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THE POINT

Wall Street Journal, Saturday / Sunday, April 11-12, 2020, commenting on New York State’s response to COVID-19’s demands on its healthcare system:

” … New York’s biggest force multiplier has been regulatory relief.”

DISCUSSION

I invite your attention to my recent series: “‘Ethics’ Rules Shape the Legal Services Market: To Protect Clients? Or to Protect Lawyers from Unwanted Competition?” (here, here, here, here, and here).

As a practicing business lawyer — with a 12-year hiatus during which I was a general manager and executive (i.e., not practicing law) at Whirlpool and then GE — I concluded a long time ago that legal-services-market “ethics” rules have little to do with protecting clients, and a lot to do with protecting lawyers from unwanted competition.   

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Last Saturday (April 11, 2020) the Wall Street Journal (subscription required) featured the following editorial: “Doctors Without State Borders: Governors are easing rules on caregivers , and it’s long overdue”.

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THE POINT

1. Law firms and in-house law departments are “lawyer-centric” in managing their own workflows. They “reward the ‘exceptional, do-it-all-and-charge-for-it’ approach” that relies almost exclusively on attorneys’ skill sets.

2. As a consequence, law firms and in-house law departments “fail to determine the best skill set for most efficiently executing many jobs that are routine parts of corporate life.”

DISCUSSION

The legal profession’s expectation: The lawyer is meant to be star of the show. Anyone other than lawyers on the team is simple an “assistant to” the attorney.

Patrick Lamb — along with his law partner Nicole Auerbach — is one of a tiny group of law firm attorneys whom I view as genuine pioneers in legal innovation.

His message in a tweeted video on April 2, and a blog post on April 1, argues that the legal profession has got it wrong.

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Patrick Lamb’s blog post uses examples from his own career to describe his journey from lawyer-as-autonomous-genius to lawyer-in-collaboration-with-other-disciplines.

Trial lawyer that he is, Patrick Lamb argues concisely that the legal industry needs to move from “just lawyers” to “multi-professional teams” in his tweeted video:

“[You] need to break down the work that needs to be done into a series of processes,

“And see who is best able to execute on those processes.

“The surprising answer is that, more often than not, you don’t need a lawyer to do the job.

“You need somebody who’s capable, and who is a process-focused person, to administer the process, except an occasional spot where a lawyer’s judgment is required.

“And if you break down work into those series of processes, you find that you can frequently get it done, much better, and also much cheaper.”

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See update below about 3M lawsuit against a re-seller of its N-95 masks alleging “price-gouging” filed April 10, 2020.*

THE POINT

1. Conventional law firms design waste into their work — charging by the hour, over-staffing, assigning inexperienced attorneys alongside qualified ones, and avoiding substantial technology adoption.

2. In-house counsel — whose number and influence have grown in the past 40 years — have not used their companies’ purchasing power to fix this problem. So it persists.

DISCUSSION

On March 28, in the anchor’s set-up to a business news show’s interview with Mark Cuban, I wondered if I’d heard it wrong:

Was Mark Cuban really criticizing 3M Company for price-gouging and the like on 3M’s N-95 surgical masks (“so-called because they block 95% of very small particles”)?

In the midst of the COVID-19 pandemic?

No — not 3M directly.

Mark Cuban was alleging that 3M had failed to use its influence to stop distributors and other third parties from price-gouging and the like on 3M-made N-95 surgical masks.

His point: 3M could use its purchasing power with respect to these distributors and other third parties to bring a stop to this problem … if it wanted to do so.

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THE POINT

1. Bar authorities and courts too often take extreme, over-literal views of the professional “ethics” rules that shape the legal services market.

2. Unsurprisingly, their interpretations frequently just protect attorneys from unwanted competition — not protecting clients from fraud or abuse.

DISCUSSION

As a lawyer, I take a strict, traditionalist view of legal “ethics” rules that truly pertain to honesty: Don’t lie to a judge, never allow yourself to be in a conflict with your client’s interest, etc.

And on eight or nine occasions I have withdrawn from representing a client where I believed that following their wishes would have the effect of making a misrepresentation to a counter-party in a deal, to a government official, or to a court (and where the client refused to make a disclosure I proposed to restore honesty to the situation).

But I believe that most of the “ethics” rules shaping the legal services market are little or no use in guarding clients from harm. Instead, they mostly protect lawyers from unwanted competition:

  • Part 2 — U.S. lawyers can’t practice law as part of an accounting firm.
  • Part 3 — Where an app connects you to a company that retains a lawyer for your traffic ticket case, and also puts a ceiling on the fine you have to pay, the app company violates legal “ethics” by “practicing law”.
  • Part 4 — If a client chooses an attorney after finding them on a client / lawyer matching service, the web listing is “referring” the lawyer to the client — even though it’s the client who selects the lawyer.

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Each of the offerings prohibited in the above cases meets a legal need:

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THE POINT

1. LegalMatch.com is a legitimate, constructive solution to a legal need faced by the public that the legal profession seeks to shut down on “ethical” grounds”.

2. Legal “ethics” should be a shield to protect clients from fraud or abuse, not a sword for the legal profession to attack unwanted competitors.

