Recently my article about Who Sets The Lawyer Fees was used as a guest blog by Alan Weiss. The blog discusses the recent Wall Street Journal article about the Justice Department’s attempt to control fees that the bankruptcy lawyers seek, and the possibility that the U.S. Trustee Program may now be entering the fray.
In case you missed it, here’s the link to Alan’s blog: bit.ly/KoDDLx
In the Wall Street Journal, staff writer, Jacqueline Palank discusses the Justice Department’s attempt to control fees that bankruptcy lawyers seek. Creditors and employees may, at times, be a bit disgruntled by such fees. So, now, the U.S. Trustee Program appears to be entering the fray.
Before going further, it should be noted that i) any fee sought by an attorney must first be approved by the client going into bankruptcy; ii) the fee cannot be paid before a Bankruptcy Court Judge approves the fee request; iii) the legal fees most often are a pittance compared to the debts of the company and thus have little or no impact on either the creditors or the employees. In fact, the current proposal is limited to companies whose assets and debts exceed $50 million, hardly your “normal” bankruptcy.
The only reason for focusing on the legal fees is that this is a topic that makes good reading in the tabloids, including the WSJ. While the quoted hourly rate received by some attorneys seems high, it is insignificant in comparison to the compensation received by incompetent CEOs and others in the C-suite offices. Why don’t the tabloids focus on the cause of the bankruptcy? Why not focus on the compensation of the management team, which often is at astronomically higher multiples compared the lowest paid employees of the company? Why not seek redress against the management that is responsible for bringing the company to its knees? Although this focus may have more positive economic impact, it clearly is not sexy enough to sell many papers.
The U.S. Trustee is proposing, according to the writer, several new approaches to control lawyers’ fees, including:
• Though the lawyer applicant must disclose his/her hourly rate now, the Justice Department wants the lawyer to disclose the lowest, highest and average hourly rates the law firm charges in all its matters.
• The Department wants the lawyer applicant to create and disclose to the Court a budget for legal expenses. This budget would, necessarily, disclose to all involved, including the creditors who are adversaries of the bankrupt, the client’s planned legal strategy.
In the 1960s, the Supreme Court ruled that it was anti-competitive for bar associations to maintain a listing of suggested fees for different types of work. Such a listing, in particular, helped younger and newer lawyers set their fees at rates that were more in line with more senior lawyers. Not having such a list would compel lawyers to set their own fees, the theory being that lawyers would then be more competitive with one another to the consumers’ benefit. The Trustee by its first proposal ignores this. The existing disclosure already provides information that tends to be anti-competitive. Law firms can see what others are charging and price their own services accordingly, causing rates to slowly increase in lockstep over the years.
Intruding into the fees charged for practice areas, such as general business matters, estate planning, tax work, and other areas of work performed by the firms who also do bankruptcy work has no bearing on the special expertise of large company bankruptcy lawyers. No area of law other than bankruptcy requires such disclosure for court approval. Fees are left to be negotiated between attorney and client. Other than precedent, there is no reason disclosure should be made here either and the process should not be extended. “Transparency” is a bogus issue. There is no backroom conspiracy on how bankruptcy fees are charged. All the proceedings are public and must be approved by the Court before attorneys are paid anything.
Budgets are good. I recommend them to my attorney-clients with whom I consult. Budgeting is a process, however, between the client and the attorney. By requiring that bankruptcy budgets, which reveal legal strategy, be made public, the U.S. Trustee is saying that bankrupt companies have no rights. They have no right to advocacy; they have no right to develop a strategy that might affect creditors’ claims; and they have no right of confidentiality. This is clearly contrary to the U.S. Constitution and our entire judicial system. While the bankrupts, and their inept management, may have proceeded down an economically unwise path, they still have rights to seek the best windup of affairs in their economic environment.
