Leaving Your Firm

Parting isn’t always such sweet sorrow.  In fact, it can be downright contentious.

If you are contemplating leaving your firm, do your research. Meeting your ethical obligations fulfills only part of your responsibilities.

IF YOU ARE A PARTNER

Conduct your partnership withdrawal in a manner that honors the contractual and fiduciary responsibilities owed to your fellow partners.  Contractual duties are controlled by your written partnership agreement.  Fiduciary duties are described in case law and codified by statute in Oregon’s Revised Partnership Act.

IF YOU ARE NOT A PARTNER

Review your employment contract, employment letter, office policies, office procedures, or any other applicable terms that may control the process for terminating your relationship with your current firm or your obligations upon departure.

ARE ISSUES LIKELY TO ARISE?

Consult outside counsel experienced in the areas of lawyer mobility, partnerships, fiduciary duties, lawyer separation, and law firm dissolution.

PUT CLIENTS ABOVE ALL ELSE

If you are making a lateral move to another firm or setting up your own practice, remember that the client’s freedom of choice in selection of counsel is paramount.  Always put the interests of your clients first.  Keep the transition as amicable, professional, and stress-free as possible.  Contentious withdrawals alienate clients and damage relationships.

GIVE NOTICE TO YOUR FIRM BEFORE YOU CONTACT CLIENTS

Inform the firm of your decision to leave before contacting any clients.  Failing to give adequate and timely notice to your firm or partners before you contact clients is a violation of the duty of loyalty owed by a lawyer to his or her firm based on their contractual or agency relationship.  It may also constitute conduct involving dishonesty, fraud, deceit, or misrepresentation in violation of Oregon RPC 8.4(a)(3).

RESOURCES

The Professional Liability Fund has extensive resources for Oregon lawyers who are departing a firm, withdrawing from a partnership, or dissolving a firm.  Visit our Web site for more information.

All rights reserved [2014] Beverly Michaelis.

 

 

The Five C’s of Hybrid Fee Agreements

Call it a hybrid fee agreement (HFA) or an alternative fee agreement (AFA).  Lawyers are looking for creative ways to appeal to clients who are resisting the traditional hourly rate approach.

Employment Law HFA

Consider the employment law case that is less than a slam dunk.  You could put in many hours only to see no fee. Ah, the life of a contingent fee practitioner.

Or is it?  One creative lawyer decided to offer his client a hybrid fee arrangement: a reduced hourly rate of $100 per hour with a 25% contingent kicker in the event of a recovery. (Lower than the “going” contingent rate of 33%.)  If the client agrees, and your fee agreement passes the test below, there is nothing wrong with such an arrangement.

Family Law HFA

Among family law practitioners – who are forbidden to take a contingent fee – a popular hybrid fee arrangement incorporates a flat fee earned upon receipt with an hourly rate that kicks in at a specific stage. The flat fee compensates the lawyer for work done in the early stages of a case: initial consultation; file opening; drafting and finalizing the Petition for Dissolution (or preparing a response); serving the opposing party; drafting and serving the first request for production of documents.  The flat fee could encompass additional services – each lawyer can determine where the cut-off should be – but charging a flat fee for time spent from the first consultation through initial discovery is predictable and easy to do.  Again, if the client agrees and your fee agreement passes the test below, this is a perfectly fine arrangement.

Does your HFA or AFA Pass the Test?

Every fee agreement must satisfy the 5 “C’s” test:

  • Clarity
  • Completeness
  • Compliant
  • Common sense
  • Can’t be excessive

Clarity

If a fee agreement is ambiguous, it must be construed against the lawyer. Cf. OSB Formal Ethics Op No 2005-15.” Oregon State Bar (OSB) Formal Ethics Opinion No. 2005-124.

If you decide to experiment with your fee agreements, strive to be as clear as possible.  With the employment law scenario, the main challenge is the math.  Conceptually the idea is pretty clear.  With the family law scenario, the number one problem is failing to explain what the client is “buying” with the initial flat fee earned upon receipt.  Just how far does the $1,000 initial payment go and when does the $200 per hour rate kick in?

Completeness

Consider all possibilities.  A good example in the employment law context: if you have the right to recover attorneys fees, address this in your agreement.  See OSB Formal Ethics Opinion No. 2005-69 [Attorney fee awards are the property of the client unless "the terms of the fee agreement expressly provided that Lawyer was entitled to the greater of the fee computed thereunder or the court-awarded amount."]  Fee agreements should address all conceivable outcomes.

