#2 What Should Quality Legal Representation Cost?

Following the detailed introduction in my first Blog as to the myriad components that go into the selection of an attorney, you may wonder why, among all the choices for a topic, I have now turned to the issue of attorney compensation? The answer is simple. Research demonstrates that while you as a consumer of legal services certainly care about and want all of the qualities in your attorney that I have enumerated, the first issue on the mind of a potential client engaging with an attorney for the first time is, “What is this going to cost me?”

Moreover, if the attorney is to attain the ultimate goal of achieving Trust with the client, this topic must be addressed early, candidly and honestly. In that discussion, the attorney must explain the acceptable parameters of compensation based upon the nature of the matter and the attorney’s experience and expertise, and the client should make the effort to understand what is actually involved from the standpoint of legal work. The arrangement to be reached must be the product of what is deemed fair and reasonable by both the attorney and the client, and the fee likely to be incurred must be appropriately proportionate to what is at stake for the client in the matter.

In furtherance of the above principles, I have already disclosed that my current standard hourly rate is $400 per hour, but in certain matters, I offer flat fee arrangements, hybrid fee arrangements and even a contingent fee option. This brings me to the above quote from my beloved grandfather, Jack Simon, who believed that when shopping one must buy things of quality since they are most likely to meet your needs, and because, “Cheap is expensive.” Of course, the context of his comment was a discussion with my mother as a young girl when confronted within a limited budget of buying more articles of clothing at a lesser price with lesser quality or only one or two well-made and more expensive garments that would last longer and be more attractive when worn.

Nevertheless, my grandfather’s adage happens to be as equally applicable to legal services today as it was to my mother’s wardrobe so many decades ago. There are no doubt some who believe that lawyers are fungible; that one lawyer is as good as the next. Those that are guided by this principle choose the least expensive representation they can find, and harbor the belief that the work will somehow get done without repercussions thereby fully justifying the short-term savings. This approach, as its adherents inevitably find, is fraught with disaster. To understand why this is so, we must pull the curtain back a bit and examine the practice of law in traditional business terms.

Although a law office is a place where special responsibilities and relationships abound, it is also a business subject to certain universal rules and limitations. In stark terms, free of distracting complications, we can better envision this circumstance when we recognize that every business offers one or more products. Each of those products are composed of the materials from which they are made as well as the labor to produce them. These materials and labor have an acquisition cost. Additionally, there are costs to acquire and maintain the platform where these products are made and offered for sale and consumption. In order for a given business to maintain its operations, it must sell its products for an amount equal to the sum of these costs plus an additional amount which we identify as profit.

The products of every law office consist of legal work. The principal element required for that production is the time of each attorney and paralegal that participates in the production of that work. Granted, there are also office expenses, equipment expenses and commodity expenses such as paper, ink and sources for research, but for purposes of this discussion let’s recognize that the compensation of the personnel producing the work are either the largest or certainly one of the largest expenses the law office incurs.

There is a cost associated with each attorney’s time. That cost is determined by that attorney’s knowledge, experience, and reputation based on prior accomplishments, which, in turn, create the level of demand for that attorney’s involvement in given client matters. The law

of supply and demand is consistently in play. Each attorney has a limit to the amount of work that attorney can produce. The higher the demand for that attorney’s services, the more limited the supply of that attorney’s work becomes. High demand and limited supply cause the price of a given commodity, in this case the attorney’s work, to increase. The converse is also true, less demand for an attorney’s work and an abundant supply of that attorney’s time result in the decrease of the price for that time.

Paralegals are non-attorneys capable of performing some of the work also performed by attorneys short of providing legal advice to clients. The more training, ability and experience of a given paralegal, the more categories of work and the higher degree of complexity that paralegal will be able to address. The more productive the paralegal, the higher the cost of that paralegal will become.

An attorney or law firm that quotes below market legal and paralegal rates can do so only under certain circumstances which include:

(1) the conduct of a bulk practice where the lower compensation per matter is counterbalanced and ideally outweighed by the increased number of those specific matters being handled, but in order to handle the higher number of these matters and achieve a profit, less time and less product cost must be allocated to each matter,

(2) the attorney and staff are in reduced demand and must find a way to induce prospective clients to choose their services, but the lesser demand likely results from less experience, less expertise and a reputation derived from a history of less client satisfaction, or

(3) the law office and attorney are just starting out, essentially untried, inexperienced, unknown, and therefore lacking much in the way of a history of matters and client dealings, which, in turn, creates uncertainty as to the quality of the work to be provided.

