Allocatur

US Courts to Encourage Competitive Bidding to Control Costs?

The National Law Journal reports on US judges using competitive bidding to select lead counsel in securities actions - one of the reasons to justify this position being that there is often little oversight of the conduct of the matter by an actual client.

The practice was introduced in the early 1990s, but the was frowned upon by some courts in 2000 and 2001. However, the judge who introduced the practice has urged Congress to codify such auctions to save investors money.

In 2003, the New York Law Journal reported on the use by GE Commercial Finance of online auctions for legal services and other GE groups followed this with further online auctions in 2005. Any such auction would need to carefully take into account the services and skills on offer from bidders to ensure a comparison of "apples with apples". Lawyers have complained that such auctions are labour and time intensive, and the recommended strategy is that adopted in any auction - set a limit (in this case a bottom line) and stick to it.

As with any negotiations on fees, a law firm must clearly identify:

• What is the cost base?
• What is the scope of the work?
• What are the client expectations?
• What is value to the client?
• How will the firm deliver the work?

This can be more difficult with on-line bidding as the opportunities to identify scope, expectations and value are more limited.

Are you defaming your client?

It's amazing how often file notes demonstrate the "them and us" attitude adopted by some lawyers to their clients. It's even more amazing that those lawyers forget that these notes will be discoverable if they ever are in a dispute with the client regarding costs or conduct. I have seen quite defamatory file notes including descriptions of clients ranging from "evil" to "an absolute nutter" and other descriptions that can't be published in a family friendly blog!

Emails are a particular problem. There is still a prevailing mentality that they are not "formal" documents. Internal emails are the worst - there is a overwhelming belief they are "private" and unless they are released by mistake - that unfortunate hitting of the reply to all button or the like - they will never be seen other than the sender and recipient. Again, such emails are discoverable in a myriad of circumstances, and most commonly in client disputes.

We should be working with our clients - not against them.
If you can't stand the client, you shouldn't be working for them. Life is too short.

7 Habits of Highly Ineffective Lawyers

A post from JD Hull at his What About Clients blog is a lighthearted look at what makes a "useless" advisor to in-house counsel. Mr Hull notes the following attributes:

1. Be risk-averse at all times. Clients have come to expect this from their lawyers. It's tradition. Honor it.
2. Tell the client only what it can't do. Business clients are run by business people who take risks. They need to be managed, guided, stopped. Don't encourage them.
3. Whatever you do, don't take a stand, and don't make a recommendation. (You don't want to be wrong, do you?)
4. Treat the client as a potential adversary at all times. Keep a distance.
5. Cover yourself. Write a lot to the client. Craft lots of confirming letters which use clauses like "it is our understanding", "our analysis is limited to..." and "we do not express an opinion as to whether..."
6. Churn up extra fees with extra letters and memoranda and tasks. Milk the engagement. (If you are going to be a weenie anyway, you might as well be a sneaky weenie.)
7. As out-house counsel, you are American royalty. Never forget that.

I recently read an article from a former in-house counsel, who has now returned to private practice (and apologise to him because I cannot locate the article to attribute the comment). He noted that the best external lawyer was the one who when consulted would say:
"Yes, there is a problem - but I have some solutions."

The Harris Cost Lawyer/Mahlab Recruitment survey found that one of the most pressing issues for in-house counsel was keeping aware of corporate activities that may have legal implications. In-house counsel needs to be able to find solutions to issues brought to them by their internal clients. They don't need external counsel to simply present them with barriers - too many external lawyers take the approach recommended in point 2 above.

Be Brave - Turn Away a Client

It is one of the Laws of Cost Disputes that any client coming to you from another firm should be treated with care. The greater the number of previous law firms, the greater your wariness should be.

Find out why the client is changing firms. Is it due a lack of performance on the part of the previous firm - and is that lack of performance genuine or due to unrealistic client expectations?
Is the client moving because they didn't like the advice the previous firm was giving?
Was cost the issue - and if so, are you capable of delivering to meet the client's expectations?

If the client is moving for genuine reasons and you can meet their expectations, you still need to realize the client may be coming with a history of unhappy experience of lawyers. This gives you a great opportunity to prove you can do better than your predecessors, and if you achieve the difficult task of changing the client's attitude to lawyers, you will have won a loyal new client.

However, there are times when you should turn the potential client away

• if client expectations are unrealistic and can't be met
• if you for whatever reason, cannot meet the client's expectations, maybe because you don't have sufficient expertise in the field, or don't have the time to properly devote to the matter
• if the client has had such a bad history with previous lawyers that they are unlikely to ever be satisfied, no matter what the result
• if, when you discuss costs with the client, they indicate concern about the ability to pay at the level you are discussing.

So - be brave. Think about whether the client merits the time and effort.

Paper, Scissors, Rock to resolve Discovery Brawl

Discovery fights take up huge amounts of court time, can be expensive and time consuming for the client. A US judge found a novel way of resolving a discovery fight in his court as Jim Calloway explains. Why leave it at discovery? Imagine resolving the building dispute with a game of Monopoly, a Family Law dispute with a round of Snap, or a commercial dispute with a game of Risk. Anyone for pistols at 20 paces?

