I recently turned down a complex but interesting case that had been handled by a much larger firm. In hearing about the case, I asked the potential client how he had decided to have this firm handle his case. He explained that he felt like he needed a big firm to take on his former employer’s big firm. According to this young man, who was actually fairly sophisticated, a solo or small firm would simply be out-gunned by the large firm resources.

He was wrong, of course, and part of my reason for turning down the case was that the larger firm had made some poor choices in how they pursued the matter.  His perception is not uncommon.  What few but the best-informed consumers realize is that in the law biz, bigger is not necessarily better. And usually it is far more expensive.

Take this example in which Century Indemnity Insurance Co. is reportedly involved in a fee dispute with the large law firm of Latham & Watkins.  According to the linked report, Latham & Watkins billed an associate who had not even passed the bar at the rate of $450 per hour.

The thing about new lawyers is that when they come out of law school, they really don’t know how to practice law. They may be the best and the brightest by virtue of their acadmic achievements. But at most, they’ve simply studied cases, constitutions, and laws. They haven’t learned how to apply the skills.

When you’re paying by the hour this matters. A seasoned attorney can accomplish in a tenth of a time what a new attorney can, and the seasoned attorney will generally turn out better quality work to boot. That difference is supposed to be reflected in hourly rates. In other words, a new attorney’s rate should be much lower than a seasoned attorney’s rate.

Put another way, who in their right mind would pay $450 per hour for work by someone who will take 10 times as long to do the same task and likely won’t do as good a job?

Those who are truly in the know realize that small firms often deliver the best value. A well-trained and experienced practitioner in a small firm often has profound advantages over large-firm colleagues. The small firm practitioner typically has lower overhead and thus doesn’t bill frivolously. We deal directly with our clients and have to work harder to maintain relationships. Small firms tend to be nimble. We don’t answer to committees, and waste clients’ time and money with lengthy memos, team meetings, and the like. Instead, we get the work done.

Part of me is wickedly amused that Century Indemnity paid through the nose. In representing injured people, I have developed a sense of disdain for many large firms and their inflated billing practices. But of course, that’s between the firm and its client, and none of my business. Should be interesting to see whether this dispute shines a light on inflated hourly rates and overpaying for legal help.

David Sugerman

Sad piece here in today’s Oregonian about Portland trial lawyer Mike Shinn, who faces possible disbarment for taking clients’ money. Seems like this is just a take-it-in-the-shorts week for trial lawyers, as former trial lawyer John Edwards seems to be digging himself an awfully deep hole.

In the Shinn matter, the Oregon State Bar is reportedly pressing ahead with disciplinary proceedings, as it should. The Bar may also ask for an emergency suspension of Shinn’s license to practice.

Simple rule that every Oregon lawyer knows:  If you take a client’s money, you lose your license. It’s got to remain an absolute rule.  Clients need to trust that their lawyers are dealing fairly and honestly with them.

It’s sometimes easy for client-lawyer relations to go bad. You’re never starting in a happy and good place if you need a lawyer.  And that’s when the client first walks in the door.  Some lawyers do a particularly bad job of communicating with clients, and this can add to problems.  But none of those things ever justifies a lawyer taking an undeserved dime from a client. And if that’s what happened, Mr. Shinn should lose his license.

I’ve known Mike Shinn casually for a long time. He’s done some great work over the years. My hope is that this is all a misunderstanding and that he didn’t cross any lines. Regardless of my hope, the Bar needs to get to the bottom of it.  As for the former clients who are pressing their claims, we owe them both apologies and gratitude. It’s a thankless position. If there’s a lawyer out there acting corruptly, the willingness to challenge is the best way to protect the public.

Kudos, too, to Judge Tennyson who had the unenviable job of blowing the whistle. You don’t get a lot of love letters when you turn someone in. But it’s the right thing to do.