Compliant

If your client is entering into a contingent fee agreement, he or she must execute the “Oregon State Bar Model Explanation of Contingent Fee Agreementbefore signing an agreement with you.  If you are charging a flat fee earned upon receipt, read and comply fully with Oregon RPC 1.5, Oregon RPC 1.15, and OSB Formal Ethics Opinion 2005-151 (Revised 2011).  May I also suggest reviewing this excellent article: Helen Hierschbiel, “Alternative Pricing Models: What’s in a Fee?,” Oregon State Bar Bulletin (November 2011).  Practice Tip: flat fee earned upon receipt fee agreements must include special “disclosure” language set out in Oregon RPC 1.5.

Common Sense

Don’t torture yourself or the client trying to figure out the math of your hybrid fee agreement.  Once you’ve developed a sample, run it by your next door neighbor or another lay person.  Ideally, run it by several nonlawyer friends.  Does it make sense to them?  If not, go back to the drawing board.  Remember: “If a fee agreement is ambiguous, it must be construed against the lawyer. Cf. OSB Formal Ethics Op No 2005-15.” Oregon State Bar (OSB) Formal Ethics Opinion No. 2005-124.

Can’t be Excessive

“The Oregon State Bar Legal Ethics Committee has also said that split contingent/hourly fee agreements do not automatically violate the rules of professional conduct. See OSB Formal Ethics Opinion No. 2005-54. However, the committee cautions lawyers that a fee that appears to be lawful at the outset, may turn out to be clearly excessive in the end….” Helen Hierschbiel, “Alternative Pricing Models: What’s in a Fee?,” Oregon State Bar Bulletin (November 2011).

All fees are subject to a look-back at the end of the case. The employment law HFA is more likely to be challenged than the family law HFA.  In the employment law scenario, tabulate the total hourly fees charged to the client and your contingent fee share of the recovery.  Add the two together.  Do these exceed the standard contingent rate of one-third?  If they do, you may be on perilous ground. Helen’s article, Alternative Pricing Models: What’s in a Fee? discusses all the factors that go into gauging the reasonableness of a fee.

Parting Thoughts

Developing HFAs or AFAs that are ethically compliant and legally enforceable can be done – don’t get discouraged.  In fact, the ABA Law Practice Division (ABA LPD) will soon release Alternative Fees for Business Lawyers and Their ClientsIf you are an Oregon lawyer and want this book (who wouldn’t?) but do not belong to the ABA, use the Professional Liability Fund discount code at checkout to save money: OSBPLF.

All Rights Reserved [2014] Beverly Michaelis

 

Ethical Issues and Responsibilities in Billing for Paralegals

On July 25 I am presenting Ethical Issues and Responsibilities in Billing for Paralegals on behalf of the National Business Institute and Institute for Paralegal Education.  This program is a practical course designed to enlighten attendees on using ethical billing practices while still satisfying billable hour requirements.  Here are the details:

Program Description

The requirement of paralegals to maintain a certain number of billable hours can sometimes lead to a slippery slope of what qualifies as billable. As you enter your time, you need to be conscious of the fact that every bill tells a story. What do your entries convey? Is your time frequently written off? Do clients fail to appreciate the value of your services? Examine hands-on, practical tips any one can implement so you can avoid ethical missteps and see immediate improvement in your overall productivity and billing practices.

Attendees Will Learn

  • The three key steps to success in billing
  • How to keep time accurately – even if you don’t have sophisticated software
  • How to avoid time being written-off or written down
  • How to manage your time to meet monthly/annual billable hour requirements
  • The magic formula for transforming time entries into the perfect bill
  • The ethics of billing: dos, don’ts, and the role of professionalism
  • Landmark cases establishing the client’s right to collect paralegal fees in conjunction with an attorney fee award
  • Tips for beginners

Who Should Attend

  • Paralegals
  • Legal Assistants
  • Anyone who bills time

CLE Credit

The program has been accredited for 1.0 ethics credits in Washington, California, Delaware, Florida, Indiana, Montana, North Carolina, Ohio and New Mexico.  NALA and NFPA have also accredited the program for 1.0 ethics credits.  Detailed information is available here.

Registration

Register now by following this link.  This is a Web-based audio program, which includes a Q & A session.  Upon registering, attendees will have access to the downloadable coursebook.  Cost:  $99.00 for the first registrant; $89.00 for each additional registrant.

