Heller Ehrman and Mayer Brown Reopen Merger Talks

After talks broker down with Baker & McKenzie, Heller Ehram is pursuing other options, including a merger with Chicago-based Mayer Brown.

According to The Am Law Daily, talks between the firms earlier this year broker down doue to Mayer Brown concern about conflicts from Heller's insurance recovery practice, which represents policyholders in coverage disputes with insurance companies.

Mayer Brown represents insurance companies in litigation and corporate matters. The Am Law Daily reports that a source has indicated that any merger between Mayer Brown and Heller would exclude Heller's insurance recovery practice.

Let's Hire More Lawyers Than We Need

Thanks to Dan Slater in the WSJ Law Blog to draw attention to Wednesday's WSJ article “No Joke: Law Firms Hire More Lawyers Than Needed”

“Over the course of the summer, leaders at the country’s biggest law firms have come to an unpleasant realization: They’re about to employ more lawyers than they need.”

The article points out that “a strange and rigid hiring process" that requires law firms to commit to law students two or more years in advance. Oh yeah, then they pay them $160,000 to train them - which is even more problematic when there are more associates than work to do.

There are some firms looking at changin the way the do hiring. Barnes & Thornburg’s Chicago office recently dissolved its summer-associate program. Per managing partner Mark Rust, “now, when we look at our staffing, we ask, ‘Who is it that we need?’ If we need a restructuring lawyer, we’ll go out and hire one as a third-year or as a lateral attorney. It’s ‘just-in-time inventory.’”

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Summer Associate Survey

Image via Wikipedia Each year, American lawyer prodies a summer associate survey of 195 firms. Out of the 10,000 law students at work at these firms last summer, more than 70% responded to the survey. As this summer comes to a close, let's look back to see how firms did last year.

"While respondents to our Summer Associates Survey liked big firms, they liked life at small to midsize firms even better. Students craved juicy assignments, friendly offices, and lots of attention, and the firms that best satisfied these needs tended to be medium-sized shops with relatively small summer programs."

Nutter McClennen, Fox Rothschild, and Buchanan Ingersoll were the top three firms as rated by their summer associates. These top scores were due to real/interesting work, training/guidance, and partner interaction

Morgan Lewis was one of the few large firms to top the list. Following their 7th rated result in 2006, in 2007 they were ranked 4th. How? By giving its 120 summer associates had real work. "I was amazed at how quickly I was given access to clients," wrote one summer associate. "On my second day (before we even completed training), a partner grabbed me to attend a client meeting. Subsequently, I worked along with that client for multiple assignments throughout my summer to the point where the client knew me personally.

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Bank Failure and Client Escrow

Image via Wikipedia In a guest post on Susan Cartier Liebel's "Build A Solo Practice, LLC" blog, writer and speaker Ed Poll provided some insight into fiducuiary relationships, accounting concerns, and banking realities.

Here is much of the text, but for valuable insight take a look at her blog and his The Business of Law™ website.

"Cash Management – The Lawyer’s Fiduciary Responsibility

Every lawyer-client relationship begins (or should begin) with a written engagement agreement that includes how and when the lawyer will be paid. As a general rule most engagement agreements stipulate that the client’s payment for work that has been performed is to be deposited into a lawyer’s general account and payment for work that will be performed is generally to be deposited into a client’s trust account.

Managing and accounting for client funds held in trust is a personal responsibility of the lawyer. In an accounting sense, these funds are a liability of the law practice to the client, must be kept in an entirely separate account and cannot be commingled with any other law firm funds.

Disciplinary Rules

The American Bar Association’s Model Code of Professional Responsibility specifically addresses the issue of trust accounts and commingling of funds. Disciplinary Rule DR 9-102, “Preserving Identity of Funds and Property of a Client” states the following:

(A) All funds of clients paid to a lawyer or law firm, other than advances for costs and expenses, shall be deposited in one or more identifiable bank accounts maintained in the state in which the law office is situated and no funds belonging to the lawyer or law firm shall be deposited therein except as follows:

(1) Funds reasonably sufficient to pay bank charges may be deposited therein.

