The Business Of Law

“Then he bummed a cigarette and faded off to sleep”

So goes the lyrics in Kenny Rogers’ iconic 1978 song, The Gambler. That song, along with countless Hollywood movies featuring either the suave sophisticated gambler lighting a lady’s cigarette while playing blackjack, or the down on his luck gambler chain smoking as he loses the mortgage have helped cement the relationship between gambling and smoking. So ubiquitous is smoking at the tables, that the tables are literally designed with ashtrays built into them.

Against the backdrop of indoor smoking bans that are sweeping the country, it’s almost funny to see smoking indoors at casinos, yet for the thousands of workers at Las Vegas casinos, the exposure to second-hand smoke is no laughing matter.

Last week a suit was filed against Wynn Las Vegas and its parent Company Wynn Resorts Ltd. by employees who claimed that their health was affected by second-hand smoke. A similar suit was filed in July against Harrah’s entertainment owner of Caesars Palace hotel-casino.

The suits allege that Wynn and Caesar’s have knowingly exposed their workers to dangerous second-hand smoke and have failed to take common sense measures to limit that exposure. Specifically, the suits talk about other large casinos in Las Vegas, most notably the Bellagio and Palazzo who have either changed operations or installed technology to cut down on second-hand smoke on the gaming floors. Some casinos even designate as much as 50% of the gaming floor as non-smoking.

The lawsuits allege that Wynn and Caesars have resisted even these simple measures and what’s worse, they have threatened employees who complain about second-hand smoke with disciplinary action.

I’m not going to argue whether smoking should or should not be allowed in casinos, I’ll leave that to the politicians, but there is clearly a problem when employers are allegedly refusing to take common-sense measures to limit exposure, or when they are actually forcing employees to endure that exposure or risk being disciplined. If this was a factory where the boss forced workers to be exposed to asbestos without proper ventilation, or safety precautions, we’d be up in arms, but because it’s cigarette smoke, for some reason we’re a little less appalled.

I expect we’ll be seeing a lot of cases from the workers at these casinos who for years have been exposed to this harmful carcinogen. If this is of interest to you and you intend to pursue it further, please get in touch with me.

Greetings readers, my name is Gabriel Miller, and I’m the General Counsel of Sokolove Law.  As the top lawyer for the largest marketer of legal services in the country, I spend a great deal of my time watching very closely the rules of professional responsibility across the country.  From time to time, I’ll weigh in here to comment on interesting happenings in the area of legal ethics.

Last week, law.com brought news that Connecticut outlawed the practice of hiring so-called “runners” to solicit legal business for personal injury lawyers.  The Law.com article had a great description of how the system worked:

“People known as “runners” would be on stand-by, listening to police scanners and waiting for an auto accident to occur so they could rush to the scene. Their job was to contact accident victims and steer them toward specific doctors, chiropractors and, often, personal injury lawyers. The runners would be paid for each client they delivered; sometimes the runners would wait in busy hospital emergency rooms and spot people waiting to be treated and then whisk them out with a promise that they knew a doctor who could see the person immediately.

Runners also obtained police reports and contacted accident victims at their homes. Connecticut trial lawyer, Kathryn Emmett also had heard from other trial lawyers that some accident victims were being encouraged to file insurance claims and lawsuits based on phony injuries”

Connecticut joins 9 other states who have outlawed this practice, punishing lawyers with up to a year in jail and fines up to $5,000 if they are caught hiring “runners”.

What’s really interesting about the law is that it brought trial attorneys and the insurance companies together on the same side of a political debate.  In fact part of the impetus for the law came from the Connecticut Trial Lawyer’s Association, whose members starting hearing about runners’ unscrupulous practices from their clients.

The practice is more common than one might think with lawyers in Philadelphia, New York, and New Jersey having been convicted in recent years for violations of anti-runner laws.

Simply put, the practice of hiring runners, and other such actions give all attorneys, but particularly personal injury lawyers a bad name. There is a big difference between providing access to the civil justice system by educating people about their legal rights and options, and preying on people when they are the most vulnerable.

The Connecticut Trial Lawyers and their colleagues around the country are smart to support reasonable regulation to weed out the bad actors.

If you have a question about this or another topic on legal ethics and professional responsibility or if you know of a topic you’d like me to comment on, drop me a note.

