Articles Posted in Cost Disciplines in Legal

Part 1 of this four-part post introduced a February 19, 2019 Forbes article, “Clients Need Legal Services But Not Necessarily Lawyers” — by Mark Cohen, both an accomplished business attorney and former chief executive of his own (non-law firm) business.

Part 1 introduced Cohen’s observations about the process management and technological benefits of “disaggregating” what law firms and in-house departments traditionally have viewed as “legal” tasks. In this connection he wrote about “alternative legal service providers”:

“Law is not solely about lawyers anymore ….”

“Several new-model legal service providers … have replaced law’s brute force, labor intensive lawyer-does-all model with data-driven, customer-centric, automated, corporatized, scalable, collaborative, multi-disciplinary, and well capitalized service models.  These providers are often managed by business professionals and entrepreneurs, not licensed attorneys …”  

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Why this “disaggregation” of “legal tasks” now?

Because, says Cohen:

“‘Legal problems’ have become ‘business challenges that raise legal issues.’ The complexity, speed, and new risk factors impacting business—together with the impact of the global financial crisis, technological advances, and globalization—have changed the legal buy/sell dynamic.

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My client was an Amsterdam-based investor who wanted to build an aviation services business in the United States.

As a corporate and commercial lawyer whose practice largely emphasized the transportation sector, I needed to get this client the best advice possible on positioning its new business from a U.S. federal income tax perspective.

This meant choosing between tax attorneys who practiced in a law firm versus tax accountants who practiced in an accounting firm.

Minimizing tax and keeping the IRS off their back was not just a “legal” problem. It was more like a business problem that had a legal aspect.

For their business savvy, tax law expertise, familiarity with how the IRS treats such foreign investors — and a cost advantage — I recommended a regional accounting firm instead of tax attorneys in a law practice. 

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Business people care about results.

That was the biggest lesson I learned upon crossing to the client side of the lawyer / client table.

After spending a decade as a practicing attorney.

Kind of a “duh” factor for my friends who’d lived and died by the P&L all their careers.

But for a lawyer whose career had been devoted to the analytical preoccupations and time-honored how-to methodologies that occupy 99.9% of a lawyer’s education and daily focus — it was a revelation.

Until I’d shouldered executive responsibilities, I was tone-deaf to what business “results” actually were.

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Because he began his career in software engineering, Jason Barnwell, Microsoft’s Assistant General Counsel – Legal Business, Operations and Strategy — appears to have launched his professional life with a focus on “results” akin to that of a general manager.

So — as a software engineer — it was only natural that he offered to write computer script that would enable one individual to complete all of a document creation-and-collation task to which his law firm had assigned six team members.

Just as naturally Barnwell’s law firm employers — practicing under the legal profession’s hourly billing business model — found a way to stretch out their document creation-and-collation task to six people. Presumably charging for the time of all six people — performing manually what Barnwell’s computer scripting would have automated.

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Part 1 of this three-part post described software engineer-turned-attorney Jason Barnwell’s introduction — two months into his first law job after graduating from USC Law School — to the legal profession’s idea of “productivity”.

As the junior lawyer on a deal team, he offered to automate the process of creating and collating the shareholder consents necessary to close an M&A transaction by “some basic scripting”. As he put it in an article published earlier this week: “I was still an adequate software engineer back then”.

My guess is that his skills were in fact more than “adequate” — with four years of software engineering experience in the Bay Area — and a mechanical engineering degree from MIT.

Anyway, Jason Barnwell reasoned that reducing the individual bodies required for this paper shuffling from six down to one would be a good thing. Ditto the fact that the five team members thus freed up would be able to, “focus on other aspects of the transaction rather than walking laps in an ozone filled copy room”.

He was rebuffed — without explanation. Pressing for an explanation he was again rebuffed. Undeterred, Mr. Barnwell resolved to “revisit this for the next M&A deal”.

He remained undeterred until six weeks later:

“I saw the itemized bill for the transaction … There was a line item for my contribution. My hours worked multiplied by my billable rate. My client paid a lot for me to make copies“.

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The legal profession matter-of-factly defines “productivity” as the number of hours an attorney billed the client and then got paid for.

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This is a tale of two definitions. Two definitions of what “productivity” means in the delivery of legal services to a company.

It’s about an MIT-trained software engineer named Jason Barnwell who worked in one of the country’s major corporate law firms right out of USC Law School.

The tale begins two months into his first job with a nationally prominent corporate law firm.

Spoiler alert: In Part 2 we learn that Jason Barnwell later became — and is now — Assistant General Counsel – Legal Business, Operations & Strategy at Microsoft.

But I’m getting ahead of the story.

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Jason Barnwell had been, “staffed as the junior-most associate on an M&A deal advising our client as they sold their business”. He was “naïve” enough — his word — to believe that automating a process in which the law firm deployed six associates and paralegals to photocopy and collate voluminous shareholder consent documents would improve the team’s productivity.

Not to mention, deliver better service to the client.

By writing some basic computer script that was part of his software engineer skill set, Mr. Barnwell’s automation solution would enable one individual to prepare all of these necessary transaction packages — thus freeing up the remaining five team members to do the other tasks needed to close the deal.

For Jason Barnwell — veteran of 4 years of software engineering — getting more done, with fewer resources, in less time, and with fewer mistakes — that all seemed fairly “productive”.

But Jason Barnwell — newly minted attorney with a mere 2 months of corporate law practice — was about to learn that his new profession had a different definition of “productivity” than what he’d been taught at MIT.

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This last of three posts about a 54-page opinion in which U.S. Bankruptcy Court for the Central District of Illinois Judge Mary Gorman explained her reduction of a nationally prominent law firm’s $1.8 million fee down to $670,000 offers a case study of the billable hour’s perverse incentives.

Today I address a case-study-within-a-case-study — a bill for $270,000 within the $1.8 million total sought by the law firm. Judge Gorman considered the wisdom of a law firm’s decision to pursue multiple litigations that — she believed — offered better odds to the lawyers of getting their hours paid than it offered to the client of getting recovery that would exceed those lawyers’ fees.

Judge Gorman’s case-study-within-a-case-study illustrates a critical drawback to use of the billable hour to price attorneys’ work:

Even when the client loses, the lawyers win. 

Except in the unlikely event that the hourly bill is submitted for approval by someone with the legal sophistication — and firmness — of a reviewer like Judge Gorman, who cuts that $270,000 bill down to $80,748. But I’m getting ahead of the story.

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