Don’t worry about the lawyers’ hourly rates once the bankruptcy petition is filed. They are regulated first, by the client, and second, by the Court. Who is watching the compensation of the management team before the company entered bankruptcy? Why are inept executives not punished with fines, or worse, for malfeasance and negligent management tactics? Why are they allowed to benefit so expansively at the expense of their workers? Why don’t the tabloids focus their sharp light there? Oh, I forgot, the tabloids need to sell papers, they are part of the industrial complex that both Presidents Washington and Eisenhower warned us about as they left office. Perhaps the fact that quite a few newspapers and newspaper chains (Tribune Co. and papers in Detroit, Denver, Minneapolis, Philadelphia and many other cities) have been mismanaged and had to file for bankruptcy has something to do with it, too.
FOR IMMEDIATE RELEASE
Contact: 310.827.5415, firstname.lastname@example.org
Law Practice Management Expert Edward Poll to Host New Webinar this Week
Webinar Topic: How to Start Your Own Law Firm
VENICE, CA – Mar. 1, 2010 – Ed Poll, JD, MBA, CMC and principal of LawBiz® Management Company (www.lawbiz.com) and Edward Poll & Associates, Inc., will lead a webinar on “How to Start Your Own Law Firm” this Friday, March 5, 2010 at 9am PST. The webinar will be presented in collaboration with ExecSense Webinars and will available for download from their webpage (www.execsense.com) after the live event.
In “How to Start Your Own Law Firm”, Ed Poll will discuss the process of opening a private practice. The 60 minute event will cover the initial considerations attorneys should make when deciding whether or not to start a law firm, and will then walk through the various steps, including financial and operational matters, that lead up to a successful opening. This webinar, which is available on your computer, mobile phone and iPod, will also discuss specific “Dos and Don’ts,” and will include a FAQ at the end.
Host Edward Poll is a nationally-recognized expert in Law Practice Management. He has operated LawBiz® Management for 20 years and has helped lawyers across the across the country achieve greater profitability and success through his coaching, consultations, and other offerings such as books, and social media outreach.
According to Catharine Lloyd, head of speaker relations for ExecSense, “We were honored to have Mr. Poll lead a webinar on this topic. His work is highly regarded in the industry and the webinar is a great resource for lawyers.”
For complete information or to purchase this webinar, please visit www.execsense.com or call them at (415) 453-3003.
About Ed Poll, JD, MBA, CMC
Ed Poll, J.D., M.B.A., CMC, is a nationally recognized expert in law practice management. He helps attorneys and law firms increase their profitability consulting with them on issues of strategic planning, internal operations, business development, and financial matters. Poll brings his clients a solid background in both law and business. He has 25 years experience as a practicing attorney and has also served as CEO and COO for several manufacturing businesses. In 1990, he founded LawBiz®Management Company and is now focused on coaching, speaking, and training law firms.
Poll is the author of the just released book, Growing Your Law Practice in Tough Times (West-Thomson-Reuters 2010) and numerous other publications that have become the definitive works in the legal field, including: Law Firm Fees & Compensation: Value and Growth Dynamics (LawBiz© Management Co. 2008), Attorney & Law Firm Guide to The Business of Law: Planning and Operating for Survival and Growth, 2nd ed. (American Bar Assoc. 2003); The Profitable Law Office Handbook: Attorney’s Guide to Successful Business Planning(LawBiz® Management Co. 1996); Secrets of the Business of Law®: Successful Practices for Increasing Your Profits!(LawBiz® Management Co. 1998)
About ExecSense Webinars
ExecSense is the largest producer of executive webinars in the world, developing over 500 webinars a year led by hundreds of C-Level executives (CEO, CFO, CTO, CMO, CLO) and partners from 60% of the largest 200 law firms.
Depending on the webinar, it includes audio files and documents in PowerPoint, Word and/or Excel. ExecSense webinars can be viewed on your computer, mobile phone, iPod or printed and viewed offline. Over the course of a year, ExecSense is first-to-the-scene with webinars on breaking news, trends, and skills, often produced within hours of an important event occurring. ExecSense is a privately held company headquartered in San Rafael, California, founded in 2000.