Attorneys are not fungible The quality of the work produced and the levels of client satisfaction vary widely from attorney to attorney as do the experience and resulting expertise of each attorney. I have seen supposedly routine and recurring matters such as a residential property sale result in unmitigated disaster because the low quoted fee simply did not permit sufficient attorney involvement with too many tasks delegated to the paralegal behind the scene. This protocol may avoid serious mistakes as long as the transaction is truly routine. Where, however, there are irregularities such as title issues that an attorney will likely discern where a paralegal may not, the results can easily become cataclysmic.

I was involved in defending a party to litigation that arose where recorded wetland restrictions, prominently disclosed in the title report, that limited the use of the subject property were neither adequately discerned by the law office representing the buyers nor properly

explained to their clients. These lapses enabled the transaction to proceed through closing, but thereafter litigation erupted in the form of a legal malpractice suit against these attorneys when the buyers learned they could not use the newly purchased property for their intended purpose. This problem came about because the inspection of the title report was delegated by the attorney to a paralegal that regarded detailed limitations imposed by the wetlands as a routine matter that had little or no bearing. As a result, the issue was not raised by the paralegal to the attention of the attorney, and in this instance the attorney did not review the title search firsthand prior to the closing.

Where this approach of low fee quotes, limited review by the attorney, and broad-based delegation to the paralegal is followed, the client can also expect minimal and possibly no response to questions desired to be raised. Under these circumstances, the client cannot help but feel abandoned, client satisfaction is low to non-existent, and mistakes are far more likely to occur.

There is, however, another side to this coin as well. This occurs where larger firms with extensive numbers of attorneys and paralegal staff overpopulate a matter in order to “feed their hungry beast.”

The “beast” to which I refer is the daily need to support a large platform consisting of numerous attorneys, paralegals, other support staff as well as expansive office facilities. The professed advantage to choosing such a firm is the diversity of capabilities and specialties to be found among a large group of senior attorneys as well as the “fire-power” derived from a cadre of associate attorneys available day and night to rapidly produce the required work.

Whatever attraction this arrangement may hold for the prospective client, however, arrives with a major impact on price. The infrastructure must be maintained, and, in order to do so, these firms tend to work on matters through teams of professionals consisting of a senior partner-attorney, a mid-level partner-attorney, various associate attorneys and one or more paralegals. Each member of the “Team” performs a designated set of functions.

For example, the senior partner will interface with the client, learn the factual situation prompting the representation, intake key documents, and make recommendations as to the general strategy to be implemented. Where the facts are detailed, the senior partner will likely be accompanied by a mid-level partner or senior associate to provide note-taking functions thereby enabling the senior partner to focus on the client.

Following this initial interview, and with the preliminary recommendations to the client in place, the senior partner then confers with and directs the mid-level partner, who will actually supervise the work functions. In this step, preliminary decisions are made as to the research

needed to support the recommendations given as well as the other steps to be taken within the evolving game plan dealing with the matter.

The mid-level partner in conjunction with the senior partner will prepare the engagement letter setting forth the factual background, objectives, and financial terms of the representation for submission to the client. We will infer for this example that no charge will be made to confirm the engagement of services in this manner, but that may not always be the case.

Once the terms and objectives of the engagement are confirmed by the client’s countersignature, the mid-level partner calls his Team of associate attorneys and paralegals together making assignments to implement the evolving plan. Each associate attorney is assigned specific issues to be researched and the resulting file memos to be written. The paralegals are directed as to how to set up the file and which form documents can be produced in initial draft for further development by the associates assigned to the task.

All work product emanating from the associate attorneys will likely flow to a senior associate for review and embellishment, but will nevertheless then proceed to the mid-level partner for review and approval, then to the senior partner for ultimate review before the work

product is submitted to adversary counsel and copied to the client. These steps are replayed for each phase of the representation, each issue and event that arises, until the matter is resolved. The foregoing narrative is generic, but equally applicable to both litigation and transactional matters.

As should be obvious by now, the totality of these functions can be performed by fewer personnel even in the most detailed, comprehensive and important matters. Each of the participants in the Team’s efforts are dutifully recording the time spent in performing their assigned tasks. Where this large firm systemic “Team” approach is turned loose, an interesting anomaly often results: while there are “only” twelve to fourteen hours in the most aggressive workday, the collective time entries of these Team members can easily eclipse the number of those workday hours resulting in more hours billed in a given day than there are in that day.

Let’s examine the following chart illustrating this large firm narrative:

TABLE 1: The Large Firm Experience