(2) Funds belonging in part to a client and in part presently or potentially to the lawyer or law firm must be deposited therein, but the portion belonging to the lawyer or law firm may be withdrawn when due unless the right of the lawyer or law firm to receive it is disputed by the client, in which event the disputed portion shall not be withdrawn until the dispute is finally resolved.

The conclusion to be drawn from this requirement is that money earned by a lawyer for provision of services belongs to the lawyer and must be removed from the client’s trust account when earned.

Fiduciary Responsibility

When a lawyer is entitled to make the transfer, the lawyer must make the transfer or be guilty of commingling personal and client funds. The lawyer is a fiduciary who must keep accurate accounting records of such transfers under every State’s rules of professional conduct.

Each lawyer must answer a fundamental question: when you first receive funds, which account should they be placed into, the trust account or the general account? The rules of conduct seem quite clear. If the funds are provided on retainer, then they are not yet earned and the money goes into the client trust account. If the funds have been earned when you received, they go into the general account.

Contingencies such as bank failure serve as no excuse. Every State imposes a fiduciary duty to properly account for clients’ funds to prevent misappropriation or negligence.

Banking Realities

Recent challenges to the country's banking system raise the specter of bank failuers, with wide impact on the American public. Lawyers, for example, are the subject of recent inquiries because of their IOLTA trust accounts.

The problem arises when any single account, in one person’s name exceeds the Federal Deposit Insurance Corporation guaranteed limit of $100,000. In an active family law, real estate, personal injury or debt collection practice, it’s easy to grow beyond this cap. For example, if a lawyer holds $10,000 for each of ten people, the cap it exceeded. Since most practices have more than ten clients, the problem is obvious.

Is it the responsibility of the lawyer to be in the banking business? No, but the lawyer is responsible for acts of an agent, which in the case of client trust accounts is the bank. If the bank fails, the lawyer (in light of Rule 1.15) is responsible. One way to ensure client safeguards is to identify in bank records the name of the client and the amount of dollars held for that client, in effect creating sub-accounts. Another, more direct approach is to maintain a separate trust account for each client whose funds exceed $5,000 to $10,000 and are likely to be held for an extended period of time. The interest on such a separate account belongs to the client. This is not an IOLTA account.

Jurisdictional Rules

Lawyers must stay cognizant of the rules in their jurisdiction that may require client funds in excess of a certain amount, and expected to be held for short periods of time, be placed into IOLTA accounts. In Connecticut, for example, an IOLTA account is the only place where lawyers and law firms may deposit a client's or third person's funds which are less than $10,000 in amount or are expected to be held for a period of not more than sixty business days. In these circumstances, more than one IOLTA account may be advisable.

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Conflicts with Profit-Per-Partner

Image via CrunchBase, source unknown

In his blog, Mike Dillon of Sun Microsystems writes about the conflict between law firm profit-per-partner metrics and their clients' focus on efficiency and value. Quick take:

1. Law schools (especially in the U.S.) remain primarily focused on theory, rather than practice. As a result, a significant expense for law firms is attributable to providing practical training to recent law school graduates.

2. Legal media need to shift the focus from metrics like profits per partner to those metrics that are valued by clients. When legal periodicals begin to report firm operating expenses, average cost per billable hour and similar metrics, the legal world will change very quickly - and for the better.

3. Law firms are in an increasingly competitive (and global) market and must understand every component of their operating expense and business model. What is the cost of attorney turnover in the firm? What are its core v. non-core technical strengths? Can the firm manage sub-contractors (i.e. other legal service providers) to provide more cost effective services to clients in non-core areas? Does the firm fully understand its customers and does it tailor its services to the customer's specific needs?

The text is below, although I suggest reading the full blog at http://blogs.sun.com/dillon/.

"Years ago, I worked for an established New York based law firm. I was assigned to support one of our major clients, a large international pharmaceutical company. As a junior associate I grappled with billing - trying to juggle the minimal value of my limited legal experience with the pressure of meeting the firm's billable hour requirements. I shared this with the senior partner on the account and, to my surprise, he told me to bill for all of my time and that he would ensure that the firm received "compensation commensurate with the value the firm provided to the client".

