f/k/a . . . the archives

January 31, 2004

Self Help Support Site Officially Launched

Filed under: pre-06-2006 — David Giacalone @ 10:22 pm

In mid-December, we recommended checking out the extensive Library resources available at the new website of SelfHelpSupport.org.   If you haven’t cruised over there, here’s another reminder, prompted by the official launching of the site, which took place on Thursday.

 

The site is a project of The National Center for State Courts, with the collaboration of the American Judicature Society, the Legal Services Corporation, Zorza Associates, Pro Bono Net, and State Justice Institute (SJI).  Madelynn Herman, NCSC knowledge management analyst, helped develop the site and directs the project:


The site will enable courts and legal aid programs from across the country to address the challenges of pro se litigants to share their innovations and best practices


Its online library of resources has more than 400 items, links to articles and reports, and original documents, organized into 16 subject folders


The website is “designed to serve as a virtual meeting place for professionals who are involved in any capacity with self-representation

No Fool He

Filed under: pre-06-2006 — David Giacalone @ 9:26 pm

in box


I was just about to bemoan having to spend an entire week without fresh workproduct from my double-weblogging Pasadena buddy, George Wallace, when I discovered that he’s promising to publish a few post-posted postings at A Fool in the Forest while he’s on vacation.   I’m not sure if his Declarations & Exclusions will be similarly refreshed (but, let’s face it, insurance law is not my thing).


As any visitor can tell from his two very different web ventures, George is a man of extremes, and of many talents.  His vacation will take him from dog sledding to dessert settings, which calls for some fancy accessorizing and packing.


Remembering what it’s like to prepare for a week away from the office (even before weblogs were invented), I’m certain George’s In Box looked a lot like the one pictured above when this week began.   By this afternoon’s final burst of office activity, I assume both In and Out Boxes looked


like this:   out box . .


George is under strict orders to bring no computer or other web-accessing device on this vacation jaunt.  Mrs. Wallace is clearly a Wise Person, and Mr. Wallace is not Fool enough to disobey.   

Valuable Debate on the Ethics of Value Billing

Filed under: pre-06-2006 — David Giacalone @ 3:03 pm

fireworksSmN

 

Our post Wednesday about ethical issues raised by “value billing,” has achieved its purpose — starting a spirited debate.   See the thread here, with a valuable contribution from our thoughtful reader “Dave,” and the responsive posting by Matt Homann yesterday, who started it all over at the [non]billable hour within his praise for value billing.

 

Because “Dave” raises arguments that I believe represent the views of many lawyers (especially those who are very active in the use of technology to serve their clients and who believe in good faith that they are best serving their clients), I’m going to quote his Comment and my response here on the Front Page (emphases added):


Dave:   David, I respectfully disagree with your analysis of “value billing” (or flat-rate billing, or whatever you want to call it). First, your analysis assumes that the billable hour should be the base for any comparison (i.e., value billing is fair only if the charge is less than the comparable billable hour). This assumes that the billable hour is a fair method in the first place.

Lawyers are not only charging for their time, they are also charging to reimburse them for undertaking a certain amount of risk and to obtain the value of their expertise. Say that I have studied LLCs exhaustively and, due to technological efficiencies, I can set up an LLC for a client in less than an hour. What should I charge for that service? In other words, what has the client obtained from me and how should I be compensated? The client not only received 45 minutes of my time–he or she also reaped the rewards of many hours of research and preparation that enabled me to prepare an LLC in such a short amount of time. If my hourly billing rate is $200, should I charge the client $150 for my service? That amount seems to undervalue what the client received–a legal entity that I have basically warranted will be upheld if challenged at a later time. How is that only worth $150?

%key  On another note, consider percentage billing. Many financial advisors charge their fees as a percentage of the total assets under management. Why not charge estate planning clients or transactional clients the same way? This brings a dose of reality to the situation. After all, the monetary value of an estate plan to a client with $100 million in the bank is much different than the monetary value of an estate plan to a client with $100,000 in the bank. The lawyer’s risk is greater as well. Why shouldn’t the fee reflect this difference? The same goes for a business transaction. Why shouldn’t the lawyer’s fee be a percentage of the deal?