I’ve been ruminating all day on this story, along with my continuing annoyance over the Edwards matter. Maybe they’re totally unrelated. During my noon-hour work out, I had a flashback to my teen years. At the height of the Watergate scandal, I was sitting outside under tall shade trees with my apolitical grandfather. Harry was the kind of guy who wanted nothing more than to run his business, sip his whiskey and have a good time. He viewed all politicians with suspicion when he thought about them at all.

I was riveted by the Watergate hearings, and I asked Harry what he thought about the whole thing.

He took a long draw off his scotch, “They were schmucks,” he said.

“What do you mean?” I countered. I think I was thrilled that he would share some wisdom with me, his raging adolescent grandson.

“They were schmucks for doing it, ” he said. And then a quarter beat later he added, ” And they were bigger schmucks for getting caught.”

Maybe Harry’s take fits better on Edwards. As for lawyers who take clients’ money, well they’re schmucks from the get go.

David Sugerman

Here’s some good news in what is something of a sleeper. Measure 51, a one-sided and unnecessary ballot measure that would limit consumers rights failed to qualify for the November ballot.  The measure would have limited attorney fees to 10 percent in most contingent fee cases.

Contingent fees are those paid as a percentage of what a lawyer recovers for an injured person.  They are an equalizer. While the wealthy and big businesses can afford to pay lawyers by the hour, the rest of us don’t have the means to do so. The contingent fee system levels the playing field, allowing middle income Oregonians and small businesses the ability to hire skilled lawyers who will work for a percentage of what they obtain for the client.

The measure limited only contingent fees; it didn’t limit what those who afford to pay by the hour could pay. Had it passed, the measure would have limited consumers’ access to the best legal talent by artificially limiting fees.

My son–a somewhat sardonic 18 year old–saw through it immediately. “Wouldn’t limiting fees actually encourage lawyers to file more frivolous lawsuits?” (He’s  smarter than his dad; I never thought of that…thanks kiddo, you’re doing the old gray fart proud.)

Here’s the thing. At bottom the one-sided measure would favor insurance companies, HMOs, and manufacturers of dangerous products. They don’t want consumers to have access to the courts. They know that the best way to close the courthouse doors is to make sure that injured consumers can’t afford to hire lawyers. This, by the way, is part of the Bush/Cheney/Rove agenda. And as with many other things they failed.

Thankfully, Oregon consumers knew better. We’ve come to realize that the initiative process is one that is used by special interests to advance a radical agenda. It’s getting harder to qualify measures, and Oregonians are getting more skeptical about the unintended consequences of poorly drafted initiatives.

That’s great news.

David Sugerman

The Center for Justice and Democracy compiles fact sheets on a number of civil litigation topics, including case filings, litigation expenses, lawyer fees and the like.

Here’s a nice annotated summary from the Civil for Justice and Democracy of the myths connected with the civil justice system:

http://centerjd.org/MB_2007civil.htm

Two of my favorites:

1) The “frivolous lawsuit malpractice crisis” is shown to be a myth.

From an article in the New England Journal of Medicine:

“A recent Harvard School of Public Health study that closely examined 1452 closed claims concluded that ‘[p]ortraits of a malpractice system that is stricken with frivolous litigation are overblown.’[fn4] The study found that most injuries resulting in claims were caused by medical error, and that those that weren’t were, nevertheless, not “frivolous” claims. [fn5]“

Source: David M. Studdert, Michelle Mello, et al., “Claims, Errors, and Compensation Payments in Medical Malpractice Litigation,” New England Journal of Medicine, May 11, 2006.

2) And then there’s the tidal wave of litigation that is overrunning our courts because too many injured people file lawsuits:

“The number of tort trials concluded in U.S. District Courts declined by 80 percent from 1985 to 2003.”

Source: Bureau of Justice Statistics, U.S. Department of Justice, “Civil Justice Statistics,” found at http://www.ojp.usdoj.gov/bjs/civil.htm

There are all sorts of other topics covered in the CJD reports. If the general importance of the civil justice system matters to you, you might want to peruse their website, www.centerjd.org

David F. Sugerman