The Business of Law – Marketing and Business for Enterprising Attorneys

Martin Lomasney, a legendary Boston politician from the West End, coined a now-popular expression regarding communicating.  He famously advised his young associates, to “never write if you can speak; never speak if you can nod; never nod if you can wink.”

Lomasney would surely spit out his Ward 8 (a drink named in his honor) if he learned that many lawyers are now communicating with their clients via text messaging. But that’s exactly what’s happening.

Like it or not, the mobile communications revolution has hit the legal profession, and according to a recent article in Lawyers USA (subscription required), more and more clients are wanting their attorneys to communicate with them via text message, online chat, or instant messaging applications such as Blackberry Messenger.

That’s good news in some ways for the clients who feel like their lawyer is now more accessible than ever, and they can communicate with them in ever-faster ways.  But according to legal malpractice experts these new media pose new challenges for attorneys.  Here are some of the pitfalls as reported by Lawyer’s USA:

1.    Texting increases the likelihood of errors and miscommunication because of the short rapid phrases and use of abbreviations.

2.    Texting and messenger features employed by smart phones can lead to loss of sensitive data and information.  It’s still fairly easy to lose your phone. But imagine losing your phone with all kinds of sensitive client information stored in old text messages on it.

3.    Texting can also lead to violations of information security because you can’t be sure who’s on the other end of a text message.  Most phones are not as secure as email accounts, and anyone could pick up a cell phone and start texting.

4.    Finally, texting can lead to document recovery and chain of custody issues because text messages can be inadvertently deleted very easily, and they are not typically backed up by a server.

I suspect the same will happen with respect to text messaging and other forms of online and mobile communication.  The times they are a–changin’ and we as lawyers will, once again, have to change the rules and mores  along with them.

As my fellow ethics lawyer Ellen Pansky of Pansky Markle & Ham said in the article:

“Both in a civil action for malpractice or in a disciplinary proceeding, if a lawyer can’t document [that he or she] had a certain communication there is something of a presumption it didn’t happen.”

This is of course exactly what Martin Lomasney wanted.  But for attorneys, it’s better to have a record of what transpired and to preserve that record.

All of that said, I must say that this feels like a bit of much ado about nothing.  I remember when lawyers first started using email and there was somewhat of a hue and cry citing many of the very same concerns now being raised about instant messaging and texting.  Eventually it all died down as the courts and state bars conceded, without saying so, that the prevalence of email required its acceptance as a communication method between  lawyers and their clients.  Today it would be nearly impossible to find attorneys who don’t use email.

New research published in The New England Journal of Medicine says that patients suffering from kidney disease who took the drug Aranesp may be at greater risk of having a stroke.  An earlier, separate study has found that patients who took the drugs were twice as likely to suffer from blood clots in the lungs and legs as other patients.

The new research, conducted by Dr. Mac Pfeffer at Brigham and Women’s Hospital in Boston, found that twice as many patients who took Aranesp, manufactured by pharmaceutical  giant Amgen, suffered a stroke versus the placebo. The researchers say they don’t yet know why the stroke risk was so much higher.

Aranesp is one of a class of drugs commonly referred to as ESAs, or erythropoiesis-stimulating agents, and have been used by doctors treating anemia and low blood counts in cancer patients.

According to Mike Huckman, the pharma beat reporter over at CNBC:

“The study, which Amgen paid for, was done on more than 4,000 people who have type 2 diabetes, chronic kidney disease and anemia, but who were not on dialysis.

Amgen says it has already shared the data with the Food and Drug Administration and that it expects the results to eventually be turned into a warning on the drug’s label. Aranesp is designed to boost red blood cells, give people more energy and cut the need for transfusions. Other recent studies showed the drug may also cause tumor growth, resulting in new FDA warnings. “

But the study raises some interesting conflict of interest questions.  As CNBC notes, it was released on the same day that NY AG Andrew Cuomo  announced a lawsuit against Amgen related to alleged kickbacks to doctors for prescribing Aranesp.  Also interesting is that Dr. Pfeffer has received consulting fees from Amgen, and was given a grant from the pharma giant to conduct his study.