KPIs as a Marketing Tool for Law Firms?

The Harris Cost Lawyers/Mahlab Recruitment survey of Corporate Counsel/Law Firm Relationships found that 51% of corporations use panel firms, but only 23% of Corporate lawyers had procedures in place to formally review the performance of their lawyers, even if a panel was used.

Formal KPIs provide a non-threatening environment in which a client can express their concerns and desires. It is an interesting marketing tool for a law firm to propose their own set of KPIs, if the client does not do so. This assists the client, but also sets the ground rules and parameters within which the parties are operating. Identifying appropriate KPIs will require identifying the client's expectations - which is the base starting point for delivering value to the client.

We all should know that we are fortunate if a client expresses dissatisfaction, because at least we then have the opportunity to remedy the situation. 95% of clients keep quite if they are unhappy and simply never come back, or worse still, we both lose the business and end up in a dispute over costs.

Formal KPIs help avoid this.

Colour your Arguments?

A really interesting post by Matt Homan on a different way to prepare presentations and other marketing materials. Using colours to breakdown the material into facts, humour and audience participation makes you look at the presentation in a different light.

Using it to present an argument in court might lighten court proceedings a little - although the use of blue (representing audience participation) perhaps should be discouraged in a court room!

Are you a McDonalds or an Ikea delegator?

How do you delegate? A McDonalds delegator specifies in precise detail what is to be done and how - but not leaving room for the delegatee to take a different (and perhaps better) approach. The delegatee learns little from the exercise. The delegation is micromanaged, and the delegator spends too much time on the task. Therefore the delegation is inefficient.

The Ikea delegator gives instructions which may appear to have been interpreted from another language, and when the delegatee receives the instructions, some key "bits and pieces" may be missing. The delegatee has a general idea of what the end picture should be be, but can spend a great deal of time getting to an imperfect result. Given the time involved, the cost of the delegation may be significantly greater if the task had been undertaken only by the delegator. Also, the end result may not be satisfactory and the delegator may spend more time correcting or redoing the task. Again, the delegation is inefficient.

Tips for Effective Delegation

Consider the appropriate person to delegate to.
Except in exceptional circumstances, no more than one level of staff should be involved in the delegation. Avoid the partner delegating to the senior associate who delegates to the 1st year solicitor who delegates to the summer clerk. This results in enormous duplication of effort which cannot be recovered from the client.

Explain how the task fits into the whole picture.
Giving a brief background to the matter puts the
task in context and helps the person being given the task understand what is required.

Explain fully what is required – outcomes and expectations.
If you have a picture in mind of what the outcome will be, explain that. If a research project for example, will the outcome be a 20 page treatise or a 1 page summary? If necessary give guidance on how to do the task, particularly if there is one way which will be significantly more efficient – but don’t micromanage. Set out any deadline, and give pointers to any relevant resources. Most importantly in terms of costs, explain the expected outcome in terms of length of time to be expended, (is this a 5 hour job or a 1 hour job?).

Ask the person being given the task if they understand what they are expected to do.
If necessary, get them to tell you in their own words. Emphasis that they should come back for further direction or with questions if they are not clear.

Give feedback on completion of the task.
This is the only way of ensuring continuing improvement and development.

Will Your Law Firm Service Company have to Repay Clients?

Thanks to Simon Lewis (http://www.sinch.com.au/seminfor) for referring me to the release from the Queensland Legal Services Commissioner regarding charges for outlays and disbursements. Any markup on these will now have to be disclosed to clients and the client's consent obtained. This ruling also applies to service companies. In that instance, the law firm will be required to disclose the interest in the service company or other entity which is charging marked up disbursements.

Not only that but firms will need to refund markups from 1 July 2004 to avoid prosecution. It will be interesting to see if the ruling is followed up in other states. Certainly, in Victoria, markups on disbursements will not be recoverable other than in accordance with specific provision in a Cost Agreement. Some years ago the Law Institute of Victoria alerted practitioners to the difficulties of charging file management and file opening charges. The full release is at http://www.lsc.qld.gov.au/policies/guidelines.pdf

Do In-House Counsel Charge Other Business Units?

78.4% of Australian in-house counsel do not track internal legal costs - therefore most costs are not passed back to other business units. Only 6% of Australian in-house counsel charge business units, and if they do, costs are generally based on an estimate rather than on time actually spent. Tracking internal legal costs is one way of demonstrating value of the legal department - if this work was not undertaken by the in-house department, significantly greater costs would have been incurred with external lawyers. Rees Morrison has an interesting post about the New York City in house law department sending hypothetical bills to all the City departments it represents. Both demonstrating value, but also a way of encouraging efficiency in the use of the law department. This could also be used to show how a lack of communication within a corporation about business activities can increase costs in the corporation. (see my previous post on pressing business issues).