These types of fees give certainty to clients–something which they cannot get in billable hours scenarios. The client knows in advance that it will cost, say $1500 for an LLC or 0.5 percent of the client’s total assets to obtain the value of your services.


“firecrackerG”


Editor:  Dave, Thanks for giving us your perspective. This topic is clearly going to call for a lot more thinking and writing by me. Here are some quick reactions to your points, which are also offered with respect and an open mind:


The “reality” is that technological advances and efficiencies are expected — in our economy and in basic economic theory — to bring prices down. So is an oversupply of service providers. Your approach seems to be stripping the client of both normal market benefits and fiduciary protection.

An attorney’s hourly rate is expected to take into account the attorney’s expertise and investment in human and machine capital. The attorney states his or her hourly fee, explains it if the client wonders why it is so high, and then (after some negotiation, perhaps) either enters into an agreement with the client or doesn’t.

Your estate planning example seems to me to show the perils in your approach from the clients’ perspective:


Talking about the attorney’s risk but then not trying to measure the risk when setting a fee seems a sure way to overcharge. The attorney may have more risk when dealing with a $100,000,000 estate plan than with a $100,000 estate plan, but it is surely not one thousand times more risk.

Also, the attorney would certainly spend far more hours working on the $100 million dollar estate than the $100,000 bank account, when setting up an estate plan. Those extra hours — multiplied by an hourly fee that represents the attorney’s expertise and efficiency — compensate for the “extra” value added by the attorney.


plungeGraphG  As with contingency fees, percentage billing is only fair to clients if the client is fully informed about just what the lawyer is bringing to the table to “earn” the percentage. It’s bad enough that personal injury lawyers basically demand to be made a partner in every client’s injury claim. To force this upon ever-more types of clients, without fully informing the client, seems to me to be putting the lawyer’s financial interests far above the clients’ interests.

The LLC example is also worrisome to me. If $150 seems too small a return for your time, perhaps you need to adjust your hourly rate to reflect your perceived self-evaluation. That allows the client to determine your value in a manner that the client can grasp and deal with. As a fiduciary, you need to let the client know just how much time you’ll be spending — explain to the client why less than an hour of work is “worth” $1500.  

Justifying a percentage fee or a flat fee by saying “the client has certainty” can often be simply a rationalization — so does a life-without-parole sentence, rather than 25-to-life. It begs the question as to whether the amount is reasonable in the circumstances. What would the likely range in fees be, if billed by the hour, for your hypothetical LLC client? One hour (likely) to maybe three hours (if there are unseen complications)? Even at $300 per hour, the fee would certainly be far below the $1500 “certain” fee. Trying to make certainty sound like a wonderful value or bargain for the client seems like lawyer-speak to me — and probably would to most clients.

pointerDudeSm  A good rule of thumb for a fiduciary (or any service-provider): if you’re embarrassed to tell your client/customer how little you have to do to accomplish the task, when compared to the fee, your fee is too high.  That’s why many informed consumers have rebelled against the customary real estate agent percentage when selling a home.  It’s also why a lot of probate courts have questioned or put a dollar limit on probate fees based on the overall value of the estate. 


Two final points: As discussed in this post, the special privileges that come with our professional license presume:



1)That since clients cannot adequately evaluate the quality of the service, they must trust those they consult; and 2) That the client’s trust presupposes that the practitioner’s self-interest is overbalanced by devotion to serving both the client’s interest and the public good.


As agent of reality, and consumer advocate, I must often tell my colleagues two things they don’t want to hear:


  • (1) in general, attorney services are worth a whole lot less (add a lot less value) now that consumers can read and write and technology makes it possible to provide legal services far more quickly and efficiently (or through self-help); and
  • (2) there are over one million attorneys in the USA and they are all looking to make a buck.

These factors can’t be avoided by coming up with new ways to “sell” and “price” the product or to push back market forces and the tide of history.



Techno Glitch Note re Comments:  For some reason, Comments to this post are not registering on the Comment meter below, although they are appearing on, and can be reached through, our Discussion Page listings.   For example, Dave has left an interesting reply that can be reached through this thread.

January 30, 2004

An Informative Article on Outsourcing Lawyer Services

Filed under: pre-06-2006 — David Giacalone @ 2:28 pm

law books  

    heading abroad?