Get the smelling salts, I’m writing a blog post on “process management”. Seriously, I came across an interesting piece over at the Legal Intelligencer by Gina Passarella this week, that talked about the idea that the legal profession could improve its business model by indulging in a little bit of project, and process management.

“Egads” you say…and as Gina points out “process management is the antithesis of the billable hour model”.

But I ask: Does it have to be?

Why couldn’t lawyers price their work, not by the billable hour (whose death knell, I have predicted), and instead look to outcomes. The model is quite simple, instead of being at the whim of the billable hour, lawyers would look at an overall legal project, estimate how difficult the project is, and then provide the client with a cost. If the project can be completed in less time, then the law firm adds to their profit. If it takes longer, then the firm knows that it needs to perfect its method of estimating.

Imagine if you went to your mechanic to have the brakes on your car fixed and you were given two options. First, you could have the master mechanic with thirty years of experience fixing your kind of car. Good news is that it will only take him one hour to fix the problem; bad news is he charges 800 dollars per hour.

Second choice would be the new guy, he’s just out of mechanic’s school, and basically has no idea what he’s doing. He’ll tinker around for about 5 hours before he figures out how to replace the brakes, but the good news is he only charges about 50 dollars per hour. Only other issue is that if you have the new guy do it, are you really sure it was done right (I mean after all we’re talking about brakes here—pretty important). So again your choices come down to:

1. Have it done right in one hour, but pay $800 for it, or
2. Have it done (maybe) right, in five hours, but pay $250

Kind of feels like a Cornelian dilemma to me.

Wouldn’t you rather the mechanic just tell you how much it will cost to fix your brakes? You agree to the price, and if the shop can figure out how to fix the brakes really efficiently, then everybody wins—you get your car back sooner, and the shop has more profit?

I’m no MBA (o.k. I am Babson class of 1996), but it seems to make sense to me.

No of course, Dora the Explorer is not made with asbestos, but based on the news of Mattel’s recent settlement, the defects and subsequent recalls of the toy giant’s products are certainly hitting Mattel’s wallet in an asbestos-like way.

News hit last week that out of Federal Court in California that Mattel has reached an agreement to settle 22 separate class actions over millions of toys that were made in China and found to contain excessive levels of lead. The reported settlement could reach into the “tens of millions” according to reports.

According to Law 360 (subscription required):

“Mattel recalled over 14 million toys in the U.S. alone in 2006 and 2007. The toys were found to have lead levels that exceeded legal limits or to have small magnets that could become loose and harm children if ingested, according to a statement from Mattel.

More than 95 different types of children’s toys were affected, including some of the companies’ most popular items, like some Sesame Street toys, Dora the Explorer and Diego toys made by Fisher-Price, and Mattel toys such as Batman, Polly Pocket, Barbie accessories and Sarge cars, according to the company.”

There’s a lesson to be learned in the Mattel tragedy, and that is that too many manufacturers are still willing to cut corners and put consumers at risk.  When they do, civil litigators act as an appropriate safety net to compensate victims.

But civil litigation also makes products safer and changes policies.  Consider the following as has been reported publicly:

•    As part of the settlement, Mattel will donate $275,000 to the National Association of Children’s Hospitals and Related Institutions, a not-for-profit group of 150 children’s hospitals and pediatric units.
•    The six Mattel-related recalls in 2007 triggered recalls by dozens of other companies resulting in 21 million potentially toys being recalled.
•    The recalls drove Congress to pass a new law that sets strict limits for lead, lead paint and other chemicals.
•    Last year, Mattel and Fisher-Price agreed to pay $12 million to 39 states to end a lengthy investigation into the lead-tainted toys.
•     In June, Mattel also agreed to pay a $2.3 million civil penalty for violating the lead paint ban.

At Sokolove Law, we are actively marketing legal services in a number of categories related to product liability. If you’re interested in partnering with us, please get in touch with my colleague Marc Stern.

Amidst all of the news about the Bear Stearns criminal trial that started last week, we should not lose sight of a different battle brewing on Capitol Hill.

According to the Huffington Post, Wall Street financiers are waging a battle against President Obama’s call for a Consumer Financial Protection Agency.