It will be interesting to see how this study plays into legal action against the drug maker. We’ll be ready, let us know when you are. Feel free to drop me a note.

As close readers may remember, back in September I wrote a post calling for an end to the billable hour.  At the time I wrote the following:

The problem with the billable hour is that the lawyers have no skin in the game.  Whether drafting a contract, or litigating a case, lawyers and the law firms that employ them should be compensated based on the quality of their work and the outcomes for their clients.

I also wrote:

Oh change is coming.  At the moment it’s being driven by clients, but it will not be long before the revolution reaches the masses, and people start to demand that law firms and lawyers get paid for outcomes not hours.

Well it seems change may be coming a little faster than I thought.  Two stories last week out of Boston and Dallas highlight lawyers who like me have rejected the idea of a billable hour, and are operating instead on a fixed fee for service model.

In Boston, the erstwhile Lisa van der Pool over at the Boston Business Journal profiles Jay Shepherd of the Shepherd Law Group an employment law firm.  I love the lede of the story:

Shepherd famously doesn’t charge clients by the hour. He’s a prolific blogger — and tweeter. He’s never worked for a big firm. And he thinks that sometimes, as a group, lawyers suck.
I like this guy already!!  Here’s a link to the whole story.

In Dallas, Mark Weintraub of General Counsel Law is helping small- and mid-sized businesses manage legal contracts, mergers and acquisitions, employment issues and more with a “when- you- need-a-lawyer” approach called FlexGC™, a flexible, fractional legal service that cuts costs while delivering senior-level legal expertise. The firm will assess the services offered on a monthly basis and charge clients a fixed fee each month.

The firm’s approach is profiled in a recent story in the Dallas Business Journal.

Kudos to Shepherd and Weintraub.  They seem to have the entrepreneurial spirit that will change the way we deliver legal services in this country.  Godspeed!

I want to give credit in this post.  Credit to the FTC for a very creative legal argument, but more importantly credit to Steven Krane of Proskauer Rose for blowing that argument up in Federal Court.

First a bit of background.  The case at issue had to do with whether the FTC could make law firms comply with a set of regulations designed to prevent identity theft known as the Red Flags Rule.  The rule requires that businesses develop and implement plans to protect the personal information of their customers by screening for certain identity theft “red flags.”  The RFR was born out of the Fair and Accurate Credit Transactions Act of 2003 and requires certain businesses, primarily financial institutions,  to establish “reasonable policies and procedures” to detect and prevent identity theft.

Here’s the FTC’s creative argument.  In seeking to regulate law firms, the FTC  argued that lawyers were essentially in the business of “extending credit” because they typically get paid after they complete their work.  Therefore, the argument went, they are subject to the RFR.  So basically if a lawyer gets paid after they work, they’re just like a bank and therefore subject to these regs.  See what I mean, give them credit for creativity.

Not so fast though. In August the American Bar Association filed suit in federal court in Washington, D.C., to prevent the FTC from applying the Red Flags Rule to attorneys. The ABA was represented by Steven Krane, an attorney at Proskauer Rose with an annoyingly impressive resume who in addition to his many accomplishments is Sokolove Law’s chief consigliere on professional responsibility issues.

On October 29, the judge granted summary judgment for the ABA.   There’s a nice write up of the case here.

The judge made the right decision.  Lawyers don’t extend credit to their clients; some of them simply get paid after the work is complete.  That doesn’t make them “creditors” by any common sense definition, anymore than plumbers, carpenters, accountants or any other service provider can be classified as a “creditor”.

What’s more interesting about the FTC case though is the question of federal regulation of the practice of law—an area traditionally regulated by the states.  Some have argued that we need a more uniform set of professional responsibility rules.  I would agree.  As the largest marketer of legal services in the country, I know full well the task of navigating 50 different sets of rules around legal advertising, and the time and resources that go into compliance with all those rules.

That said, I tend to worry about federal regulations where they don’t appear to be necessary, or worse, are redundant.  For example, lawyers already operate under strict rules of professional responsibility, which require confidentiality on behalf of clients, so why do we need a new federal regulation around identity theft?