 

MyShingle pointed today to a more-informative-than-usual article about the outsourcing of actual lawyer work (not merely back-office functions, which Milbank Tweed is reported to be planning to do in a large way).  The article, “A Passage to India,” by lawyer Rich Smith appears as Commentary on the Motley Fool website (Jan. 26, 2004).

 

Smith intelligently discusses the causes and likely consequences of moving legal work offshore.  He notes, for example:


“In coming years, expect to see more and more companies outsourcing their legal work to offshore countries — most likely former colonies of England with English-speaking workers, lawyers versed in common law, and highly educated populations.  “

 

In particular, companies with big contingents of in-house lawyers, like West and its staff of legal editors, will be moving more legal jobs offshore.”

The article describes West’s offshore operations, and General Electric’s outsourcing of in-house work to India.  Smith predicts that trickle-down savings by publishers will soon reach subscribers, and that “The double-savings to the American companies that buy the [far cheaper foreign] legal services will then trickle down further to the great mass of American consumers of the companies’ products.”

January 29, 2004

Law Firm News is Making Me Queasy

Filed under: pre-06-2006 — David Giacalone @ 6:40 pm

“vampire”  agita?

 

Is it just me, or does the following combination of headlines from today’s NYSBA News Watch (which were listed in this exact order) cause anyone else uneasiness, distress, and good old agita?


01/29/2004    


Do you still regret passing up BIGLAW, Sherry?

Like Falling Off a (Web)log

Filed under: pre-06-2006 — David Giacalone @ 5:48 pm

tightrope

 

[believing that calm is better than complaining, haikuEsq deleted the text of this post]

 

Class (Underground) Act

Filed under: pre-06-2006 — David Giacalone @ 5:19 pm

small suave dude . . .


Evan Schaeffer at Notes from the (Legal) Underground ”met” me online last week, when we engaged in a lengthy dialogue over both weblog etiquette and contingency fee ethics.   It wasn’t always pleasant, and we’re apparently still far apart on the latter topic.   Nonetheless, Evan graciously thanked me today.for participating at his site, and even linked back again to my argument against his position.   To me, that makes Evan a class act.  In addition, his weblog is filled with good humor and goods insights.  [Sorry ladies (or lads), but I cannot vouch for his hunkiness.]  If you haven’t checked it out, just what are you waiting for? 

Posner At His Best Sinking Fleet’s Class Action Settlement

Filed under: pre-06-2006 — David Giacalone @ 1:23 pm

Class action lawyers will surely be heading their shopping carts away from the 7th Circuit’s check-out aisle, after today’s decision in Mirfasihi v. Fleet Mort. Corp.  And district court judges might be slipping out the backdoor, too. (7th Cir, No. 03-1069, Jan. 29, 2004)  In a tour de force of Posnerian logic and rhetoric, the class action settlement involving Fleet’s distribution of customer information was unanimously set aside today. (Thanks to Howard for the pointer)


compass gray . . .


You didn’t need a compass to tell which way this opinion was heading, once Judge Richard A. Poser asked (emphasis added): 


Would it be too cynical to speculate that what may be going on here is that class counsel wanted a settlement that would give them a generous fee and Fleet wanted a settlement that would extinguish 1.4 million claims against it at no cost to itself?”

Judge Poser’s patience was also wearing a bit thin, when he penned (emphasis added): “Fleet, joined by the class counsel, argues that the members of the pure information-sharing class didn’t really receive nothing in exchange for giving up their claims; they received the emotional satisfaction of knowing that Fleet had been forced to give up its profits. That is a preposterous argument. . . . The idea that a rational fiduciary would surrender a claim worth $35 million in exchange for the satisfaction of knowing that his wrongdoer had been forced to pay $243,000 to members of another class staggers the imagination.”

 

Here are a few other points made in the opinion, which chides the plaintiffs’ attorneys for overlooking their fiduciary duties and the district court judge for ignoring his obligation to assure (emphasis added): 


A colorable claim may have considerable settlement value (and not merely nuisance settlement value) because the defendant may no more want to assume a nontrivial risk of losing than the plaintiff does.

