2.5 hours for every hour collected.

Some firms pay the associate a salary and pay a bonus for meeting bonus objectives. What is the bonus based on? The associate isn’t home free. The salary is based on meeting the billable rate. So if you’re not meeting that billable rate, you will likely not last long. It has been said that it takes three years for a law firm to begin making money on an associate. That may be true, but looking up the bar number of the associates at a firm that typically hires three newly admitted lawyers a year, may reveal that maybe one of the three is around for year two. It looks like more firms are quick to cut their losses on an unpromising associate.

Some small firms may try to get a little too clever with compensation programs and run afoul of wage and hour claims by trying to dock a salary in a month following low billable hour achievement. Or trying to play fast and loose with categorizing the associate an independent contractor instead of an salaried employee.

There are federal and state indicia of employment status of a contractor versus an employee. Law firm employers need to be careful and consult with an employment lawyer if any questions. Associates need to be careful and ask questions about expectations about billables and collectibles. And if they have questions, they too may want to consult an employment lawyer.

 

Business PlanningEthicsLaw Practice ManagementLawyer AssistanceProfessionalism

The Gift of Time

 

image    by Sheila Blackford   ©2015   The 2015 holiday season is in full swing. This time of year, many lawyers question if they should leave their law firm and go solo or start up their own multi-attorney firm or just hang it up and retire or switch careers. These are all things that are best to think about. I just question whether this might not be the best time to be making such life changing decisions. It’s a bit like deciding whether to get a divorce. Good to consider but with the stress of the holidays and busy pace of visiting family and friends, this may not be the time when you can do your best thinking. Can you give yourself the gift of time?  Why, you ask? To give yourself time to consult with a good lawyer: yourself.

Take the time to think things through.

  • Can you see where this decision leads?
  • Do you need to sit down with a financial advisor to crunch numbers?
  • What about covering health insurance for you and any family members?
  • What practical considerations are needed in place to help you in the first six-month transition period?
  • Do you have the stomach for flying solo or weathering difficult relationship issues involving sharing control and maintaining trust?
  • If employees will be involved, do you have all the human resources areas taken care of before you create a BOLI complaint or lawsuit?
  • Do you need to sit down with a CPA and your tax returns and financial projections to determine your right choice of entity?
  • Should you and your prospective law partners do Myers Briggs, Strengthfinders, or some other psychological testing to determine if you really will bring compatibility and balance to the planning table?

Know your resources.

Oregon State Bar Economic Survey.

Oregon Attorney Assistance Program Attorney Counselors. For assistance with career planning and counseling.  503-226-1057  or 1-800-321-6227

  1. Shari Gregory, LCSW, JD on Ext. 14.
  2. Kyra Hazilla, JD, MSW on Ext. 13.
  3. Mike Long, JD, MSW, CEAP on Ext. 11.
  4. Douglas Querin, JD,LPC, CADCI on Ext.  12.
  5. Bryan Welch, JD counseling intern on Ext. 19.

Oregon State Bar General Counsel’s Office for assistance with ethics questions arising in the practice of  law. 503-620-0222 or 1-800-452-8260

  1. Helen Hierschbiel, General Counsel on Ext. 361. Will become Executive Director of OSB January 2016.
  2. Amber Hollister, Deputy General Counsel on Ext. 312. Will become General Counsel of OSB January 2016.

Oregon State Bar Client Assistance Office for assistance with initial screening of ethics complaints about lawyer conduct. 503-620-0222 or 1-800-452-8260

PLF Attorney Practice Management Advisors for assistance with the business of practicing law, including closing a law practice, departing from a  law firm, retiring or selling a law practice, or opening a new law practice.  503-639-6911 or 1-800-452-1639

  1. Sheila Blackford, JD on Ext. 421.
  2. Hong Dao,  JD on Ext. 412.
  3. Jennifer Meisberger, JD on Ext. 411.
  4. Beverly Michaelis, JD on Ext. 415.

PLF Claims Attorneys for assistance with handling situations where there is a concern of a potential malpractice claim. The receptionist will connect you to an available claims attorney.  503-639-6911 or 1-800-452-1639

PLF Practice Aids and Forms

 

MentorsProfessionalismResources

Gifts Aplenty

JEL23652-Blackford, Sheila P3 (2)   by Sheila Blackford   ©2011   Here in Oregon, new lawyers are beginning their professional life working with their new mentors according to the desired goals of Oregon’s New Lawyer Mentor Program. I have seen many of these new lawyers who are seeking help with launching their own law practice. Likely this is a situation being repeated in many states as more law school graduates take and pass their state but don’t find a position with a law firm or government agency or in-house counsel.