At the time, I wasn't confident enough to ask how this was accomplished. But I later found out that this partner had a long standing relationship with the client's CEO. At the end of each year, the two of them would meet over a nice dinner and bottle of wine and review the work that the firm had done the previous year. Among other things, they would discuss the amount and type of legal support the firm had provided and the value of that work to the client. At the end of the meal, they would agree on an annual fee for the following year - usually memorialized on a napkin. Some years the fee increased; in others, it decreased.

I was thinking of this story while attending a meeting with lawyers from a number of San Francisco Bay Area companies and law firms. Under the aegis of the ACC we were together to discuss the devolution of legal services from the halcyon days described above to the present where law firms optimize for profits per partner while in-house legal departments focus on efficiency and value. It was a lively discussion and, although there wasn't a clear solution, some ideas resonated with me.

1. Legal Education - Law schools (especially in the U.S.) remain primarily focused on theory, rather than practice. As a result, a significant expense for law firms is attributable to providing practical training to recent law school graduates. In turn, this expense is passed on to clients in the form of higher hourly fees. Our legal education system needs to provide better practical training. In this respect it should mirror the residency requirements of medical schools or legal programs in other countries. For example, in Germany, a practice residency is already incorporated in the law school curriculum. In addition, law schools need to recognize that the "legal profession" is also a business for providing legal services. To be successful, lawyers need to be trained in how to manage a competitive business enterprise. Interestingly, future members of our profession already understand this and are focusing on the issue.

2. Legal Media - As a public company, Sun provides a very transparent view into all aspects of our business operations. This transparency drives increased competition in the marketplace for our products and services. Obviously, law firms aren't required to provide this type of information. However, the limited information that is available focuses on the wrong metrics. Legal media need to shift the focus from metrics like profits per partner to those metrics that are valued by clients. When legal periodicals begin to report firm operating expenses, average cost per billable hour and similar metrics, the legal world will change very quickly - and for the better. Law firms understandably dislike RFPs. In-house legal departments feel the same. Unfortunately, there is no other mechanism for clients (i.e. customers) to ensure that they are getting cost-effective value.

3. Law Firms - Law firms need to better understand that they are both licensed professionals and also employees of a business enterprise in an increasingly competitive (and global) market. This means they need to understand every component of their operating expense and business model. What is the cost of attorney turnover in the firm? What are its core v. non-core technical strengths? Can the firm manage sub-contractors (i.e. other legal service providers) to provide more cost effective services to clients in non-core areas? Does the firm fully understand its customers and does it tailor its services to the customer's specific needs? (In this regard, I note that I have never had a firm propose a non-standard billing relationship for a specific matter. Instead, I've always had to request it.)

4. In-House Legal Departments - We need stop complaining and be part of the solution. This includes not just considering, but engaging firms that provide alternatives to the traditional legal services model. (Some examples - Axiom, Paragon Legal and the recently announced Virtual Law Partners). We also need to be more willing to retain small to mid-sized firms and firms in other geographical regions. Above all else, we need to more actively share information about attorneys and firms that deliver the value that we need as consumers of legal services.

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Do Clients Buy Law Firm or Lawyer?

Book cover via Amazon How does the client select their attorney? So asks Charles H. Green, author of Trust-based Selling (McGraw-Hill, 2005), and co-author of The Trusted Advisor in his blog article "Do Clients Buy the Law Firm, or the Lawyer?". It is worth reading it in its full form.

A brief synopsis:

"The real decision process . . . covers two distinct phases—screening and selection. Screening usually comes first, and is heavily focused on the law firm. The client puts together an initial "short list," based on some combination of prior experience, reputation, recommendations, and some initial search.

Even if only one firm emerges as likely to be viable—most clients insist on some kind of personal interaction before making a decision. And usually this selection process involves several firms. Selection may be more or less formal, may involve presentations or phone calls, but in almost all cases involves personal interaction." The focus of this second stage is the lawyer.

Read the rest here.

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Write Next Proposal With Client

Image via Wikipedia
Another good one for Charles H. Green.