DISCUSSION

Let’s say that you find yourself in need of a lawyer. And that you don’t know of any attorneys in your geographic area who are experts in the field you’re concerned with.

According to the California appellate court, whose ruling against LegalMatch.com the California Supreme Court summarily upheld (i.e., without an opinion) on March 11, 2020, this was how LegalMatch.com worked:

  • “LegalMatch sends information to lawyers based solely on the client’s selection of geographic location and area of expertise.”
  • “After the lawyers receive this information, each lawyer has the opportunity to affirmatively reach out to the individual [would-be client].
  • “Depending on the client’s preferences, the potential client may choose to send contact information to the lawyers so that they may continue their discussion outside of the platform.”
  • “Lawyers and clients negotiate between themselves to determine the parameters of their attorney-client relationship.”
  • “Each lawyer who purchases a subscription is slotted into a geographical location and category of legal expertise.”
  • “The number of lawyers in a geographic location and category of legal expertise is limited by an algorithm (allocation system) that maintains LegalMatch’s profitability by balancing the number of clients and lawyers available.”
  • “Potential clients may use the site for free.”
  • “LegalMatch receives no fee for the successful formation of an attorney-client relationship.”

This, in other words, was nothing more than a lawyer-client matching service. Nevertheless, this court held that LegalMatch.com amounted to an illegal lawyer “referral” service.

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THE POINT

1. TIKD was a legitimate, constructive solution to a legal need faced by the public that the legal profession seeks to shut down on “ethical” grounds.

2. Legal “ethics” should be a shield to protect clients from fraud or abuse, not a sword for the legal profession to attack unwanted competitors.

DISCUSSION

Let’s say you were driving in Miami (or elsewhere in South Florida, or Tampa metro area, or Washington, D.C., or specified counties in Maryland or California), and a police officer gave you a ticket for speeding.

Say it was for $200.

Until legal action by the Florida Bar and a traffic ticket lawyer forced it to suspend operations, a Coral Gables, Florida company called TIKD would offer you the following:

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THE POINT

1. Unlike countries in Europe and Asia, Big 4 accounting firms are prohibited from offering corporate legal services in the U.S.

2. Through its rule-making state bar authorities (made up of lawyers), the U.S. legal profession is fighting tooth-and-nail to keep it this way.

DISCUSSION

U.S. law firms tout their prowess as legal powerhouses that a serious business cannot safely do without. In quiet conversations with in-house counsels and P&L executives alike, attorneys from these firms unsubtly invoke the fear-and-dependency that an earlier generation expressed this way:

“Nobody was ever fired for hiring IBM.”

For attorneys who sell their services this way, the last thing they want is competition from the likes of EY, PwC, Deloitte, and KPMG for substantial corporate legal work. 

That (along with other aspects of legal market structure) is what’s at stake in the following, arcane-sounding, legal “ethics” prohibition:

“A lawyer or law firm shall not share legal fees with a nonlawyer”.*

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Big 4 accounting firms have been practicing law outside the United States for a couple of decades.

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THE POINT

1. “Ethics” rules are the main determinant of how the legal market is structured: Who can do what? With whom? What is “practicing law”?

2. After decades of practicing business law, I believe that “ethics” rules structuring the market for legal services are largely about protecting lawyers from unwanted competition.

DISCUSSION

The legal profession decides who can do what in solving businesses’ legal problems.

They decide the circumstances in which lawyers may — and may not — work with people whom lawyers call “nonlawyers”. And they decide if solving a particular type of legal problem amounts to “practicing law” — something that only a licensed attorney is allowed to do.

The legal profession makes these decisions through state bar authorities that adopt rules of professional “ethics”.

Those state bar authorities are made up of … well … lawyers.

In the United States, attorneys set for themselves the competitive boundaries of markets in which they can sell their services — and in which they use the force of law to forbid others to compete with them.   Continue reading

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Speed-to-contract is vital to your revenues.

As a P&L executive you know that.

As a former P&L executive — now practicing law — I know that.

But too many lawyers just don’t. They focus on verbal tweaks and “improvements” that hold up the process.

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It was only after I accepted a corporate client’s invitation to leave law practice and run one of its divisions that I understood how important timely execution is to doing the deal. Until then I was preoccupied, like most of my lawyer colleagues, with constant adjustment of terms in pursuit of a legally perfect document.

Of course the answer can’t be that we eliminate attorneys’ contribution to all this. Speed-to-contract that ends up with the wrong contract terms is self-defeating.

But now there’s technology that helps to accelerate the pace, while incorporating good legal guidance into a much more agile and timely process.

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Last Thursday (March 5, 2020) I was, for the umpteenth time, shocked to be reminded of how un-businesslike the legal industry’s billable hour-based business model really is.

I say “un-businesslike” rather than “crazy” — or something more colorful — because the clients I serve are businesses themselves. And their businesses succeed or fail based on their results.

The legal industry (the vast majority at least) demands that their client businesses pay on the basis of lawyers’ inputs. And as I explain below, law firms charging by the billable hour business model routinely misstate what those inputs are.

So it’s no wonder that lawyers and business people have such a hard time understanding each other.

They literally occupy different universes.

From a commercial standpoint at least.

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So what shocked me last Thursday?

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