Industry Outlook: Legal
Cyber security has emerged as among the top concerns for law firms. Our panel of legal insiders discuss what their firms have done to secure their data and information. They also tackle perennial topics like alternative fee arrangements and how to best support new attorneys as they begin their careers.
Shantelle Argyle, Open Legal Services
Tom Barton, Prince Yeates
Rand Bateman, Durham Jones & Pinegar
Christian Clinger, Clinger Lee Clinger
Heather Farnsworth, Match & Farnsworth
Bill Fillmore, Fillmore Spencer
Mark Gaylord, Ballard Spahr
Jonathan Hafen, Parr Brown
Graden Jackson, Strong & Hanni
Kristine Johnson, Parsons Behle & Latimer
Eric Maxfield, Holland & Hart
Andrew Morse, Snow Christensen
Kennedy Nate, Magleby Cataxnos
Darren Reid, Holland & Hart
Sean Reyes, Utah Attorney General
Lyndon Ricks, Kruse Landa
Keven Rowe, Jones Waldo
Nolan Taylor, Dorsey & Whitney
Joseph Walkowski, Trask Britt
Lee Wright, Kirton McConkie
Scott Young, Stoel Rives
A special thank you to Angelina Tsu, vice president and legal counsel for Zions Bancorporation, for moderating the discussion.
What is happening with the billable hour? Do you see the traditional law firm model continuing as it is or will it be the next bubble to burst, as some have predicted?
YOUNG: We have been predicting the death of the billable hour for a long time, and it’s still here. My view is it’s going to be here for a while. Alternative fee arrangements are coming, but they are going to be the exception to the billable hour.
ARGYLE: We have embraced the billable hour and consider it an access-to-justice tool if you do it correctly. That means we are not expecting another flat-fee client to subsidize the client whose case took more hours than expected. As a charity, obviously we are very transparent and we are looked at with scrutiny. So the billable hour is a way for us to demonstrate the work we have done and keep track of it in a way that we meet our ethical responsibilities.
But what we are trying to do is improve upon the billable hour, coming up with other ways to package the billable hour. So for example, instead of just an unbundled menu and having discrete tasks, build a compound menu like a fancy restaurant, for example, where each menu item has degrees of luxury they can add on. So you can get the steak. You can get the steak with crab on top if you want. Maybe that’s mediation with an appointment before the mediation to prepare for mediation, and they can add that on. So they can customize according to their budget and their needs, and that billable hour goes a lot further and your budget includes an estimate of those billable hours and how many they are going to take. It’s more customized and clear to them what they are going to be getting.
ROWE: Law firms and lawyers are still so integrated in making business work in the United States that I don’t see the law firm model ever going away. We see shifts, we see lots of competitive forces in the legal industry with how big your firm should be, what your client base is. But there are a lot of smart lawyers that are still making business work for lots of clients in the country and around the world. And I just don’t see that ever changing.
REID: As a litigator, I can tell you that the billable hour is alive and well. We hear about these mythical beasts, these boutique firms that are doing all of these amazing things. They advertise in all of the national magazines and things. I don’t know how they do it. They clearly have different cases than the ones I’m working on. But I can tell you that I’m not putting food on the table unless I’m billing hours. That’s what our clients generally expect. At the margins, maybe there’s some room for innovation. But usually that’s maybe in the patent world or some other kind of niche practice. But as bread and butter commercial litigators, the billable hours drives the engine.
GAYLORD: As a litigator, I think that’s very true. It’s not going anywhere. But I don’t think that’s necessarily true when it comes to business and finance deals or public finance deals, because a lot of those are fixed-fee deals. If we know what that transaction is, it’s going to be based on a percentage or a flat fee, and then we as lawyers have to manage that. And sometimes you hit it right and sometimes you hit it wrong. So as a firm, you look at that approach and you might adjust it the next time you do a deal.
BARTON: At our firm where we have more national clients, there is great pressure on rates. But where we have local clients and maybe we have a stronger relationship, we are not a vendor, there’s just not as much rate pressure. We have tried to take a more flexible approach. We have broken matters up. We will do part of a matter on one structure and part of a matter on another structure, especially with the local clients where we have our relationships.
