I’m back from a hiatus in my blogging after two months of traveling back East on family medical and elder care duties.

This blog, like my law practice, remains focused on a dilemma faced by business owners and executives:

How to manage legal and regulatory exposure where your attorneys (outside firms and in-house counsel alike) offer the specialized expertise in law that you need — but insert waste into their charges and staffing practices — and make little effort to prevent liability before it happens.

I first really understood this problem only after I was invited by a corporate client to leave the practice of law to be general manager of a division.

Litigation and regulatory demands soar. A hostile legal climate requires the highest standards of legal analysis and representation — with harsh consequences if you get it wrong.

Meanwhile attorneys’ fees and in-house legal budgets refuse to go down (see here and here). Ten days ago I received this promotion from a legal budgeting consultancy:

As you prepare next year’s [legal] budget, think beyond ‘last year plus five percent‘.”

Such a low bar on cost control and management no longer surprises me.

Because I’ve worked on both sides of the lawyer / client table.

Continue reading

In a recent blog post Ron Friedmann responded to a question posed in a legal technology publication:

“‘How do you envision the legal team of the future changing?’ The thesis of my answer: multidisciplinary teams ….

” … The complexity of the modern world makes many problems multifaceted. How many ‘legal problems’ are really business problems with a legal element?  Clients need lawyers to team with other professionals – and treat them as peers – for the best solution.

“A story from early in my legal market career illustrates the point. I had just arrived at a large firm to run practice support. A partner who knew I had a quant background asked me to help on a competition matter. A regional office of a regulator questioned our client’s action. It worried that many consumers would be adversely affected by a mistake it had made. I ran a simple time-series regression on the number of claimants to date. It showed a quickly diminishing curve. That is, a reasonable projection showed few new complaints would be filed. That one graph got the regulator to back off. That was a simple stats answer, not a legal’ answer.”

Continue reading

This past Monday (July 2) Mark A. Cohen wrote the following in Forbes online:

“Law is staging its own version of ‘every kid gets a trophy’ … Every week, all over the globe, the legal industry throws gala dinners to celebrate its ‘innovators,’ ‘visionaries,’ and ‘pioneers.’  These gatherings afford attendees a chance to dress up, schmooze with peers, feel important, and convince themselves that their industry is performing splendidly. Legal providers are hearing ‘Celebration’ while for buyers it’s ‘I can’t get no satisfaction.'”

I met Mark Cohen a couple of months ago at a global conference on legal innovation sponsored by Northwestern University’s Pritzker Law School’s Center for Practice Engagement and Innovation where he is a Distinguished Fellow.

On one hand, he’s what I’d call “a lawyer’s lawyer”, with:

” … An international reputation as a ‘bet-the-company’ civil trial lawyer with stints as a decorated Assistant United States Attorney; BigLaw Partner; National Litigation Boutique Founder and Managing Partner; Federally-appointed Receiver of an international aviation parts business conducting operations on four continents; and outside general counsel to three insurance companies.”

But this “lawyer’s lawyer” also founded and managed two entrepreneurial companies before advising law firms and law departments on improving their services delivery:

Continue reading

independence-hall-1-1210370-1-1-225x300In Congress, July 4, 1776.

The unanimous Declaration of the thirteen united States of America, When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.–That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, –That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.–Such has been the patient sufferance of these Colonies; and such is now the necessity which constrains them to alter their former Systems of Government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States. To prove this, let Facts be submitted to a candid world.

Continue reading

My last post was discouraging:

“Business Leaders Need to Drive Better Legal Pricing and Services Delivery Because Lawyers Won’t or Can’t”.

Discouraging, but proven.

Among law firms:

  • 69% of leaders surveyed said that, “partners resist most change efforts”, and
  • 59% gave this reason: “We are not feeling enough economic pain to motivate significant change.”

And among in-house law departments:

“Altman Weil found that 55% of Chief Legal Officers believe that they do not have enough buying power to negotiate more effectively. Some 51% also say that law firms are resisting discounting. Interestingly, 30% of the CLOs do not want to damage good relationships with external counsel by asking for greater discounts.”

But it’s not all gloom.

Some outlier firms and individuals in the legal industry understand that client companies need to do more with less in managing their legal affairs. And they’ve been taking decisive action to that end.

Continue reading

The message of this blog, and what I do for my clients, is based on a single guiding conviction:

American businesses large and small pay increasing (never decreasing) legal costs – and miss opportunities to prevent liability before it happens.

