In years gone by, many people attended law school because a legal education enhanced their skills. In today’s world, entry into law school is first evaluated based on ROI, return on investment. And, in some instances, the comparison is coming up short. After the Great Recession, getting a job after law school was not guaranteed. Law school graduates, in addition to being uncertain about their job market, faced extraordinary debt burden.
A 2012 survey indicates that at least 24% of law school graduates are not practicing law. Rather, they were finding their way into nonprofit and education sectors and the federal government. This compares with9% in a similar 2003 survey. One factor pushing this statistic is the need to reduce or pay some of that student debt.
And when considering whether lawyers are satisfied in their chosen career, measured against whether they would go to law school again if given the opportunity, almost 2 out of seven said “no.” This latter statistic seems to be consistent with similar statistics of earlier years. In the 1970s, in response to a survey that I commissioned with the State Bar of California, almost 1/3 of the respondents indicated they were not satisfied with the practice. But they didn’t have the huge amount of debt that today’s graduates are carrying. I suspect that what keeps people enrolling in law school is another statistic: those graduates with the highest grade point averages have median pay levels that exceed $121,500, more than those who achieve the lowest grades. This is a significant difference, and the reason for the continued attraction of law schools.
Todays law firms are struggling to pay for their 3 most importance expenses: labor, rent, and insurance. This week, Ed offers tips to help you manage your cash flow so that paying the bills doesnt break the bank.
I’ve talked about a lawyer having an estate plan. I’ve talked about creating an estate plan for your law practice; this is an idea first generated by Ellen Peck, retired judge of the California State Bar Trial Court. Now, there is another estate plan to prepare: Digital.
What are you going to do with all your passwords, all your email accounts, all your accounts in social media and all your other accounts that reside in the internet?
Your virtual life doesn’t end just because you die. And in some arenas, the material you have on the internet cannot be removed or taken down. You may even have money residing in some of the internet residences such as PayPal, on-line gambling accounts, etc. Be sure to appoint or designate someone to be responsible for dealing with these issues. Be sure to write down all the accounts and passwords. And be sure to contact such companies as LinkedIn, Facebook, Google, etc. to comply with their policies.
There is little or no case law to date about planning for digital assets after death, and certainly no precedent of which I’m aware on this. But, for just that reason, it’s time to think about these issues.
Not bad enough that legal services are already expensive, but court closures resulting from budget cutbacks will make legal services of all kinds even more expensive. Alternative methods of dispute resolution will need to be engaged. This is like a bad heart, needing new arteries created from exercise. But, we don’t know yet what the "exercise" will be to enable the cost of legal services to go down. Will it be technology? Will it be alternative dispute resolution? Will it be "why can’t we all just get along?" attitude changes?
Marlo Van Oorschot talks about the cost of a divorce rising, as just one example. But, she puts it in terms that everyone can understand.
More budget cuts are going to cause court closures in the family law department this year. This means the time and cost to bring a family law case to conclusion is going to increase. Unless an alternative means of resolving a case is implemented, parties should plan on spending two years and their children’s college education funds waiting to have their day in court.
Fee suit exclusions seem to be the latest insurance ploy to cheat unsuspecting lawyers.
An engagement agreement is designed to be a "two way street." The lawyer promises to do certain things… address the needs (and wants?) of the client; represent the client to address the challenge being faced by the client, whether it be a lawsuit or a transactional issue. And, of course, the lawyer is representing that he/she is competent to do so.
The client, on the other hand, promises to tell the truth to the lawyer, provide information and documents relative to the matter when requested by the lawyer to do so … and to pay the fee as billed in accordance with their arrangement.
What are the consequences of failure to honor the respective promises? For the lawyer, it is a malpractice suit and/or a disciplinary proceeding. For the client, it’s withdrawal by the lawyer (unless on the eve of trial or otherwise would prejudice the client) or a lawsuit for payment of the fee.
BUT, some insurance carriers are lining up with clients, saying that if the lawyer sues for fees, and the client cross complains or counter sues for negligence or files a disciplinary complaint with the state bar, the carrier will not provide defense costs or pay any judgment against the lawyer. The effect of this is to deny the lawyer the ability to collect the fee when the client fails to pay. Why pay insurance premiums for something you will not receive? The $64 question.
Fee suit exclusions are a veiled attempt by insurance companies to raise premiums without notice to the lawyer. And, the lawyer generally isn’t even aware of this exclusion.
Both law schools and insurance companies conspire to keep lawyers ignorant of the business nature of their practice. In no other industry do creditors ignore their rights and fail to sue debtors for refusal to pay legitimate debts resulting from their purchases. Why should lawyers be placed in a different position? Why should clients be encouraged not to pay their lawyers’ fees?
The reality is, according to people I’ve spoken with in the industry, that there are few lawsuits filed by lawyers. (Perhaps it’s because lawyers have been scared away.) Further, the reality is that there are few counter suits for negligence. The further reality is that lawyers win most of these lawsuits; the figure I’ve been given is winning 9 out 10.
Seems that the lawyers face a big challenge: Failure of the law schools to teach business practices so lawyers can more effectively represent clients and efficiently deliver legal services; insurance carriers looking out for themselves, not their customers (lawyers); and bar associations believing their sole function is to protect the public, rather than a dual function of protecting the public AND helping their members (lawyers) to become better practitioners (including business skills).
Lawyers who survive in this environment should be commended.
Sarah Martinez, a recent law school grad, broke the ice. She has sued Howard, Rice, Nemerovski, Canady, Falk & Rabkin in San Francisco Superior Court for extending her an offer of employment, deferring it and now reneging, saying it didn’t have the resources to hire anyone in the near future. Among the counts alleged are racial discrimination, sex discrimination, and breach of contract.
While every case stands on its own facts and merits, it’s clear that Big Law will have to alter its offering policies in the future. The impact on law schools and those coming up through the grades is yet to be determined, but I suspect it will dramatically alter the economics of the future practice.
Lawyers, ready to retire, must consider the value of their law practice as an asset that can be sold … With 401 Ks becoming 101 Ks (or less), the revenue from the sale of one’s law practice may provide the revenue stream needed for retirement.
The California Guide to Opening and Managing a Law Office has just arrived! It’s a 600 page power packed treatise that evey sole practitioner should review. It, along with the ABA’s Flying Solo, is uniquely designed to raise issues that need answers for success.
Disclaimer: I’m responsible for two of the volume’s chapters. There are many contributors and editors who have made this an outstanding reference work.
One of my law firm clients has a lawyer who is what I would call a "reluctant marketer." This lawyer is a great lawyer, a "worker-bee," but not a great rainmaker. The managing partner considered engaging a coach to help the lawyer improve his skills within his comfort zone. Why is this important? Because the amount of work for this lawyer that is being internally generated is lessening. In other words, this lawyer has to begin helping himself a bit.
Parenthetically, I saw a recent survey that shows the amount of hours being worked by lawyers, generally, is coming down. But more on that later.
But, the management committee has come back and said that "costs" are frozen. No more spending. Is this a backward way to look at the situation? What about looking at expenditures from the ROI perspective? If you buy a new piece of equipment and it pays for itself in a couple of months, wouldn’t you move forward? I think you should. If a coach or marketing director can help the lawyer increase his/her revenue because of improved rainmaking efforts, shouldn’t you invest in the process?
And what would this mean to the other lawyers? A reduction in their take home pay? When you’re already earning hundreds of thousands of dollars, a collective reduction by only a few dollars in sdthe short run for an ROI building expenditure may be worthwhile.