My advice to these new lawyers  is to get more mentors to work with. There is no “One-Size-Fits-All” mentor. But there are talented lawyers who are experts at closing statements, drafting clear contracts and compelling motions. Others have mastered the fine art of working the room at a networking event or meeting with a prospective client. Still others are excellent at numbers and managing law firm financials so that clients are served at the most reasonable rate at a reasonable profit to the firm.

Where to find these potential mentors? Begin asking other lawyers and judges and judicial clerks to name the five best family law attorneys or civil litigators or criminal defense lawyers or estate planning attorneys. Watch these recommended lawyers in court. Then begin deciding who you think you’d like to learn from. You will be surprised how often these lawyers will be willing to give you tips. I haven’t heard of any of them turn down meeting with a new lawyer. Part of being good at your game is being dedicated to the profession. Realizing that, it is easy to see that you are just as important to these lawyers as they are to you.  Consider them your team of mentors and begin getting gifts aplenty.

Business PlanningGeneralProfessionalism

Battling Dragons as You Start Your Solo Practice

JEL23652-Blackford, Sheila P3 (2)   by Sheila Blackford   ©2010   I see more lawyers these days who are launching their solo practice. Some line up office-sharing arrangements while others decide to go slow by initially working from home. An article I wrote for the Oregon Bar Bulletin, “Home Alone: Where to Hang Your Shingle” may give some ideas for lawyers thinking about this option.

An over-riding concern of lawyers starting up their solo practice is making sure that they don’t spend too much money all at once. For some, starting up on the proverbial shoestring seems to be the best they can do given the circumstances. Almost two years later, I still find my article “Law Office Start-Up: Law Office on a Shoestring” can help some lawyers think through their early budget. No matter how small, a budget is essential.

Starting up a law practice as a solo is starting up your professional life. Do it with at much thoughtful investigation as you can. Make a business plan and put it in writing. I remember the following adage: “Those who fail to plan, plan to fail” being drilled into my head early in the business world. It made me a planner! Sucessful ventures are usually accompanied by well-thought-out plans.

Not all of us are entrepreneurial. Not all successful solo lawyers are either. It is natural to feel nervous and even fearful starting up a business, especially a law practice. Some starting up now will be successful and some will hang it up before the year is up. The important thing is not to become paralyzed by fear wondering which will be your destiny. It’s not knowable today. Today, the task before is to take the first step. Summoning courage that carried you to this point, enables you to move forward or as Goethe urged, “to begin it.”

“Each indecision brings its own delays and days are lost lamenting over lost days…What you can do or think you can do, begin it. For boldness has Magic, Power, and Genius in it.” — Johann Wolfgang von Goethe

EthicsLaw Practice ManagementProfessionalism

Lawyers Leaving Firms – Happy or Otherwise

JEL23652-Blackford, Sheila P3 (2)  by Sheila Blackford   ©2010   Lawyers leaving their firms are on my mind today. Seems like stressful conditions financially are big contributor. There is more movement of lawyers from firm to firm. This raises issues of ethics and professionalism.

1. The Client is not property. The client gets to decide whether to leave the firm following the lawyer who has been doing the work or to leave the firm for a different firm or to stay. The implications of this are sometimes bitter: you have to let the client know that the lawyer who has been doing the work and being in contact with the client is leaving. Here in Oregon, following the ABA Model Rules, see ORPC Rule 1.4 Communication. Click here for a PDF of them which you might want to print them out to keep in a folder or save it on your computer for future frequent reference. It certainly is reasonable to keep your client informed about the status of his or her matter: “your attorney is leaving our firm at the end of the month.” Is the lawyer leaving to move to another state? Is the lawyer leaving to take a position practicing in a different area of law and will be unable to do this type of law? Is the lawyer leaving anyone behind at the firm who could competently continue to work on the client’s behalf? This seems eminently important information to be shared with a client “to permit the client to make informed decisions regarding the representation.”

