Monday, September 18, 2017

Risk, Money and Market Pressure (Litigation Financing, Billing Busted, and New Legal Practitioners: The Big Four)




Let's talk about money a bit. Well, financing and other forces on the legal market. First: "Attys Can Ethically Sell Future Fees To Nonlawyers, Prof Says" --
  • "Allowing attorneys to sell their unmatured fees to nonlawyers would permit law firms and legal practitioners to more widely use a capital source that still complies with current ethical restrictions on nonlawyer investment in the industry, according to a law professor."
  • "Professor Anthony J. Sebok of Yeshiva University’s Benjamin N. Cardozo School of Law contended that there has been little consideration by state bar ethics committees as to whether the purchase of expected attorneys’ fees by nonlawyer entities is permitted under American Bar Association ethics rules."
  • "In his April 21 paper, Sebok surmised that this method of capital creates a passive investment that does not necessarily involve the sale of a property interest in an attorney’s practice and should be allowed under current ethical rules restricting lawyer fee arrangements with nonattorneys."
  • "Sebok drew parallels to the practice of “standard” factoring, in which a lawyer or legal entity sells accounts receivables that have been billed to a client but are not yet paid. He said the vast majority of ethics bodies in the U.S. recognize the standard form of factoring as an acceptable practice under the so-called direct relation test, which measures the significance of a financial arrangement between a nonlawyer and a lawyer."
"Elephants in the Room Part I: The Big Four’s Expansion in the Legal Services Market" --
  • "The Big Four’s recent expansion into the legal market is not the accounting industry’s first foray into providing legal services. Throughout the 1990s, the big accounting firms expanded aggressively from their traditional audit business. After a decade of investment and expansion, the Big Five, as they were then known, built legal arms which rivalled the scale of the biggest law firms. Despite their early success, their ambitions in the legal industry were thwarted by a series of scandals and ensuing regulation, which exposed the potential conflicts of interest stemming from mixing audit with legal advisory services."
  • "The first section of this paper examines the prior expansion of accounting firm into the legal market – a period from which accounting and law firms can learn valuable lessons. The second section looks at the current state of the Big Four in today’s global legal market. Accounting firms have learned valuable lessons from their prior misadventures in the legal industry. They are approaching expansion more cautiously and are using more sophisticated business models that combine traditional aspects of legal services delivery with newer methods. This strategy, combined the Big Four’s relationships with large clients, have allowed the Big Four to penetrate many areas of the legal industry and, once again, rival the largest law firms in the world."
"After Wedding, An Associate's Overbilling Leads to a Suspension" --
  • "Mary Jaclyn Cook spent nearly two weeks last December in Hawaii, getting married and honeymooning in the Pacific paradise. All the while, she knew she was short on hours... A November meeting with her boss had failed to quell Cook’s fear that she would be fired if she missed the target. On Jan. 3, 2017, when time logs were due, Cook wrote 60 entries totaling 135.7 hours. Thanks to the help of a December in which she billed more than 12 hours every day, despite her travel, Cook managed to end the year about an eight-hour workday over her firm’s expected hours for associates. If only it were true."
  • "This month, Cook and the Colorado Attorney Regulation Counsel agreed to a nine-month suspension from the practice of law for the now former Faegre Baker Daniels associate. In a stipulation with the disciplinary board, Cook admitted to inflating and fabricating time entries totaling nearly 140 hours, worth nearly $40,000. The firm never collected the money, having noticed Cook’s unusually high hourly totals in December before most of its bills went out to clients. She resigned from the firm in January."
  • "Cook 'was caught off-guard, and she panicked. She claimed the hours were legitimate,' according to the stipulation. Stark countered by saying that a document management system her log claimed she used on certain days showed she never logged in those days. After the meeting ended, Cook confessed on the same day to Stark about the overbilling, stating she was afraid she would lose her job if she missed the firm’s hours requirement. Faegre Baker Daniels gave her the change to resign, which she accepted."
  • "Michael Frisch, an ethics expert and professor at the Georgetown University Law Center, said that while there is no excuse for overbilling, Cook’s tale is symptomatic of the billable hour pressures that associates face and the inherent conflict they create within firms, their lawyers and clients. 'The whole idea of targeting billable hours, saying an attorney must work ‘X’ number of hours to stay employed, doesn’t encourage efficiency and it doesn’t encourage the most cost-conscious use of attorneys’ services for clients,” said Frisch, who spent 17 years as a grievance prosecutor for the District of Columbia’s Court of Appeals. “And that’s been widely recognized in the profession.'"

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