Happy New Year.  I’m back.

I’ve decided 2010 is the year that I admit my Law Firm 2.0 thesis is wrong.  I blew it.  BigLaw is alive and well – perfectly efficient and constructed – and all of my ramblings were just that.

Yeah…  right.  It’s not April 1.

But I AM pretty pissed off at people not paying their lawyers.  Even if their lawyers are inefficient, frustrating and sometimes comical.  (But still more expensive than hiring Dane Cook or some other C+ list comic to perform at your kid’s Bar Mitzvah).

Why am I mad?  Aren’t I the guy who is constantly picking at the big firms for their business model issues and imploring them to reduce client costs? 


But the people refusing to pay their lawyers and / or are always demanding discounts are not helping the situation.  They are only making it worse for themselves and the rest of us.  Here’s the scoop:

I’m hearing from more and more lawyers (and “proud” clients) that their clients are expecting discounts on every bill their lawyers present them.  It ranges from hard and fast rules (e.g.,we’ll pay 80% of your bill and 0-100% of the remainder depending on performance or if we feel like it) to haggling on each individual bill.

And what do the lawyers do?  Well the first step is to protest, but normally, the firm bends and gives into to some form of discount.  (a really interesting blog quoting internal Simpson Thatcher documents about client discounting is a must read)

At the end of the year, the firms figure out their revenue and profit margin and realize that they didn’t make as much as they would like, so what do they do?  They raise their hourly rate.  If they are going to provide discounts, they want a larger base to discount from. 

The outcome of this is that now everyone is paying higher hourly rates and we are all worse off.  In fact, those of us who pay our bills are subsidizing those who don’t during the year. 

Lawyers used to never discount, but accounting firms have ever since I’ve been working with them.  Accounting hourly rates were always known to be exorbitant, but the game was that they’d come and cut you a “good guy” discount, sometimes as much as 50%.  So this game is nothing new.  I fear this is where BigLaw is going. 

Now, I’m not arguing that you should NEVER ask for a discount.  There are plenty of instances where the firm deserves to give back some money due to a host of issues.  I’m just peeved at those who make their Law Firm 2.0 thesis one of simply not paying their bills.  If you have that much issue with your outside counsel’s billing rate, address the situation in a transparent manner or hire new lawyers. 

Because if you don’t, you are only incenting the firms to create a billing eco-system that is even more inscrutable and opaque.  This is ultimately worse for all of us, unless we all collude and adopt the same method of payment.  Which we won’t.  And besides, it’s stupid.

Law Firm 2.0 depends on the clients too.  We must do our part.  Short cuts like this aren’t Law Firm 2.0, rather short sighted window dressing.  Work with your partners to get them more efficient and show them the way if the can’t themselves.

And if not, find a new firm.  There are plenty out there that are starting to get religion.

Welcome to 2010.

  • Phil Sugar

    I guess you are ranting about those people that got a legitimate bill and then demand a discount and withhold payment as a ransom threat. Ok, that I agree is sleazy wherever it happens, in law, or in retailing, or anywhere else.

    But it seems from the link we're talking about negotiating a cheaper rate up front or coming up with an alternative pay for performance. Like if you get this done for less than $X I'll pay you your full rate otherwise we have another rate.

    To that I would say get used to it, it happens everywhere else….and if the response is to raise rates….eventually you'll lose to the competition that doesn't.

    I think one of the challenges in this tough marketplace is that when you do agree to open your wallet you need to put parameters in because sometimes instead of appreciating the business and trying to do the job as economically as possible people look at it like: I finally have a customer!!! I need to milk this for all its worth.

    That's not just lawyers, but electricians, plumbers, accountants, mechanics whomever.

  • What do you think about this, which seems like a good practice. One of the firms we work with does something along these lines (keep in mind this is not an AFE, but could be a bridge for hourly guys stuck in the predicament):

    Discount early payment by 10% (within 30 days). Over 60 days, 10% extra. Keep a credit card on file, as long as it doesn't violate ethics rules (Google Jim Calloway, he knows the deal) and bam – receivables are now a lot closer to being collected.

    So the client can feel that they get a discount, and the atty can ensure money in the bank. (The atty that does this also raised their rates 10%, btw).

  • I like it. I am not sure however that I have a credit card that can support these amounts however. 😉

    Jason Mendelson

    Sent from my iPhone
    – please forgive iTypos.

  • SueRayn

    It would be really great if all of you wou actually pay your vendors. I'm a title examiner and cannot tell you how much time I spend chasing attorneys for their outstanding balances. I'll not take on another Attorney client without a retainer or a credit card on file. Some have been relly great but when the real estate ^^*%#@ hit the fan I was last on the list. Whats the recourse for someone like me? I find another attorney who is willing to sue his "brother" and or small calims on the low balances. I make under $100,000 a year working for myself with no safety net, a single parent mom with 3 kids and a deadbeat dad. Ya ya ya call the wambulance, right? Well here's the fist to all of you who don't pay your bills… quit bitchin

  • Michelle

    Well here's one for ya! We are the deadbeats…. small company (start up) sued by the competition that never had a freaking (yes I wanted to use the other word) case and yet were forced to defend ourselves in a ridiculous lawsuit that ended up with them dropping the case the day before trial. (order of non suit and a walk away!) WELL Shit we all walked away with 66,000 in attorney bills that we can never afford – yes we paid up front approx 10K and since then additional 20K but hell we have 36K to go.
    Closed the business due to the economy and having gotten blessed with 2 children in 2 years was not feesible to keep it open. So now here we are going to have to mortgage our home to pay for a dumb ass suit that had no merit to begin with but because of our GREAT country and I do meant that part – we are forced to defend our right to have a free enterprise at the tune of 66K……………………………..not to much free in that!
    I am in awe of how we ever got to that point to begin with since we live in a "right to work state" Texas – but we were there and had to fight our way out! Lesson learned never never never hire an attorney!

  • Time can chang most of things.

  • bags

    Marc Jacobs is an American designer. He is a fashion brand Marc Jacobs brand and its by-line Marc by Marc Jacobs, chief designer. Jacobs is also the current French luxury brand Louis Vuitton’s artistic director.nThe essence of style: the United States do anything they want in the fashion industry designer marc jacobs, louis vuitton for the surgeon, but also the individual’s two brands Marc by Marc Jacobs handbags, Marc by Marc Jacobs bags business flourished, because of its elegant design, luxury and Sexy heart won numerous beauty, popularity has been completely broken borders. Marc Jacobs Handbags continuous 06,07,08 reelection sales champion!n