All Rights Reserved [2014] Beverly Michaelis

 

Oregon eCourt Week – Filing Fees and IOLTA

Clickhere_medFLT_490x250Using debit or credit cards to pay eCourt filing fees raises a number of potential concerns – some ethical, others practical. For example, is it permissible to obtain a debit card connected to the IOLTA account? If yes, what can practitioners do to protect client funds? Alternatively, if a firm decides that an IOLTA debit card is too risky, what are the logistics for getting reimbursed if the firm advances eCourt filing fees?  Is a credit card a better alternative?

Here is some guidance on these issues. Continue reading

Just Say No to Charging Clients Merchant Fees

Lawyers often ask if they may ethically charge clients for credit card merchant fees.credit card

There is no ethical barrier to passing on the merchant fee, or crediting the client for the net amount of the transaction only, if the client agrees. Therefore, the first step toward charging clients merchant fees would require updating your written fee agreement to include this cost. If you wish to modify existing agreements, remember that any modification in the lawyer’s favor “… requires client consent based on an explanation of the reason for the change and its effect on the client…. In addition, the modification must be objectively fair.”  OSB Formal Opinion 2005-97.

The real obstacle in passing on merchant fees is a little something called the Truth in Lending Act. (TILA).  As noted by the Oregon State Bar in OSB Legal Ethics Opinion No. 2005-172:

Passing the merchant fee on to the client or crediting the client for the net amount of the transaction only … may implicate Regulation Z of the Truth in Lending Act,
12 CFR §226.  As a result, you may be compelled to offer cash discounts to all clients and make specified disclosures to your clients who pay by credit card.
See CONSUMER LAW IN OREGON ch 14 (Oregon CLE 1996 & Supp 2000).

The bottom line: unless you are willing to immerse yourself in the TILA and create compliant disclosures, don’t try to pass on merchant fees.  The TILA is an extremely complex piece of legislation, as evidenced by this 61 page manual published by the FDIC (Federal Deposit Insurance Corporation).  Furthermore, the best practice is to build the cost of taking credit cards into your fee – what you charge for your services.  This is what the retail world does.  When we pay by credit card, retail merchants don’t say: “That will be $159.00 for the lamp (or spa services) and another $4.77 for our merchant fee.”  Clients do not like to be nickel and dimed to death.  Just say no!

For a further discussion about credit cards, including answers to FAQ, see this post.

For tips on flexible and inexpensive credit card processors for lawyers, check this out.

All Rights Reserved [2014] Beverly Michaelis

Making Money: Maximizing the Business Side of Practicing Law

Law is both a profession and a business. So what pearls of wisdom did the experts at the 2014 ABA TECHSHOW have to say about the business side of law practice? Read on…

How Are We Doing?

  • According to Lexis’s Chris Anderson, over 50% of solos have no accounting software at all. @MrsMacLawyer RT @lawyerist (My 2 cents: true and sadly ineffective – the return on investment in purchasing quality billing and accounting software can’t be overstated.)
  • Law firms used to raise rates 10% a year; now just about 3% says @gnawledge – @Business_of_Law
  • Key Business Challenges for Lawyers [INFOGRAPHIC] – MyCase Blog @nikiblack

Talking to Clients about Fees

  • Calling a client that’s behind on payment is a hard thing to do; manage expectations — says Steve Best of @affinitytech @Business_of_Law
  • Lawyers are not comfortable having conversations about fees (both sides) – feels “salesy” and “confrontational” says @gnawledge – @Business_of_Law

Setting Rates and Crafting Agreements: The Rule of 3

  • Law firm billing discounts are a 1-way street; once you give them, you’ll continue to give them; protect the price – @gnawledge – @Business_of_Law  (My thought: I don’t believe in continually marking down bills.  I do believe in offering early payment discounts.  The client saves money.  The lawyer is paid more quickly.  Win-win.)
  • Rule of 3 in law firm pricing: 1% cut in price = 3% cut in profit – @gnawledge – @Business_of_Law
  • Rule of 3 defined: Attorney bills at $300/hr; 1st 100 is salary; 2nd 100 is law firm cost; 3rd 100 is profit – @gnawledge – @Business_of_Law
  • Bills Out – Money In – #ABATECHSHOW session @PeggyGruenke makes this case for flat fees – @Business_of_Law
  • New meaning for AFA: “appropriate” fee arrangement – @gnawledge – @Business_of_Law
  • The better law firms are at pricing, the better it is for the market – @gnawledge – @Business_of_Law
  • Resources for law firm pricing: LMA Group (Legal Marketing Association) | ILTA. (International Legal Technology Association) @gnawledge – @Business_of_Law

Billing

  • Some firms have 300 billing codes…but just 20 are used. Need to think through codes – @gnawledge – @Business_of_Law
  • Billing codes are gamed; got a cap on one code, the hours get logged in another. @gnawledge – @Business_of_Law
  • Where’d those billable hours go? Right here in the matter management system – @Business_of_Law (Link to LexisNexis FirmManager “Money Finder.”)