“The part of the $2.4 million that is not claimed will revert to Fleet, and it is likely to be a large part because many people won’t bother to do the paperwork necessary to obtain $10, or even a somewhat larger amount.


“The district judge has approved a handsome fee for the class lawyers, $750,000, despite the meagerness of the relief agreed to in the settlement.


“Because class actions are rife with potential conflicts of interest between class counsel and class members [cites omitted], district judges presiding over such actions are expected to give careful scrutiny to the terms of proposed settlements in order to make sure that class counsel are behaving as honest fiduciaries for the class as a whole.”


“Unfortunately the district judge’s decision approving the settlement does not discuss the settlement’s questionable features—not only the one we’ve stressed, namely the denial of any relief to an entire class, the kind of thing that led to rejection of the settlements in Crawford v. Equifax Payment Services, Inc., 201, but also the reversion of unclaimed refunds to the putative wrongdoer and the fact that the class that was denied relief did not have separate counsel from the counsel for the favored class.”


“In Reynolds v. Beneficial National Bank, supra, 288 F.3d at 284-85, we emphasized the district judge’s duty in a class action settlement situation to estimate the litigation value of the claims of the class and determine whether the settlement is a reasonable approximation of that value.  [cites omitted] The district judge in this case made no estimate of the value of the legal claims of the information-sharing class.”


Summing up, “So the settlement cannot stand.”

Posner At His Best Sinking Fleet’s Class Action Settlement

Filed under: pre-06-2006 — David Giacalone @ 1:23 pm

Class action lawyers will surely be heading their shopping carts away from the 7th Circuit’s check-out aisle, after today’s decision in Mirfasihi v. Fleet Mort. Corp.  And district court judges might be slipping out the backdoor, too. (7th Cir, No. 03-1069, Jan. 29, 2004)  In a tour de force of Posnerian logic and rhetoric, the class action settlement involving Fleet’s distribution of customer information was unanimously set aside today. (Thanks to Howard for the pointer)


compass gray . . .


You didn’t need a compass to tell which way this opinion was heading, once Judge Richard A. Poser asked (emphasis added): 


Would it be too cynical to speculate that what may be going on here is that class counsel wanted a settlement that would give them a generous fee and Fleet wanted a settlement that would extinguish 1.4 million claims against it at no cost to itself?”

Judge Poser’s patience was also wearing a bit thin, when he penned (emphasis added): “Fleet, joined by the class counsel, argues that the members of the pure information-sharing class didn’t really receive nothing in exchange for giving up their claims; they received the emotional satisfaction of knowing that Fleet had been forced to give up its profits. That is a preposterous argument. . . . The idea that a rational fiduciary would surrender a claim worth $35 million in exchange for the satisfaction of knowing that his wrongdoer had been forced to pay $243,000 to members of another class staggers the imagination.”

 

Here are a few other points made in the opinion, which chides the plaintiffs’ attorneys for overlooking their fiduciary duties and the district court judge for ignoring his obligation to assure (emphasis added): 


A colorable claim may have considerable settlement value (and not merely nuisance settlement value) because the defendant may no more want to assume a nontrivial risk of losing than the plaintiff does.

“The part of the $2.4 million that is not claimed will revert to Fleet, and it is likely to be a large part because many people won’t bother to do the paperwork necessary to obtain $10, or even a somewhat larger amount.


“The district judge has approved a handsome fee for the class lawyers, $750,000, despite the meagerness of the relief agreed to in the settlement.


“Because class actions are rife with potential conflicts of interest between class counsel and class members [cites omitted], district judges presiding over such actions are expected to give careful scrutiny to the terms of proposed settlements in order to make sure that class counsel are behaving as honest fiduciaries for the class as a whole.”


“Unfortunately the district judge’s decision approving the settlement does not discuss the settlement’s questionable features—not only the one we’ve stressed, namely the denial of any relief to an entire class, the kind of thing that led to rejection of the settlements in Crawford v. Equifax Payment Services, Inc., 201, but also the reversion of unclaimed refunds to the putative wrongdoer and the fact that the class that was denied relief did not have separate counsel from the counsel for the favored class.”


