Lawyers have never been known as great bill collectors. Eager to charge fees, they are loathe to go after late-paying clients. Too tacky. Too risky. Too unprofessional. As one frustrated law firm administrator says, "They find it distasteful."
Enter the recession.
Now, as a matter of survival, lawyers are being forced to make the bottom line a top priority. In one sense, they're becoming tougher -- employing innovative ways to ensure that they get paid, particularly by clients who are suffering the recessionary blues themselves. In another sense, they're softening -- becoming more open to negotiating fees and accepting fee arrangements they would have scorned just a few months ago.
The tack depends on the size of the firm, its practice specialities and its clients. What works at giant Skadden, Arps, Slate, Meagher & Flom in New York or 11-lawyer Brand & Lowell in Washington is bound to be different.
Arnold & Porter, the District's largest firm, and Zuckerman, Spaeder, Goldstein, Taylor & Kolker, with 52 lawyers, are both using what they call "evergreen retainers." Instead of seeking a retainer and then moving on to hourly billing when that money is gone, these firms require some clients to replenish the retainer fee as the money is drawn down by the law firm.
"I don't think somebody sat down and invented this," said Roger Spaeder. "It's simply a business practice that has become popularized" by the recession.
Firms are also looking to collect quickly from clients for outside expenses, such as transcripts, investigators and expert witnesses. In years past, firms often advanced these expenses and waited for reimbursement, but that, according to several partners, is tantamount to lending the clients money.
"We don't want to become the bank of Dow, Lohnes & Albertson," said Einar Bohlin, executive director of Dow, Lohnes. He said his firm has stepped up its efforts to get expense retainers from some clients, particularly for major litigation. Other firms are trying to encourage their clients to pay service providers directly so the law firm isn't playing middleman.
If in good times, a firm expects to collect 60 percent to 75 percent of its receivables in 45 days, said Arnold & Porter's James W. Jones, "for the present economic situation you might ... add two or three or four weeks to that."
Law firms, he said, generally don't add late charges to bills, so clients may "first ... pay those bills with penalties attached. Lawyers' bills often go to the bottom of the pile."
Just how tough to get on late-payers has always been a dilemma and that has intensified with the troubled economy. At Brand & Lowell, with its white-collar defense practice, most clients are already in trouble when they arrive. Late payment may just be part of the bargain. Abbe D. Lowell said they are "sympathetic and have created numerous workouts. ... The answer is you don't bite the hand that feeds you."
Still, most firms, including Lowell's, are becoming more vigilant, closely scrutinizing new clients' ability to pay and letting clients know quickly when they fall behind.
By contrast, law firms are becoming more hospitable to incentive fees coupled with lower hourly rates, strict budgeting or other fee arrangements their corporate clients have been pushing for years.
Spurred by fierce competition, many firms reluctantly agreed to such arrangements in the past, but, as Benjamin W. Heineman Jr., General Electric's senior vice president and general counsel, believes, "The recession has, depending upon your point of view, accelerated or exacerbated those trends."
David L. Reichardt, senior vice president and general counsel at Northern Virginia's DynCorp, a professional and technical services company, said some D.C. area firms are trying "hybrid billing" -- lowering hourly rates and combining that with a contingency fee based on success.
And that's not all. At a seminar in New York City, Reichardt said that Peter Mullen, executive partner at Skadden Arps, got up to talk about his firm's attention to cost and efficiency. Reichardt was taken aback. Here was the law firm built on the big profits of mergers and acquisitions talking more-for-your-money lawyering. "I've never heard anything like that from Skadden, Arps," Reichardt said.
Nor is Skadden alone. Besides making sure their clients pay the bills, plenty of firms are working hard to make sure there are bills to pay.
Seth Waxman of D.C.'s Miller, Cassidy, Larroca & Lewin was recently visiting a corporate client who had just lost a big toxic tort case. Newspapers had reported that the corporation might be the target of dozens more lawsuits.
"The general counsel showed me three boxes full of solicitation letters from firms on how they have the expert in this field," said Waxman. "There must have been 500 letters and brochures. I suppose you could deduce that one way law firms are adjusting to the current economy is to be more aggressive."
Contentious Convention The American Bar Association last week took an unprecedented 88 ballots to nominate Baltimore's J. Michael McWilliams for president -- more ballots than it ever has taken a convention to nominate a successful candidate for U.S. president.
Could it have taken so long because one of his two opponents was Roberta Cooper Ramo, the first woman to run for the job?
Ramo surged once to 25 votes -- six short of the 31 needed for nomination and ultimately the number handed to McWilliams.
New York lawyer Alexander Forger, a staunch Ramo supporter, did not see the vote as anti-female, but more a bow to the institution's traditions. ABA presidents usually come up through the power structure. Many of those jobs weren't open to women in the past. "The institution forced this result, and the institution will evolve," Forger said.
Maybe sooner than anyone thinks.
While nomination is usually tantamount to election, the ABA House of Delegates must vote at the group's convention in August. Some Ramo supporters may try to make a fight of it there.
"If it takes this long for one person to get 31 votes, ... you have to ask, 'Are those 31 representative of an association with 370,000 members?' " said South Carolina lawyer Kenneth Young. Maybe, Young said, the House of Delegates ought to decide.
Personalities D.C. Appeals Judge John Ferren has turned composer and D.C. Superior Judge Curtis von Kann is trying his hand at producer. Their object is a D.C. Bar production of "We the People," a musical about the Constitutional Convention that Ferren wrote with his son, Peter. The jurists are now searching for lawyers -- or anyone else -- who can sing a lot and dance a little. Auditions are March 9 at St. Columba's Episcopal Church in Northwest D.C. ... After 11 years in the U.S. Attorney's office, Alan Strasser heads for private practice at the D.C. office of Kutak, Rock & Campbell. Strasser, a prosecutor who has spent 13 years with the Justice Department, said, "It's time to try something new." ... Michael W. Beasley, a partner at D.C.'s Berliner, Corcoran & Rowe, will be putting his international law background to new use. A colonel in the Army Reserves, he's been called up for duty in Saudi Arabia, where he'll be working on plans to restructure the Kuwati government once the war is over.