At Sokolove Law, our mission is to open the doors of the American civil justice system to everyone. As lawyers and regulators consider new rules, or look to streamline old ones, it seems to me that this mission is a helpful prism through which to consider reform.  Of course there are other reasons for rules changes, but perhaps if we considered whether the effect of a change would be to expand or contract access to the civil justice system that might be a helpful litmus test.

Law firms of America, we want to hear from you!!  Seriously, as I’ve written before , at Sokolove Law one of the things we take very seriously is our relationship with each of our co-counsel firms.  With that in mind, from time to time, we survey our partners and other law firms to explore new services and ways we can engage with co-counsel firms.

In the coming weeks, you may receive an email invitation from Isurus Market Research, an independent market research firm.  The email will have a link to an online survey and information about a cash incentive for those who participate.  If for some reason, you don’t get the email, and would like to participate in the survey, you can contact John Cole at Isurus at 617-547-2400 or jcole@isurusmrc.com.   Participation is of course confidential and really appreciated by all of us at Sokolove Law.

It took three years and I am guessing an obscene amount of time, money and energy on all sides given the reliance on a 300 page Special Master’s Report, but the New Jersey Supreme Court recently overturned a controversial prohibition against New Jersey lawyers  advertising their inclusion in certain ranking systems like  Super Lawyers, Best Lawyers in America and Martindale-Hubbell AV.  The original prohibition had been based on the New Jersey ethical rule that bars as “misleading” lawyers comparing themselves to other lawyers.  While I applaud the baby step in the right direction, it is just that - a baby step and one that came with a ball and chain tied to the poor baby’s ankle.

Under the new regulations, attorneys are free to include the ratings in their marketing materials so long as the conferring service made a legitimate inquiry into the lawyer’s qualifications, and no price was paid for the honor.  In addition, here comes the ball and chain part, ads must include a disclaimer that states “No aspect of this advertising has been approved by the Supreme Court” and describes the methodology for the ranking system or gives a description of where it can be found.

Legal disclaimers are in part what give lawyers a bad name.  I defy anyone to argue with a straight face that the small print or speed talking you see and hear on all different types of advertising, including lawyer advertising, provides any real benefit to the consumer. So as a navigator of the often complicated and varied rules of legal marketing in the 50 states, I’ll still gladly take this baby step forward, even with the ball and chain.

Machiavelli’s “Prince” wisely observed: “Keep your friends close, and your enemies closer” but when it comes to social networking sites, some experts are recommending that bosses keep their subordinates at arms’ length.

As social networking expands at lightning speed, faster than even mores and ethical rules can keep up, employment lawyers are warning that bosses who “friend” their subordinates on social networking sites are exposing themselves to legal risk.

Tresa Baldas over at the National Law Journal had a great piece recently about the risk.  She writes:

Managers sending friend requests to staff via Facebook, Twitter and other sites constitute a growing trend in the workplace. And it’s one that needs to stop, the lawyers stress, because online relations between boss and employee can trigger or exacerbate a host of legal claims, including harassment, discrimination or wrongful termination, as well as touch off cries of favoritism if the boss friends only a select few subordinates.

The problem, of course, is that social networking sites often contain piles of highly personal information about one’s family, religion, sexuality, hobbies, lifestyle, you name it.  What if a worker is fired for a performance issue, and then later claims that the termination was because of some kind of discrimination?

Ordinarily in employment law, the plaintiff would have to prove that as the basis of the claimed discrimination, for example, the employer knew that the employee was gay, or was of a particular ethnicity, or religious group, or had a health condition of some kind, which was known to the employer. Now with the advent of social networking, plaintiffs may be able to prove “knowledge” not because it was said in the office but because it was simply posted. All they must prove is that the boss and subordinate were connected on Facebook.  That could be enough to prove knowledge and it would bolster the plaintiff’s claim.

The bottom line according to the article:

“Bosses who “friend” their subordinates on social networking sites may seem warm and harmless, but they’ve got liability risk written all over them.”