Write Your Next Proposal Sitting Next to the Client

We all know we should write proposals that are less about us. We know we should spend less space on credentials and methodology; we know we should focus more on results, benefits, and adding value in the proposal.

But we nearly always miss the biggest proposal opportunity of all—to build the relationship.

Yet there’s one very valuable thing that happens when you say, “I’ll send you the proposal.” You give the client an emotionally acceptable way of saying “no” to you. This may be the biggest reason of all that proposals exist. No one wants to be the agent of personalizing rejection; and frankly, we don’t want to be

Enter the joint proposal. What if, instead of the usual “send it to you Friday” line, you were to say: “Great meeting, Joe, we got a lot better feel for things today face to face than we could have done with more phone calls. Let me suggest we keep up that progress, rather than shutting it down.

“Let me suggest you book this conference room again for next Tuesday, and we write your proposal together.

“Together, we’ll address all the specs we’ve discussed--capabilities, costing, time estimates, benefits, payback and ROI calculations—everything we talked about. We’ll put in the stuff you need, and leave out whatever boilerplate you don’t need.

“I’ll bring everything I need from our side—pricing sheets, work design outlines—and I’ll be quite open about it. You come with the audience you need this to speak to, and the critical issues the proposal must address. As issues of interpretation arise, we’ll address them together. As issues of understanding arise, we’ll address them together.

“Together, we’ll write the best proposal that can possibly be written for the combination of you and us. Is that the best possible proposal for you? Maybe, maybe not. But we’ll both know that we got the best we had to offer for you out on the table.

“Joe, I know this approach is no guarantee we’ll get the job. In fact, it may become very clear to both of us as we write the proposal that we are particular well-qualified—or badly qualified—to do this work for you. Which means we’re reducing the likelihood of misunderstanding and surprise. Which is good for both of us.”

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Miami - Foley & Lardner

Foley & Lardner - Recent hire of Donna A. Bucella, litigation, and Dario V. Carnevale, business and real estate. Foley & Lardner's Miami office strarted from a group of nine attorneys previously at Buchanan Ingersoll.

The Lawyer's Guide to Collaboration

The authors of the book The Lawyer's Guide to Collaboration have a new blog entitled, not surprisingly, Lawyer Collaboration Tools & Techniques. The had been using their own sites to address issues related to the book (DennisKennedy.Blog and Inter Alia).

The Lawyer's Guide to Collaboration Tools and Technologies: Smart Ways to Work Together . (buy it at ABA) (buy it at Amazon)

The main feature of the site will be the blog, where we will post regularly on book-related topics, and all things collaboration. Although we might occasionally cross-post to our own blogs, it is our intention that all of our collaboration-related posts will appear here rather than on our individual blogs .

Because our early writing collaborations took place in a column called The Strongest Links, which was featured in the ABA's Law Practice Today webzine, and because we both believe that providing links to useful material is one of the best things a website can do, we're very pleased to have a place (look in the right columns) where we will be posting short linkposts to other materials that we find interesting. Our "blogroll" will also be a source of sites and blogs that we find consistently relevant and useful on the topic of collaboration.

We'll also add updates to the book when we have them and information about the book, reviews and how to order it.

Furthering the spirit of collaboration, we're really excited about the Collaboration Tools Wiki we have created to gather resources and collect materials on the subject of collaboration tools. Our modest ambition is that, with your help, it will grow into the premier Internet resource of collaboration tools and technologies both for lawyers and also for the world outside the legal profession. We're also experimenting with social networking and other Web 2.0 tools to help create a collaboration community, including existing groups on Facebook and LinkedIn. And, if Dennis can convince Tom, perhaps the book itself will have its own Twitter identity and personality to tell its own story.

Please join us in this effort to tell the story of collaboration tools and technologies. Subscribe to the blog posts by RSS feed or email. Read the book. Join the conversation in comments and elsewhere. Collaboration is no longer optional. We collaborate with others every day, and technology can help make that collaboration efficient and economical. Collaboration will be a key aspect of what some call "Law 2.0," and this site will be an entry point to new world. Welcome aboard.