Because owners and executives let the legal industry and its business model call the shots on pay, work flows, and personnel. They let law firm and in-house attorneys make decisions in these areas that no general manager would tolerate anywhere else in the business.

Meanwhile, demands of the litigation and regulatory environments proliferate.

It’s not as though no one agrees with this view.

In fact, this view is the staple of lawyers’ conferences (for instance, here, here, and here) and publications (for instance here, here, and here).

The words are the staple … that is.

Any constructive action in response not so much.

On the law firm side, the most recent Altman Weil survey of law firm leaders reported: “In 69% of law firms, partners resist most change efforts”.

69% of law firms.

Continue reading

Some times a character test presents itself in the guise of a legal question.

And when that character test presents itself it’s the duty of general management — not their lawyers — to decide with wisdom and discernment.

Because — except where there is an actual violation of law or of the bar authority’s canons of ethics — lawyers considering moral issues can miss the forest (discernment) for the trees (strict, technical rule compliance).

Consider this sequence relating to Tesla:

1. Two months ago California’s Division of Occupational Safety and Health opened an investigation into Tesla following a report about “underreporting recordable work-related injuries and illnesses”.

2. Two weeks ago Tesla announced that it would lay off nine percent of its work force.

3. Ten days ago (June 18) Bloomberg reported that — as a condition to receiving severance payments — Tesla would require a laid-off employee to sign the following statement of fact:

” [The laid-off employee] had the opportunity to raise any safety concerns, safety complaints, or whistleblower activities against the company, and that if any safety concerns, safety complaints, or whistleblower activities were raised during your employment, they were addressed to your satisfaction.”

Temple University law professor Brishen Rogers:

“I do think the agreement will chill valid employee complaints …. A reasonable worker would just keep their mouth shut, rather than risk losing their severance pay.”

Ya think?

Continue reading

As we both awaited the start of a meeting, I struck up a conversation with the general counsel of a publicly traded company with $2BB in annual sales. We agreed that great law firms and attorneys are available beyond the most prominent brand name law firms.

But my friend was emphatic: Departure from those brand name law firms his client company was used to retaining would amount to a career risk. And — as the ads proclaimed a generation ago — “No one ever got fired for hiring IBM”.

74% of respondents cited “regulations and enforcement” as their top concern in the most recent Morrison Foerster General Counsel Up-at-Night Report.

Coming at regulatory burdens from a different direction, legal scholars Michael Bommarito II and Daniel Martin Katz found that regulatory references in 10-K filings had increased 4X between 1994 and 2014 (after analyzing more than 160,000 10-K filings with the SEC).

To those (like me) who believe that regulators impose excessive burdens on American businesses large and small — U.S. Supreme Court Justice Anthony Kennedy may have offered a ray of hope yesterday.

EPA, IRS, FCC, and other agencies — whom the High Court has called “the administrative state” — “wield vast power and touch almost every aspect of daily life”. And for the past three decades a judicial doctrine called “Chevron deference” has afforded these agencies considerable insulation from legal challenges.

In Chevron, U.S.A. v. Natural Resources Defense Counsel, Inc. the U.S. Supreme Court established the harmless-sounding principle that a federal court should defer to interpretations of statutes made by those government agencies charged with enforcing them, unless such interpretations are unreasonable.

However innocuous in theory — many view “Chevron deference” as more akin to a blank check for bureaucrats than a careful delineation of delegated congressional authority. As Chief Justice Roberts put it in a case where he dissented from Chevron‘s application:

“We do not leave it to the agency to decide when it is in charge.”

Continue reading

Lola v. Skadden, Arps arose from a lawsuit in which a plaintiff demanded massive disclosures of documents of a specified description. This meant that the defendant had to review thousands of documents to respond.

David Lola was a licensed lawyer hired on contract by the law firm Skadden Arps to perform those document reviews.

Later, Mr. Lola sued Skadden Arps for overtime pay. Skadden Arps contended that the relevant statute — the Fair Labor Standards Act — precluded overtime pay because the work consisted of “the practice of law”.

The prestigious Federal Court of Appeals for the Second Circuit refused to throw out the suit:

“The gravamen of [the attorney’s] complaint is that he performed document review under such tight constraints that he exercised no legal judgment whatsoever — he alleges that he used criteria developed by others to simply sort documents into different categories ….

“A fair reading of the complaint in the light most favorable to [the attorney] is that he provided services that a machine could have provided ….”

Continue reading