So should we stop any social networking between bosses and subordinates?
No. If companies wanted to shield themselves from employment liability they should in my experience first say goodbye to the office party, night shifts and small satellite offices staffed only by salespeople.  So instead, I am suggesting that companies consider the issue and whether some sort of sensible guidelines could be found to allow for collegiality.

Well, this is not my legal opinion, but I suppose each company is different, and the thing that likely makes the most sense is for companies to get their legal and HR departments together and come up with sensible guidelines that protect both management and employees.

Additionally, as a general rule, think of social networking as a giant cocktail party.  If you wouldn’t pull out pictures of your bachelor party at a cocktail party with your colleagues and subordinates there, then it likely doesn’t make sense to do it on Facebook either.

Sometimes smaller is better, that might be the lesson of recent developments in the business of law.

For years, the conventional wisdom was that the way to build a legal business and inoculate yourself form the ups and downs of the economy was to have more attorneys with a wide range of specialties scattered over the broadest possible geographical footprint.

But as we watch developments in our industry there is some evidence to suggest that just there are real advantages to being smaller.  To begin with the big firm model is to charge high prices to big prominent clients on complex matters.  That model presents several problems. Let me explain.

At big firms, pricing is based on a billable hour. Hours are billed on a sliding scale from the junior associates to the most senior partners.  That model has been vilified by business clients for years because it creates an incentive to have their legal work done by junior associates and then reviewed only briefly by senior partners.  The result is that the work often takes longer and there are real questions about the risk of error.  In addition, there are concerns that junior associates take more time to do basic work that would take more experienced attorneys less time.  The result, whether you pay $1,000 for the most senior partner, or $500 for the junior associate right out of school doesn’t really matter all that much, because it’s going to take the associate twice as long to do the work.  I’ve talked about the shortcomings of the billable hour before here.

Beyond the billable hour, the big firm infrastructure can often stifle business.   To begin with clients may not want to pay “big firm” rates, making marketing difficult, but beyond that as a practical matter, if a client is small, or is in need of minor legal assistance, the administrative costs of taking on a particular piece of business may not be justified. Think of how hard it can be to get a qualified carpenter to fix a minor repair on your house; many of the best qualified workmen only take “the big jobs”.  Want to replace your roof, or put on an addition, and they’re happy to help, but what if you just want to replace a squeaky door, or replace a piece of crown molding?

Finally, the big firm model does not allow the attorney to build lasting long-term relationships with the client.  Sure the senior partner and the general counsel of the client may have a social relationship, but the bulk of the legal work is done by overworked, multi-tasking, distracted associates focused on delivering their 2500 plus hours per year to qualify for their bonus, or in a down economy simply keep their job.  The incentive is to bill as many hours for as many clients as possible.  Simply put outputs rather than outcomes are the goal, and the firm’s objectives could not be more unaligned with the clients.

I recently came across an article in the Silicon Valley Business Journal three lawyers who left big firms to hang out their own shingle.  According to the article: “At the new firm, all are finding it easier to retain clients and capture others.”

But the article points something else out as well and that is that the lawyers who left the big firms were all confident in their marketing skills and their ability to attract clients, and that’s really the catch.

There’s no question that the smaller firm business model allows for a more client-centric focus, a closer relationship with the clients and their businesses, and even a more lucrative law practice where less revenue is devoted to bloated overhead, but that model only works if you can get clients.

That’s where Sokolove Law can help.  In the personal injury space, we have helped hundreds of firms market themselves and attract new clients, and we’ve overseen thousands of cases where clients were compensated for their injuries without paying the big firm rates.  We’re successful because we know how to market legal services to people who have been injured (after all we are the largest marketer of legal services in the country) and because our co-counsel firms are some of the best, most qualified attorneys within their areas of expertise.

So if you’re a small to medium-sized firm looking to perfect your marketing,please get in touch with me , maybe we can help.

Everyone knows the old cliché, “you break it, you bought it”. Well we may need to create a new version of that old saying when it comes to lawyer’s interaction with internet sites such as Avvo and Martindale-Hubbell that talk about them. The new saying being, “You touch it, you own it”.

