Confucius, he say…

By | 26th November 2009

“May you live in interesting times” is reputedly the English version or paraphrase of an ancient Chinese curse.

Whatever its origin, the saying crops up in a variety of differing situations including a speech by Robert F Kennedy in 1966, a letter from Austen Chamberlain to a member of the US House of Representatives and more recently in a speech by Bob Garvin, the character played by Donald Sutherland in the 1994 film, Disclosure.

The film starred Demi Moore and Michael Douglas who, contrary to what you might expect from the title, were not engaged in a Hollywood version of Part 31 but played a couple who worked in a technology company and who became engrossed in a sexual harassment case!!

Could it be that the ancient curse been invoked against the Law and the legal profession in general and litigation lawyers in particular?  It is certainly true that we live in interesting times!

I rather liked the report in the newspapers recently of the return of a pair of gargoyles to the actress Phyllida Law (how appropriate), the mother of Emma Thompson. The gargoyles looked pretty hideous and it is no small wonder that they were stolen from her garden but they were ultimately returned anonymously, presumably by the thief, with a note saying he (or she) had been very ill since taking them and asking if the actress would please lift the curse. Having a sense of humour, Ms Law has now returned the items to their rightful place in her garden with a note saying that “all curses have been lifted!”

But I digress. What is clear is that the pain felt currently by many law firms as a result of the recession refuses to abate. In article after article, this point is made by legal journals, commentators and the press.

To illustrate what I mean, a recent edition of Legal Week contained a number of articles which caught my eye. The strap lines were:

  • Leading City Firms in talks to bring in teams of contract lawyers
  • Partners seek new models but wary of LPOs (Legal Process Outsourcing)
  • Riding the tipping point
  • Don’t want to be a partner? We have the technology.

In a nutshell, these articles concerned respectively:

  • The proposed use of consultant lawyers
  • The drive for efficiency in the delivery of legal services but concerns about quality and supervision
  • The possible demise of the hourly rate as the preferred method of charging for legal services; and
  • The rise of the virtual law firm and the use of “floating” lawyers.

Regular readers will know that on previous occasions I have suggested that, while times are changing, lawyers are sometimes reluctant to change with them. I have referred before to the perceived antipathy to coming to terms with technology and its use in appropriate and proportionate circumstances and have further suggested that failure to engage in this area exposes firms to the risk of losing work and possibly also costs penalties as the courts and corporates no longer accept the old laborious ways of sifting, culling, analysing and reviewing documentation for litigation.

What can one extract from these articles? It will not take readers long to realise that they are all about the impetus for a more cost-effective delivery of legal services. Familiarity with and use of technology is only one example of where law firms currently struggle to offer an efficient and cost-effective service to their clients.

Redundant lawyers are available all around the marketplace so when faced with an upturn in business or a large litigation matter or regulatory investigation, why would a law firm not want to consider contract lawyers for specific projects? Despite one correspondent writing intemperately that “temps” are “more trouble than they are worth… (and) are only temps because they cannot get a proper job..”, the majority view seems to be that employing contract lawyers is good for law firms and increases their profitability. A number of correspondents point out that many will be good, well qualified, sometimes senior lawyers who have either lost their jobs in the downturn or have decided that there is more to life than working 26 hours a day and losing wife, contact with children and touch with reality all at once.

I was initially a little surprised at the concept of “floating” lawyers but having read that Allen & Overy is considering the possibility of creating a pool of its alumni to draw on, I realised that contract or “floating” lawyers are an interesting idea. This has, I can assure you, absolutely nothing to do with the fact that I am an A&O alumnus!!

I gather that the use of such lawyers has been commonplace in the US since the 1970s — and why not? Presumably they are available because of recent job cuts and may well be employed by the very firms who made them redundant or competitors who have an eye to the main chance but who do not want to commit to a permanent hiring policy. After all, firms have used the locum for years so why should it be different now, particularly when firms are tightening their belts and the clients are more and more cost conscious?

As for the virtual firm, I see that the concept is already with us. Subject to the usual caveats as to quality and supervision, why not, if it delivers enhanced profit to the law firm and a good and cost effective service to the client? A virtuous or virtual circle perhaps!

Outsourcing is something of a buzzword at present and I will come back to the idea on another occasion while noting that firms like Pinsent Mason, Slaughter & May, Simmons & Simmons, my former firm Eversheds and Berwin Leighton Paisner have all embraced the concept. They may be wary when it comes to quality and supervision (and their clients will want reassurance here too) but these firms are determined to try out the idea.

Which brings me to the hourly rate. The thoughtful article (Riding the Tipping Point, Legal Week – 4 November, 2009) by Chris Barnard, General Counsel of Coca Cola Europe and Ian Leedham, senior counsel, commercial and dispute resolution at National Grid, surprised me by asserting that hourly rates are a child of the 1970s and came about after fixed fees were held to constitute price fixing in the US.

Starting my career in the law, first at University in 1969 and then at Allen & Overy in 1973, I had always assumed that the hourly rate was the accepted way to charge. As with so many things in a legal career which now spans 40 years if you include three very enjoyable years at Oxford, I soon learned that there were other ways to charge for legal services but was blissfully ignorant that I had started my career at almost the same time as the hourly rate was becoming universally accepted.

The article points out that differing types of arrangements for billing come into fashion and fall out of favour regularly and highlights the work done on a fixed fee basis, by off-shoring and, interestingly, the advent of virtual law firms such as Axiom, Keystone Law and Berwin Leighton Paisner’s “Lawyers on Demand” service.

The authors go on to say that the hourly rate remains dominant even in these recessionary times and offer an explanation by arguing that it may not be in the interests of law firms to abandon the certainty of the hourly rate and embrace the concept of alternative billing because of their business model, internal cultures and fixed costs.

They go on to say that we may be reaching a tipping point when alternative billing arrangements become dominant because the profits of the top 100 firms have on average doubled in the last 5 years. The recession and the Legal Services Act will be catalysts for change and if private practice lawyers and the in house legal community do not work together to look at greater billing diversity and value analysis, the value of legal services will erode as businesses and in house teams find other ways to meet their needs.

Why is all this relevant to readers of the Smart e-Discovery blog?

I believe it is all part of a trend. Businesses are looking to cap their legal spend. The delivery of legal services can sometimes appear to be inefficient as it is often based on outmoded business models and practices which may work in the good times but which are exposed as cumbersome in times of economic downturn.

Most importantly, the outside drivers are beginning to have an effect. The Jackson Costs review, the new practice direction to Part 31, the technology questionnaire, cases such as Digicel and the recent case of Earles v Barclays Bank PLC all point to a momentum to make the litigation process more efficient and less expensive while not losing the quality of what is delivered. In some cases this may mean doing less than the Rolls Royce job because the case does not warrant it and in others it will mean delivering the Rolls Royce as quickly and efficiently as you can, partly by abandoning outdated methods and partly by embracing new ideas.

Technology has a role in this process. Its use needs to be considered carefully because you cannot make an informed decision whether to use the technology available if you do not understand the rules or what is out in the market place to help you.

The message for lawyers in these four articles appears to be simple. You will have to change and if you do not, life as you know it will change around you and you risk being left behind!