2. All fees are subject to refund if the work is not performed. Avoid calling fees earned upon receipt “nonrefundable.” This designation may be misleading, if not false, a violation of ORPC 8.4 (a)(3), prohibiting conduct that involves “dishonesty, fraud, deceit, or misrepresentation that reflects adversely on the lawyer’s fitness to practice law.” Wow. This flat fee earned upon receipt becomes a problem when the client chooses to leave with the attorney or to go to another firm. If the firm holds onto that fee, and has done little or no work, ORPC Rule 1.5 Fees prohibits doing so: “[a] lawyer shall not enter into an agreement for, charge or collect an illegal or clearly excessive fee or clearly excessive amount for expenses.” How do you know it’s excessive? “A fee is clearly excessive when, after a review of the facts, a lawyer of ordinary prudence would be left with a definite and firm conviction that the fee is in excess of a reasonable fee.” ORPC 1.5(b) goes on to innumerate eight factors to be considered as guides to determining the reasonableness. I don’t think you really need to read those factors to realize that unreasonableness of a flat fee earned upon receipt held out as “nonrefundable” to a client who want to leave with the attorney or go to another firm. This isn’t the time to try to assess fees for setting up a manila folder with a label and calling it legal work rendered. Sorry. Don’t keep money you haven’t earned.

3. Parting is not sweet sorrow. Giving notice to clients that the lawyer is leaving seems to be a big source of angst in many situations for the departing attorney and the firm. This is especially so when the separation generates hard feelings on either or both sides of the relationship. Our deputy general counsel for the Oregon State Bar, Helen Hierschbiel wrote “On the Move: Ethical duties when switching law firms” in the May 2007 issue of the Oregon State Bar Bulletin.

In a perfect world, one would do as Ms. Hierschbiel advises: “[t]he preferred method for providing notice to clients of a lawyer’s departure is by a joint letter from the managing partner and the departing lawyer to those client with whom the departing lawyer has had principal responsibility or significant contacts. The letter should provide information about the departing lawyer’s plans and indicate whether the firm is capable of and interested in continuing the representation. The letter must inform the clients that they may choose to keep their work with the firm or engage the departing lawyer. The letter should also inform clients, if they choose the latter option, what they need to do to terminate their relationship with the firm, including paying any outstanding fees or costs and how to get a copy of the file. This letter should be sent well enough in advance of the depature to give clients time to make their choices and lawyers time to take steps to effect any transfers of cases.”

However, relationships being what they are – between complicated humans who here happen to both be lawyers, a situation can develop where tempers are stoked and emotions are heated. In that event, Ms. Hierschbiel points out that “an unfriendly separation may make these best practices impossible. In such cases, separate letters may be sent. ABA Formal Op No 99-414 recommends that a letter from the departing lawyer should: 1) not urge the client to sever its relationship with the firm, but may indicate the lawyer’s willingness and ability to continue responsibility for matters upon which she currently is working; 2) make clear that the client has the ultimate right to decide who will finish the case and 3) not disparage the lawyer’s former firm. In addition, so long as the letter is sent only to those clients with whom the lawyer has a present professional relationship, the lawyer does not violate RPC 7.3(a). See OSB Formal Op No 2005-70.

“Upon separation, client files and property must be handled in accordance with the client’s direction. ABA Formal Op No 99-414; Oregon RPC 1.15(e) and 1.16(d). Generally, this means that if the client decides to go with the departing lawyer, the firm should surrender the client file [See OSB FOrmal Op No 2005-125 for discussion of what constitutes the “client file.”] to the departing lawyer and transfer any unearned advance deposits to the departing lawyer’s new trust account. Where a case is being handled on a contingent fee basis, fees will have to be apportioned. The decision on how fees will be split does not need to comply with requirements of RPC 1.5(e).”

4. A lawyer may solicit his/her former clients. “Once the lawyer is established in her new practice she may solicit the clients that she represented at the former firm. See, e.g., Oregon RPC 7.2(a)(2) (allowing a lawyer to solicit personally former clients); and Oregon RPC 7.2(c) (requirement that written solicitation of a person known to be in need of legal services in a particular matter be labeled as an “advertisement” does not apply to persons specificied in 7.2(a)).” I glad that Ms. Hieschbiel included this point in her article. If both the departing lawyer and the firm can keep this in mind, contacting the clients will be viewed in the correct perspective and it will be easier to do what is right by the client.

Hopefully, if you have read this post, you can share it with either someone who is leaving their firm or someone who is being left. I hope you can take a few minutes to read–or re-read– the article from Helen Hierschbiel linked above. Most of all, I hope that both parties can get through this transition ethically and professionally so they can get back to the business of practicing law.