In the world of legal marketing, almost all law firms now have websites, and many are using blogs to publish their expert commentary on legal topics. Some are even including social networking sites like Facebook, LinkedIn and Twitter as part of their effort to promote their services. Finally there are sites like Martindale-Hubbell, SuperLawyers and Avvo that post informational listings of attorneys.

We have seen a continued struggle as state ethics regulators try to apply ethical rules that were often put in place well before the creation of the Internet to the Internets newest applications such as sites like these. A new ethics ruling out of South Carolina reflects just this struggle.

It’s a given attorneys are responsible for the ethical compliance of their advertising. That is, if you place an advertisement you have to be sure it conforms to the applicable ethical rules. What rules apply is a whole other issue.

But what about listings on Avvo, or Martindale-Hubbell? Are those listings third party information, or are they more like ads? Well according to the Ethics Advisory Committee of the South Carolina Bar, lawyers who “claim” their listing on these websites, become responsible for ensuring that the content on the listing is accurate and in conformity with the advertising and other ethical rules. Here’s the problem though: even if a lawyer claims their profile that does not mean that they control all of the material on it. For example most of these sites, allow third parties to make comments about the attorney. Those commenting might be other attorneys or current or former clients.

The South Carolina opinion makes very clear that while websites may post informational listings about lawyers without their knowledge or consent. Once a lawyer, however, participates in the listing, the rules change. “By claiming a website listing, a lawyer takes responsibility for its content and is then ethically required to conform the listing to all applicable rules,” the opinion said. That means that if a client posts a testimonial about how wonderful his or her lawyer was, depending on the jurisdiction, the lawyer might need to either have the testimonial removed or ensure that it has the proper disclaimer. So here are some one of the many unanswered questions – If a lawyer is now required to monitor the web sites that talk about him or her, how often must he or she do it? Once a week, a day, an hour? If the website is now considered an advertisement, because the lawyer “claimed” it, when does a change in the web site require a resubmission of the site for the states that require advertising submissions? What if the change was only to a section the lawyer does not control and that does not implicate the applicable ethical rules?

It may be time to add exchange-traded funds (ETF) to the alphabet soup of culprits of the economic meltdown, and it may be that investors who lost money in ETF’s may have claims against the funds and/or their investment advisors.

ETFs offer public investors an undivided interest in a pool of securities and other assets and thus are similar in many ways to traditional mutual funds, except that shares in an ETF can be bought and sold throughout the day like stocks on a securities exchange through a broker-dealer. That of course makes them very different.

The fact that shares of an ETF can be traded daily on exchanges means they are vulnerable to the ups and downs of a given trading day, what’s more, many of these funds are leveraged, meaning they use borrowed money to try to double or even triple the daily return. The problem of course is that this leverage also means they can lose many times their underlying value, even in a single day.

With this in mind, it is generally recommended that ETF’s are most appropriate for sophisticated and institutional investors who are accustomed to the daily ups and downs of the market, and the increased risk that comes with leverage.

That’s where the trouble comes in. Since 2006 there has been increased marketing of these funds to conservative retail investors as long term investment vehicles. That’s a big problem, because the performance of ETFs over longer periods of time can differ significantly from their stated daily objective. Therefore, leveraged ETFs that are reset daily are typically unsuitable for retail investors who plan to hold them for longer than one trading session, particularly in volatile markets.

Leveraged ETFs in particular are more sensitive to market movements than non-leveraged ETFs. They are best used as day-trading vehicles, to be held no more than a day or two.

Both FINRA and the SEC have issued warnings in the last six months about the risks associated with the sale of ETFs to retail investors. ETFs are becoming extremely popular and are often marketed to retail investors without proper disclosure as to the significant losses that can incur with long-term investment.

The problem of marketing these risky products to retail investors has become so acute that regulators and investment advisors have started to warn consumers. In August, the SEC and FINRA issued an investor alert warning retail investors about the safety of leveraged ETFs calling them extremely complicated and confusing products.

Given the rapid growth of these funds, we expect there may be many investors who have suffered economic losses as a result of misleading marketing tactics. Many of these investors will likely have claims against their financial advisors and/or the funds or both.

If you are interested in learning more about this case-type and our work in this area, please drop me a note.