Trends and Where to go from Here

  • Litigation finance is a growing trend — several financing companies have raised lots of capital @gnawledge – @Business_of_Law  (My input – this can be a slippery slope.)
  • The Essential Survival Guide for the Independent Attorney: summary here. @Business_of_Law
  • Session Summary: 5 Effective Law Firm Billing Techniques – @Business_of_Law

All Rights Reserved – Beverly Michaelis [2014]

Cyber Security – Horrifying Stats and Tips for Dropbox Users

For the last two weeks, I have been featuring a potpourri of posts gleaned from tweets posted during the ABA TECHSHOW.  Today we explore cyber security with extra bonus tips for good measure.

Cyber Security – Numbers, Trends, Protecting Your Firm

Tips for Dropbox Users

  • Dropbox security: use third party apps – like Viivo – to encrypt. You own the key. @VIIVOkey happens to be in attendance.… @MrsMacLawyer RT @rocketmatter
  • Dropbox security: use 2 step authentication but put recovery code in safe place. It’s not retrievable. @larryport RT @rocketmatter
  • Also see my post, The 7 Rules of Using Dropbox and search this blog for related Dropbox posts.

Thanks 2014 ABA TECHSHOW tweeters for the tips!  And check out these resources for lawyers posted by the author on Scribd.

All Rights Reserved – Beverly Michaelis [2014]

Strategies for Coping in Difficult Financial Times

money-treeMoney is a significant source of stress for many of us.  Lawyers who are unemployed or underemployed understand the pressure all too well.

If you feel stressed by lack of money, how can you get on track?  Meet your goals?  Create a vision for the future?  The answer is to take a multi-dimensional approach.

Step 1: Coping With Your Feelings

The American Psychological Association has some excellent tips on how to cope with the tension and stress caused by personal financial problems.  Among their suggestions: ask for professional support.

In Oregon, we are fortunate to have the Oregon Attorney Assistance Program.  The OAAP is available to assist Oregon lawyers and their families with any issues that affect a lawyer’s ability to function.  This includes depression or anxiety caused by financial worry.  If financial problems are affecting your own mental health or the mental health of a loved one, friend, or colleague, contact the OAAP and speak with an attorney counselor.  OAAP services are free and confidential.

Step 2:  Communicating about Money Issues

Many of us don’t know how to talk to others about money.  We are fearful, anxious, and may even engage in self-sabotage.

Whether you are struggling to speak openly to a loved one or your law partner, help is available.

In 2010, the OAAP held a program entitled Money Matters featuring Brian Farr – a licensed professional counselor specializing in individual, couple, and financial therapy. Oregon lawyers can order the Money Matters program and download the handout at no charge from the PLF Web site.  (MCLE credit for this CLE has been extended through the end of this year.)

In Money Matters, Mr. Farr reviewed how to communicate about money issues and create a clear and accurate financial picture.  His handout includes a self-test for financial troubles, spending worksheet, monthly income and expense snapshot, and balance sheet.

If you are looking for guidance on how to talk to loved ones or colleagues about money issues, order this program.  If you are looking for practical tips on how to get a handle on your finances, order this program.  For one-on-one support, speak confidentially to an attorney counselor at the OAAP.

Step 3:  Getting Your Finances in Order

Beyond the insight and tips available in Money Matters, you will find excellent advice in this recent post by Sheila May: Managing Personal Finances During Periods of Unemployment and Underemployment.  Ms. May is a CPA specializing in forensic accounting and litigation support in Scituate, Massachusetts.

Step 4:  Additional Tips for Solos and Small Firm Practitioners

If you are a solo or small firm practitioner, add the following Business Essentials to your financial toolkit:

Do your homework on law firm economics and learn to avoid the pitfalls that lead to non-paying clients.  Details are available in this OSB Bulletin article.

All Rights Reserved [2014] Beverly Michaelis