Wednesday, July 09, 2014

An article on shoe shines and flat fees sets the Curmudgeon off on a rant

The Chicago Daily Law Bulletin was sitting outside my office door as I closed up shop last night. I don't always take it with me on the train home, but I did last night.

There was an interview with the name partner of an insurance defense firm on page three; I won't link to it or mention the firm name. I have nothing against these kinds of puff pieces generally; the firm probably paid a pretty penny to some PR firm to pitch the 'story' about the firm's 25th anniversary. The firm will buy a million reprints (or, I suppose, in this day and age, digital reprint rights) and send it to every client and potential client it can imagine. These kinds of things happen all the time and there is nothing illegal, immoral or fattening about any of it.

And maybe -- I want to be as positive as I can here -- maybe this firm really has evolved from the way I remember it into something actually worthy of this sort of puffery. I try to think the best of everyone.

But when I read about the name partner bragging on providing shoeshines three times a week so that all the attorneys can look their professional best, I saw red.

"We dress up during the week," the name partner bragged. "Saturday is a casual day."

Did you get that? What a great two-sided slam: We're not like these other, sloppy, slovenly firms who have gone "business casual" except when lawyers go to court -- and our galley slaves row on Saturdays, too. But we let them wear khakis then.

Oh, yes, I remember this firm.

They had a handful of lawyers, back in the day, the two name partners and an ever-changing collection of associates, each with a staggering caseload -- or a caseload that would be staggering if the firm had any intention of doing any work on each file.

In MBA-speak, this firm had what are euphemistically called "alternative billing arrangements" with its insurance company clients. Flat fees. Like Earl Scheib painting cars, they'd defend any case, no ups and no extras, for one flat fee. The moment anyone actually did any work on the file, the profit margin on the case was nearly shot to hell. So no one there did any work on any file except when they absolutely had to.

The firm profiled in last evening's article wasn't the first to invent the flat fee concept. I was young then so I don't know all the details, but I think, at least in Chicago, that honor goes to another outfit, the one that the named partner not interviewed came from.

Judges hated both of those firms.

Around the time that this firm now celebrating its 25th anniversary was set up, the Illinois Supreme Court decided to impose "case management" on cases. Before these rule changes, some cases could linger nearly forever on the Law Division docket. Eventually, cases would be called, in desultory fashion, for trial. Sometimes a case made it out to trial because no one remembered to show up and ask for another continuance. Oh, these lingering cases were meat and cheese for flat fee lawyers. They might even "win" when the plaintiff could not be found or the doctor was no longer in practice or the witnesses had vanished like the villagers in Brigadoon. Most cases weren't like this. Many plaintiff attorneys pushed their cases diligently to trial; some defense attorneys pushed plaintiff's attorneys to push their cases.

But the Supreme Court was embarrassed that the average months-to-disposition time for Cook County Law Division cases (and cases in other Illinois counties) grossly exceeded the ABA 'standards.' And so case management was imposed.

That meant that every 60 to 90 days or so (the intervals are shorter now, and the scrutiny more intense), all the attorneys would have to show up and tell the judge what they were doing and how soon they'd be done doing it. For outside hourly insurance defense firms this was a boon -- a billable hour that even the skin-flintiest claim adjuster couldn't question (the court made us do it!) -- and for most everyone else it was just a nuisance. But for the flat feesters, like this law firm profiled yesterday, it was nothing less than a judicial assault on their profit margin.

A lot of times, in the early days, the flat fee firms blew off these 'progress calls.' They just didn't show up. This worked for awhile. But then the judges were told to take these 'progress calls' seriously. When judges began entering orders requiring counsel for all parties to appear on pain of default, we saw the beaten dogs these flat fee firms sent over.

To be honest, I never noticed if lawyers from this firm had shiny shoes. I don't think anyone else did either. You generally never saw the same associate twice. The burnout rate was astounding -- and entirely predictable, given that these poor mopes spent their days getting lambasted by judges for (a) not knowing their files and (b) not having done anything on their files. I never once heard a judge excuse a flat fee attorney's complete ignorance of the case being called because s/he had shiny shoes.

Answering interrogatories is a pain in the tochus in the best of circumstances. The kids at the flat fee firms were doing their discovery responses under threat of default, on a final 7 or 14-day extension, producing insureds for deposition in other cases in similar straits, and, of course, going back to court on still more cases and getting judicially reamed once again. And they had to do it fast, because they had a million other cases in similar shape. And they weren't supposed to spend time on any of them.

Sometimes plaintiffs or even co-defendants sought sanctions against these flat fee firms, and sometimes the court would decide to impose sanctions sua sponte (that's Latin for 'you don't even have to ask, I'm so pissed I'll do it myself'). That's when the flat fee firm celebrated in the current edition of the Law Bulletin would roll out the heavy artillery: The other name partner in the firm profiled yesterday would come over to court on a pacification mission. She would tell the judge that the lazy dog associate who had messed this case up -- it was always the fault of the associate, never the fault of the business model -- would be beaten severely or had already been fired or will have his dripping, bloody head erected on a pike in the firm lunchroom as a warning to any other associates in our firm to never, ever miss one of your deadlines again. If you had so much as a molecule of empathy in your bloodstream, you couldn't help but feel sorry for the poor schlub who was being thrown under the bus by this partner. Judges should possess more than a molecule of empathy; they often backed down. Some would even offer counsel -- you know, you really need to hire more people to handle all this work, they'd say -- and the other partner would say, yes, judge, we're a new firm and we're having some growing pains, but we hired three new people just this week. The judge would beam and the other partner wouldn't be obliged to acknowledge that these three new bodies replaced three others who had been kicked to the curb or who had fled in terror.

I don't believe I've ever met the partner who was interviewed in the Law Bulletin last evening. So maybe he had no part of any of this.


But, in the same interview, in addition to shiny shoes, the partner bragged about alternate billing arrangements with insurance clients. Maybe he and his other name partner have come up with some more realistic business models, or more realistic pricing at least, in the last 25 years. They probably have because they're still in business.

All I know is that, back in the day, firms like this created unreasonable expectations among insurance companies about how little it would cost to defend a case. In other words, they hurt all the other insurance defense firms' business even as they were angering judges, opponents and co-defendants alike with the way they weren't handling the business they had.

There's a lot to be said against hourly billing. Hourly fees can be terribly abused. But hourly fees are like representative democracy. Representative democracy is the worst form of government ever -- until you compare it against every other form of government ever tried by humankind. The hourly fee model is the worst legal business model ever -- until you compare it with flat fees. Even with flat fees and shiny shoes.

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