Category: Management

Poor Management Means Bankruptcy!

Altheimer & Gray’s, an 88 year-old law firm in Chicago with 300 lawyers and offices around the world, filed for bankruptcy in 2003 with liabilities of more than $30 million ($25 million owed to its bank). The proposed plan will require the firm’s 59 former equity partners to pay a total of $15 million to the bankruptcy estate; of that amount an average of $753,500 will be paid by each of the nine executive committee members.

The remaining portion will be paid by the 50 other equity partners. And Altheimer’s 65 non-equity partners will contribute slightly less than $10,000 each. No one expects that very much of the more than $30 million in accounts receivable will be collected. See more.

Over-extension of the firm’s real estate obligations, failure to aggressively collect its billings and lack of a team effort to address management challenges are factors that took this firm down. No wonder that today’s young lawyers are questioning whether they want to become partners in firms in which the management of the firm is questionable at best and secretive at worst.

That sounds very much like Steve Kumble’s story as he relates it in his book about Finley Kumble in the 1990s.

While it is not practical for lawyers in large firms to have a direct voice in every decision, is it reasonable for all lawyers in the firm to be personally liable for liabilities over which they have no control? That is a key question being asked by today’s aspiring partners-to-be.

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High Cost of Attorney “Turnover”

Many commentators look to the growth of law firms only in terms of the number of lawyers this year compared to last year. However, there is another critical element to consider. For every lawyer dismissed or leaving the law firm, there is a cost to the firm. This is

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Malpractice insurance

The Attorney General of the State of New York, Eliot Spitzer, has begun an investigation into the practices of malpractice insurance carriers.

The issue is whether insurance companies are refusing to provide malpractice coverage for class-action litigators because their lawsuits are forcing insurers and their clients to pay big awards and settlements.

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Fee Sharing

Clarify your fee sharing agreement, preferably in writing.

In California, the State Supreme Court decided a case on whether a referral fee could be collected where the client did not know or agree to a fee split.

In this case, counsel for the plaintiff-attorney (seeking enforcement of an oral agreement for referral fee) argued that quantum meruit should be the minimum award even if the referral fee could not be enforced under the Rules of Professional Conduct. Otherwise, the reneging defendant-attorney is unjustly enriched. (Of course, the attorney also argued that the client was aware of the arrangement but just didn’t sign an agreement approving the arrangement.)

The California Supreme Court said there would be an unjust enrichment in either situation, but used the quantum meruit theory to award the referring attorney at least a minimum fee. Thus, both attorneys were punished to a degree, or, said in another way, there was no unjust enrichment on just one side of the issue.

In Michigan, an inactive attorney cannot enforce a referral agreement relating to a personal injury contingent fee matter.

Moral: Be crystal clear on what you’re doing with colleagues. Lawyers are no better than others — when there’s money involved, even lawyers can have selective memories!

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Growth of mega-law firms

I was asked by a reporter from an Eastern newspaper today why large law firms are seeking to get larger? An interesting question, one I answer from the perspective of history. I remember ITT (International Telephone and Telegraph Co.), with Harold Geneen as CEO. At the time, it seemed as though there would remain only four corporations in the world, GM, GE, IBM and ITT. Of the four, only GE has an unblemished record of growth; IBM almost died but has regenerated itself and is mentioned as a (more…)

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Spam and unwanted faxes

The following advice concerning unwanted fax advertisements was sent by Walter Oney, a Massachusetts attorney, to his clients. It bears further light. Not only are we being subjected to “spam” on the internet, our fax machines appear to be equally at risk.

The response by abusing marketers to the effect that we don’t have to read the material, just toss it into the round can, seems to be as inane as the response that smokers are at fault for being addicted, not the manufacturers who make tobacco products.

“Dear Client:

A very unfortunate change in the Telephone Consumer Protection Act (TCPA)may allow fax broadcasters and advertisers to legally harvest fax numbers from web sites and thereby escape the previous rule that prior express permission was required before transmitting advertisements.

You can minimize the danger of receiving unwanted ads by removing your fax number from your website. The next best alternative, which may or may not work, would be to add a legend to your web pages to the following effect:

‘[My/our] fax number appears on this web site as a convenience for our [customers/clients] and prospective [customers/clients] who wish to transmit noncommercial material related to our business dealings. No permission may be inferred for any person to transmit an advertisement of any kind.’

You might also want to routinely tell your usual suppliers, in writing, that you do or do not welcome price quotations or other types of announcements by fax.

None of these measures will guarantee you freedom from unwanted fax advertisements, and litigation may be required to establish their efficacy in the face of the change in the law.

If you want to understand how this perverse change occurred, please visit”

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