From Huffington Post:

“This is a David and Goliath fight,” says Heather Booth, executive director of the Americans for Financial Reform coalition, which includes major labor groups and aims to push for genuine reform. “The biggest banks that created the circumstances that led to greater misery, people losing their jobs and seeing their communities deteriorate, those circumstances have not been changed and there needs to be real reform and structural change.”

The financial crisis and the huge investment losses that it brought about cry out for reform, yet now that some of the dust is settling, and the financial institutions are starting to pay back TARP funds, they are at the same time lobbying against sensible regulations meant to protect consumers.

Meanwhile countless Americans are still trying to recover from huge losses suffered perhaps as the result of incompetence, recklessness, and in some cases, outright fraud.  Of course the consumer financial protection agency should be created, but the broader question is what to do about the victims who suffered these losses.

At Sokolove Law, we’ll be making sure that those victims understand their legal rights, and if they have a case, we’ll be helping them to assert those rights under the law.  The new agency may help going forward, but we still need to look backward and see if we can’t compensate those who have suffered from Wall Street’s greed and recklessness.

As has been widely reported, the third quarter of 2009 saw 13 mergers among law firms, bringing the total number so far in 2009 to 45.  There were 25 in Q1 2009 and 7 in Q2 2009.  In 2008 there were 70 mergers among law firms.

These figures might lead an outside observer to ask: Why the merger mania?  To be sure, there is much about the legal industry that is changing.  Many of these changes are outlined in an excellent article over at law.com (subscription required).

The article reports on a recent panel discussion at the ALI-ABA ACLEA 2009 Summit in Arizona held yesterday.

The panelists outlined a series of external forces—namely globalization, changing regulations, and evolving demands of clients, and they talked about the dramatic changes those forces could bring to the education of law students, the practice of law, and the business model of running a law practice or firm.

Here’s a brief excerpt:

The globalization of clients will continue to force even small firms to deal with matters abroad or represent foreign clients in the United States. Large and quick law firms will have the competitive advantage, he said, but smaller firms can compete with the use of technology.

Another big change that is already in the works is the switch to a buyer’s market. Law firms used to be the ones dictating how matters would be staffed and priced, but that is no longer, Bower said. Sophisticated clients are demanding that first- and second-year associates stay off their matters. They are also off-shoring work themselves or demanding their law firms do it, Bower said.

Perhaps the most dramatic change that is further down the road is one Bower called the “ticking time bomb” overseas. That is the Legal Services Act of 2007, which when it takes effect will allow law firms to raise capital like a public company.

Now I’ve talked about the Legal Services Act quite a bit and here’s how it relates to the merger mania that we’re seeing.  Law firms currently have limited ability to raise capital.  To innovate or expand the business, firms can either borrow money from a bank, raise capital from existing partners, or merge.

As you might imagine mergers often look like the easiest route to partners who don’t want to saddle the firm with debt, and certainly don’t want to dig into their own pockets to provide growth capital.

Of course the obvious question is why can’t firms raise outside capital to fund expansion like any other business.  The answer is that the rules of professional responsibility prohibit it.  That’s where the LSA comes in.

In the U.K. the LSA would allow firms to raise outside capital by selling shares in the firm.  Of course there are safeguards in place to prevent conflicts of interest, or lawyers putting the interests of shareholders ahead of their clients.

The net effect of the LSA though is that firms headquartered overseas will now be able to raise outside capital to grow and expand, and as U.S. law firms continue to compete in a increasingly global legal marketplace, the pressure of this outside capital will be enormous.

Will U.S. firms survive, will we change the rules to allow U.S. firms to raise outside funds to compete with their brethren across the pond.  As always, we’ll be staying tuned…

We are currently investigating claims of women who have experienced serious complications arising out of the implantation of a Bard Avaulta transvaginal surgical mesh device.  Manufactured by C.R. Bard, Inc., the Avaulta Solo Support and Avaulta Plus Biosynthetic Support Systems are surgically implanted devices which are designed to help increase bladder control and provide relief from the pain caused by Pelvic Organ Prolapse (POP) and Stress Urinary Incontinence (SUI).  However, there have been numerous reports of mesh-related complications including mesh erosion, extrusion, perforation of the bowel, bladder and blood vessels, infection, vaginal scarring, and recurrence of prolapse or incontinence.