“In Reynolds v. Beneficial National Bank, supra, 288 F.3d at 284-85, we emphasized the district judge’s duty in a class action settlement situation to estimate the litigation value of the claims of the class and determine whether the settlement is a reasonable approximation of that value.  [cites omitted] The district judge in this case made no estimate of the value of the legal claims of the information-sharing class.”


Summing up, “So the settlement cannot stand.”

Fen-Phen Plaintiff Challenges Her 40% Contingency Fee

Filed under: pre-06-2006 — David Giacalone @ 8:30 am

strike it rich . . .

 

Carolyn Elefant at MyShingle reports this morning on a law suit out of Utah, where a successful fen-phen plaintiff is attacking, among other things, the 40% contingency fee charged by her attorney — arguing that the attorney did very little work and faced very little risk in the case, making the percentage charged unreasonably high.  (Salt Lake Weekly, “Contentious Contingency,” by Shane Johnson, Jan. 29, 2004)

 

You don’t have to come to this site very often to know that I believe a contingency fee must relate to the apparent risk to the lawyer (e.g., click here), so I will be looking closely to the results of this suit.   Carolyn asks what I believe is a frequent but inapt question about the choice facing p/i clients.  Here’s her statement and my Comment:



“I can’t help but wonder this: if the clients had been given the option up front of paying, say, $10,000 out of pocket to retain Barton to pursue their claim or alternatively, to pay nothing and allow him to recover 40 percent, which would they have taken? Of course, that didn’t happen, so we’ll never know. However, I often wonder how willing clients would be to risk a decent sum of their own money for a purportedly “sure thing.” If a client isn’t willing to take this risk, shouldn’t the attorney then be compensated at a higher-than-typical average rate for assuming risk in the form of fronting case costs and working on contingency?”

DAG Comment:


The client should not have to choose between a large upfront payment to a p/i lawyer and an unreasonably large contingency percentage fee. The ethical lawyer gives the fully informed client the choice between (a) paying an hourly fee, after being given a good faith estimate of the likely number of hours the firm will put into the case (and perhaps the chance to pay on credit, if a recovery is highly likely), AND (b) a contingency fee level that is related to the perceived risk for the lawyer, and not simply a “standard” rate. See, e.g.,Fiduciary Duties and Contingency Fees  harvard.edu].

Fen-Phen Plaintiff Challenges Her 40% Contingency Fee

Filed under: pre-06-2006 — David Giacalone @ 8:30 am

strike it rich . . .

 

Carolyn Elefant at MyShingle reports this morning on a law suit out of Utah, where a successful fen-phen plaintiff is attacking, among other things, the 40% contingency fee charged by her attorney — arguing that the attorney did very little work and faced very little risk in the case, making the percentage charged unreasonably high.  (Salt Lake Weekly, “Contentious Contingency,” by Shane Johnson, Jan. 29, 2004)

 

You don’t have to come to this site very often to know that I believe a contingency fee must relate to the apparent risk to the lawyer (e.g., click here), so I will be looking closely to the results of this suit.   Carolyn asks what I believe is a frequent but inapt question about the choice facing p/i clients.  Here’s her statement and my Comment:



“I can’t help but wonder this: if the clients had been given the option up front of paying, say, $10,000 out of pocket to retain Barton to pursue their claim or alternatively, to pay nothing and allow him to recover 40 percent, which would they have taken? Of course, that didn’t happen, so we’ll never know. However, I often wonder how willing clients would be to risk a decent sum of their own money for a purportedly “sure thing.” If a client isn’t willing to take this risk, shouldn’t the attorney then be compensated at a higher-than-typical average rate for assuming risk in the form of fronting case costs and working on contingency?”

DAG Comment:


The client should not have to choose between a large upfront payment to a p/i lawyer and an unreasonably large contingency percentage fee. The ethical lawyer gives the fully informed client the choice between (a) paying an hourly fee, after being given a good faith estimate of the likely number of hours the firm will put into the case (and perhaps the chance to pay on credit, if a recovery is highly likely), AND (b) a contingency fee level that is related to the perceived risk for the lawyer, and not simply a “standard” rate. See, e.g.,Fiduciary Duties and Contingency Fees  harvard.edu].