SEC to Replace EDGAR Database

Press Release:

Washington, D.C., Aug. 19, 2008 — Securities and Exchange Commission Chairman Christopher Cox today unveiled the successor to the agency’s 1980s-era EDGAR database, which will give investors far faster and easier access to key financial information about public companies and mutual funds.

The new system is called IDEA, short for Interactive Data Electronic Applications. Based on a completely new architecture being built from the ground up, it will at first supplement and then eventually replace the EDGAR system. The decision to replace EDGAR marks the SEC’s transition from collecting forms and documents to making the information itself freely available to investors to give thembetter and more up-to-date financial disclosure in a form they can readily use.

Currently, most SEC filings are available only in government-prescribed forms through EDGAR. Investors looking for information must sift through one form at a time, and then re-keyboard the information — a painstaking task. With IDEA, investors will be able to instantly collate information from thousands of companies and forms, and create reports and analysis on the fly, in any way they choose.

IDEA will ensure that both the SEC and the investors who rely upon the financial reporting the agency demands are ready for the new world of financial disclosure that will soon arrive when financial information is presented in interactive data format. The SEC has formally proposed requiring U.S. companies to provide financial information using interactive data beginning as early as next year, and separately has proposed requiring mutual funds to submit their public filings using interactive data.

“IDEA will ensure that the SEC continues to stay ahead of the needs of investors,” said Chairman Cox. “This new SEC resource powered by interactive data will give investors far faster, more accurate, and more meaningful information about the companies and mutual funds they own. IDEA’s launch represents a fundamental change in the way the SEC collects and publishes company and fund information – and in the way that investors will be able to use it.”

See SEC Announces Successor to EDGAR Database for the full press release

Avoid the "Noise Before Defeat"

Book cover via Amazon
"Strategy without tactics is the long road to victory; tactics without strategy is the noise before defeat."

attributed to Sun Tzu

In their new book, The Execution Premium, Robert Kaplan and David Norton emphasize that good tactical execution and process optimization is not enough. Instead, organizations need to focus on whether the tactics and processes themselves are in line with the broader strategic goals.

The book, with the full title being The Execution Premium: Linking Strategy to Operations for Competitive Advantage (Boston: Harvard Business Press, 2008) is a follow up on their 1996 management primer The Balanced Scorecard.

While companies are increasingly using process optimization initiatives such as Six Sigma, there is often no determination that the processes that are being optimized are actually essential to the strategic goals of the organization. Why is that important? The authors say that "quality and process improvement programs are like teaching people how to fish. Strategy maps and scorecards teach people where to fish."

As reviewed by Adam Smith, Esq. , a leading website dedicated to law firm economics, writer and advisor Brice MacEwan gives the following law firm example of this issue:

"A 'zero-based budgeting' examination of your office space requirements--for partners, for associates, for staff, for the library, for conference rooms, etc.--might yield incremental improvements in how you allocate those expensive downtown Class AA building square feet. But they will not address the question of whether all the activities you perform in that premium space need to be performed there."

In short, if you are efficient at executing processes that are not in line with your strategic objectives, you may perform well but fall behind your competition. Only by matching tactics and strategy will your firm truly be siccessful.

Thanks to Adam Smith, Esq. for drawing our attention to this book.

For more information:

The Palladium Group: About The Execution Premium

Listen to how Palladium’s founder, Dr. David P. Norton describes an Execution Premium.

Conflict of Interest Guidelines

Image via Wikipedia
From the Conflicts of Interest Toolkit released by the Canadian Bar Association

The CBA Task Force on Conflicts of Interest just released their final report. Several issues are addressed, inlcuding multiple representation situations. The following is from the Toolkit created by the Task Force:

Multiple client representation can involve interests which are either divergent from the outset or will become so at some stage. Whether or not the proceeding or matter is contentious, the fact that the interests are divergent means that you will not be able to commit your loyalty and judgment in favour of each of the interests as is required of you. The reality is that it may be difficult to show that each client received the best possible advice that he or she would have received if the lawyer was acting for that party alone and did not have any responsibility to the other client or clients with the divergent interest. In the end, one or more of the clients may complain.