In October 2008, the FDA warned healthcare professionals of the side effects associated with vaginal mesh devices after receiving over one thousand reports over three years from nine surgical mesh manufacturers of complications associated with surgical mesh devices used to repair POP and SUI. In some cases, the pain and discomfort is so severe as to require additional surgery to repair any damage caused by implantation of the device or to remove it altogether.

We will be continuing to monitor concerns about this device.  If you’re interested in learning more about these types of cases, drop me a note.

This morning, the ABA Journal recognized our blog initiatives here at Sokolove Law and showcased my blog I wrote back in September to kick off their “Legal Rebels” online and editorial project.

The piece came from a blog post I wrote back in September entitled “This blog post would cost you $400: Billable Hours RIP”. In the article I stated:

“All told, that whole process took me about an hour plus maybe 15 minutes by my secretary for proofing and editing.

If I were a lawyer at a big firm, this blog post would have cost my client as much as $400. That’s a little crazy and I’m not the only one who thinks so.”

To read the entire article click here.

Evan Brown, who’s a well known legal blogger recently published a great piece over at Law.com.  He outlines 5 reasons why lawyers should use social media.  His list is as follows:

1.     TO LEARN
2.    TO EXPAND AND MAINTAIN A NETWORK
3.    TO BECOME A BETTER COMMUNICATOR
4.    TO DO SOMETHING GOOD FOR THE PROFESSION
5.    TO HAVE FUN

You’ll notice that Brown leaves off one obvious one: “To get clients”.  That might seem a bit counter-intuitive given the importance of digital and social media to the marketing world.  But let me explain a bit (with Brown’s help).

Here’s what Brown says:

“(Getting clients) is intentionally absent from the list because all the other reasons merge into that one. By learning, networking, helping others, communicating better and having the appropriate amount of fun, you will become a better lawyer. Clients want good lawyers. You see the connection.”

He goes on to write:

“Avoid thinking of — and using — social media strictly as a means to get clients. This looks phony, and your readers and contacts will see through it. Just be yourself. Be genuine and authentic, and people will read and follow you.”

To be sure, he’s 100% correct on both of these points, but I’ll take it a step further.  I would add to Brown’s list “Connect with your customers”.

As I’ve said before, as Sokolove Law, social media is a vital part of how we stay engaged with the two audiences who matter most to us, our co-counsel firms, and our clients.  Social media allows for an engagement and exchange of ideas that was simply not possible before.  That’s why it’s so valuable.

But to be fair to Brown, lists always sound better in groups of five not six!

Alright I’ll admit it, I’m the last person who normally cheers for uniformity, in fact one of the things I love about my job at Sokolove Law is that we’re constantly breaking from the pack, and thinking outside the box.

That said when it comes to the business of law, I think uniformity can be a good thing.

As everyone knows, the practice of law is governed by individual state laws in 50 different states, in fact, the rules can vary quite a bit, up to and including what it takes to actually become a lawyer.  For example in some states you have to take their bar exam to become a member of the bar in that state, while in others (most notably the District of Columbia) you can opt in to the bar, provided that you’ve passed the exam in any other state.

So if you were born in Massachusetts and went to law school in Massachusetts, and took the bar in Massachusetts, then you moved to another state, you might have to take the bar in that state, depending on how long you had been practicing law (again the rules vary).

Some folks are trying to change that.  Law.com had an article yesterday talking about the effort to adopt a “uniform” bar exam that would try to create a system that would allow for people to take one exam that would demonstrate their ability to practice law in different states.

To be sure there are arguments on both sides of the issue, and the article does a nice job of laying them both out.  What’s intriguing to me is the idea, generally, of streamlining the regulatory process to foster more access to the legal system.

Sure, some laws are different in different states, and it is important that attorneys know the quirks of state law, but does it make sense that there are 50 different codes of professional conduct, 50 different sets of rules with respect to legal advertising, 50 different sets of rules about referral fees and other procedural issues.

I’m not an attorney, but I do seem to remember the constitutional concept that interstate commerce is governed by federal law, exactly because it eliminates the risk of different states passing laws that are parochial, or otherwise frustrate the free flow of economic activity.

With that principle in mind, wouldn’t a little bit of uniformity with respect to our legal rules mean that legal advice and representation would be more readily available?  Wouldn’t a little uniformity mean greater competition in the legal market, with the best and brightest rising to the top?

Let me be on record firmly in favor of competition and greater access…at Sokolove Law, it’s worked for us so far.