January 28, 2004

New Jersey P/I Firm Pioneers Interactive Web Programming

Filed under: pre-06-2006 — David Giacalone @ 10:30 pm

Law.com reports tonight that the New Jersey law firm Wilentz Goldman & Spitzer “became the first firm in the state to provide live, interactive programming over the World Wide Web.”  The programming started just three weeks after ethics rule changes that allowed NJ lawyers to advertise on the internet. (New Jersey Law Journal, “Live Online From Woodbridge, It’s WilentzTV, by Mary P. Gallagher, 01-29-2004)

 

The WilentzTV show “Your Legal Rights“ is sponsored by one of the largest personal injury and mass toward plaintiffs’ firms in America, and airs live on Tuesdays at 10 AM.  The inaugural hour-long program was entitled “What You Should Know About Divorce,” and attracted more than 300 viewers.  This week’s topic was Your Rights in Criminal Matters. According to NJLJ, the series of weekly law shows is “open to anyone who clicks on a disclaimer and provides an e-mail address.”


“They also drafted a disclaimer — which viewers must acknowledge for access to the live show — making it clear that that no attorney-client relationship is being created and that no legal advice is being provided: ‘only general educational information.’ The disclaimer also notes that the information may be specific to the featured speaker’s jurisdiction and that the law is subject to change.”

Many topics are already available On-Demand at the site, although current titles lean tort mass tort issues.  We wish Wilentz well with this project and hope it is truly informative and helpful for consumers.  Of course, we wonder when clients’ contingency fee rights will be covered.

Fiduciary Duties and Contingency Fees

Filed under: pre-06-2006 — David Giacalone @ 9:49 pm

laughing man fiduciary what?”

An important law review article on lawyer fiduciary obligations relating to contingency fees (and the ABA’s undermining of those duties) is finally available online.  The article, The Continuing Assault on the Citadel of Fiduciary Protection: Ethics 2000′s Revision of Model Rule 1.5 (2003 U.Ill.L.Rev. 1181 [Number 5]) is written by Cardozo Law Professor Lester Brickman, whose continued battle against the revisions to Model Rule 1.5 were spotlighted here last year.
The article, which first describes in detail the development of the attorney’s general fiduciary obligation to clients, is summarized in this introduction:

Beginning with a detailed examination of both the origins of fiduciary obligations and previous efforts at establishing a lawyer’s duties in presenting alternative fee structures, Brickman lays the foundation of the modern contingency fee structure and a lawyer’s corresponding fiduciary obligations. Brickman then turns to the role of the Ethics 2000 Commission in clarifying a lawyer’s obligations, examining the Commission’s changes to the Comment to Model Rule 1.5 addressing contingency fees. He finds that, rather than stem the tide of what he identifies as widespread contingency fee abuse and disregard for fiduciary obligations, the Ethics 2000 Commission not only removed well-established protections for clients, but facilitated abuse in the contingency fee system.

Despite early efforts indicating that the Commission would place a renewed emphasis on the reasonableness of contingency fees, Brickman finds the Commission ultimately found that increased scrutiny of contingency fees posed too great a threat to the status quo. He concludes that the changes fly in the face of an attorney’s historical fiduciary obligation and materially diminishes the protections afforded to contingency fee clients.

[Prof. Brickman was kind enough to allow me to comment on a draft of the article and to thank me in the article for my (meager) assistance.]
Despite the ABA’s recent assault on clients’ fiducial protections, and the triumph of lawyer self-interest at Ethics 2000, the fight is not over.   Thus, we stated last year:
The battle over the new model rule governing contingency fees is being fought right now across the country, on the state level.  As reported in our posting 6/30/03, Arizona recently adopted a version of Rule 1.5 that considerably improves upon the Ethics 2000 proposal, while North Carolina became the first state to adopt the new rule without changes.   Your Editor gave his version of the problems with New Model Rule 1.5 in an Open Letter to the FTC (April 11, 2002), on the ABA and the standard contingency fee.

As we reported last month, the Florida Bar’s Board of Governors is expected to finalize a report that rejects the New Model Rule1.5 this week.

FTC Asks “Who’s Spamming Who?”

Filed under: pre-06-2006 — David Giacalone @ 4:32 pm

Today, the FTC offers information on how to avoid being a spammer or a spammee.

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