Therefore, you should not act! If in doubt, consult with a colleague, your firm management or conflicts person/committee, outside counsel, or your Law Society’s practice advice hotline.

Questions to help identify a multiple interest conflict:

• What are all of the interests that must be considered during the representation?
• Is there anyone else who has anything to do with the subject matter of the representation?
• If so, what is his/her interest?
• Is more than one person relying on your advice? If so, for what advice?
• If someone attends with a relative or friend, does the relative or friend believe that you are representing his/her interests as well?
• Is someone other than the person affected by the subject matter of the representation paying your fees?
• Where people are contributing to create a business, are their contributions different? Are their rights and obligations different?
• Where people have a joint interest, are their bargaining positions unequal?
• To maximize the interest of one of the persons involved, will the interests of another person be compromised or negatively affected?
• Will you have to keep secret any information from one of the participants that is material to your representation of the other(s)?
• Is there real potential for the parties to have a falling out in the future?
  

Real Value in a Changing World

Jones Lang LaSalle Real value in a changing world

Deloitte Dbrief on E-Discovery

Deloitte has released a summary of their recent webcast about the "discovery continuum". Some highlights:

Companies face a doubling of data they produce every 18-24 months. Legal cases that produce a terabyte of data (56 million pages) are common.

• IT Departments: Data and records management has become a key function for all companies.
  
• Attorneys: Companies expect their legal counsel to understand their IT and data management systems.
• Courts: Judges tend to be more lenient with companies that have data management programs in place and follow them.
• Committee: A committee should be formed to develop the data management system and include in-house counsel, IT department, business unit leaders, and records management personnel.

Deloitte identifies three distinct steps in this process.

Proactive Discovery

• Preservation activity helps prevent destruction of documents and data when required.
• Companies need clearly articulated records management policies and procedures.
  
• Programs must address e-discovery — collection, sorting, management, and storage.

Processing and Hosting of Electronic Data

• Increasing data requires more data storage and processing capacity.
• Mutinational companies may face a multiple of data if business is conducted in multiple languages.
• The European Union has strict privacy rules limited what can be transmitted across borders.

Document Review

• Concept analytics, keyword searches, and folder analysis are getting better.
  
• “Smart” system technology is still in its infancy, but it is promising.

E-Discovery Resources

The following is a partial list of resources for e-discovery solutions:

Starting Points:
Law.com Legal Discovery
Deloitte webcast summary: The Discovery Continuum
The Sedona Conference - Glossary of E-Discovery Terms
The Electronic Discovery Reference Model (EDRM)


E-Discovery Provider Ratings
Socha Consulting
Law Technology News Summary of Socha 2008 Rankings

E-Discovery Solution Providers
Clearwell Systems (their blog E-Discovery 2.0) and (their Pocket Guide for Judges)
Encore Legal Solutions
Encore Discovery Solutions
IBM - Enterprise Content Management

Technology Executive Specializing in Technology, Strategy, People and Projects - Eric D. Brown

Technology Executive Specializing in Technology, Strategy, People and Projects - Eric D. Brown: "Imagine you are a hiring manager trying to find someone to lead a group of IT professionals. What are the things that you would look for in a candidate? For me, it would be someone that has the following profile:

* Strong leadership skills
* Intelligence
* Initiative
* Technical knowledge (not necessarily a techie…someone that understands technology)
* An understanding of basic business skills and terminology
* Customer Service skills
* Good Communication Skills (written and verbal)"

Legal Guide for Bloggers

The Electronic Frontier Foundation has a helpful online legal guide the Legal Guide for Bloggers. This is a very good resource and is broken down into several key topics:

Defamation: The Bloggers' FAQ on Online Defamation Law.
Intellectual Propery: The Bloggers' FAQ on Intellectual Property
Trade Secrets: Chilling Effects Clearinghouse's FAQ on trade secret law.
Privacy: The Bloggers' FAQ on Privacy

Paper: How to Blog Safely

The guide also has an excellent set of resources.

Podcasting Legal Guide
Chilling Effects Clearinghouse
Media Law Resource Center
Libel And Related Lawsuits Against Bloggers
Stanford University's Fair Use Site