RICKS: Often if we become a trusted advisor to clients, at the end of the transaction or the end of the piece of litigation, sometimes there’s still grumbling about the fee. But often it is not directed at us. It is directed at the lawyers who are on the other side of the transactions. So it’s just a good thing to have an open discussion with them and let them know what’s going on, particularly if something happens partway through to change what you all thought when you went in, in terms of cost and what’s happening. Before they get that big bill at the end, if they know that it’s going to be different than they expected, that’s a helpful thing.
What is the role of data security in your firm? Do you have security tzars who impose restrictions on your information, e-mail, mobile devices, et cetera?
WRIGHT: In an era where everyone is trying to make their name as being the next Wikileaks, the one place we don’t want them to find that information is through that client’s law firm. So we are investing significant resources and time in our cyber security, data security. We look to our director of IT to spearhead that. But it is a management issue. It is something that needs to be observed from the very top. You can’t just push it to your IT guy and say, “Make sure we’re protected.”
There’s a great deal of training that also has to take place. Because while they may try to hack into your system and get through your firewalls, sometimes your bigger issue is what got left on the printer. Or what you dropped when you were walking to the train. So your people need to be trained how to treat the data, as well—not only attorneys but staff and everyone in the system trained on what to watch for, how to respond, how to protect, lock things up, put things away, because our clients expect us to keep their information safe.
JOHNSON: We have been hugely focused on that the last couple of years. We brought in an outside consultant last year to do training. He actually does some regular tests where he will send some of those e-mails. The directors will see who responds and deal with them privately. Our attorneys have generally been pretty cognizant about that, especially when they are travelling. People are careful about their laptops, what they are plugging into, their data.
REYES: I have an interesting perspective because not only do we have our own law firm to protect, but we have to help protect our clients, the state agencies, and then protect all the citizens of Utah, your clients included. Cyber security is one of the pre-eminent issues—at least it’s the one where, as I speak around the country, people are most interested in. We know what a burden it’s been in terms of just the discovery process. But now beyond the costs of discovery, each of your clients has to think about possible liability as the internet makes us ever more connected.
MAXFIELD: Ten years ago we were worried about e-mails from Nigerian princes and things like that. The attacks have gotten much more significant. Law firms being a great target. We know of a law firm in Wyoming who woke up one morning to find an e-mail ransom note, and all of their data was locked up by some hacker in Russia. That presents all kinds of crazy issues for law firms.
We have gotten to the point where not only have we taken on some of the measures we talked about, but our lawyers can’t use gmail or hotmail e-mail addresses. We have a lot of requirements imposed by our banking clients, which are frankly great structures to have.
JACKSON: We had a guy that we asked to break into our system. And it did not take him long. We were shocked.
We all try to keep our overhead low. We are all looking at our cost-per-lawyer number, so we don’t want to add this extra layer of expense. But we decided to embrace it. We encrypted all our hard drives. We have a lot of limitations on what lawyers can do with laptops outside of the office. We just decided this is the day that we live in and we have to go to the extra steps. It’s expensive. But our clients expect that we are taking measures to make sure their data is protected, and so it’s something that we decided we have to embrace.
ARGYLE: We do have a security tzar. It’s my partner Dan Spencer, and our security policy is stolen from the AG’s office where he used to work. We have modeled after their policy because it is very robust. But what I found is the low-tech ways that people manage to get information from you are easier and scarier.
Sometimes I drive Uber for fun. I have driven an attorney who was on the phone with a high-profile client and discussing case details, even though he knew I was an attorney and that I am familiar with him. So the low-tech elevator conversations. We know what restaurant not to go into during lunch time downtown where all the judges are sitting. These are things our paralegals don’t know, our accountants don’t know. So policies like be careful who you are sending text messages to. We have discovery breaches because they sent it to the wrong e-mail account, to counsel on a different case. So training is really important because, yes, somebody can hack your system. But somebody can sit down next to your paralegal at lunch. These are things that happen and we need to be cognizant of those breaches.
How important is pro bono at your firm? What policies have you adopted, what specific activities are you utilizing to provide this needed service?
BATEMAN: Speaking more for myself than my firm, I have actually tried to move away from pro bono and move to low bono. I think it’s a far more effective model. Even if I’m charging $20 an hour to somebody, there’s more buy-in from the client when they have to do something. I don’t get dumps of documents on my desk and a client saying, “Here, you go find it.”
It’s a more effective model. You service the needs, but you get the investment of the client in a more realistic way. And you end up with a better result overall than just, “Here, I’ll do it for you for free.” Because then there’s no motivation for them not to have you overturn every stone and look under every bush.
FILLMORE: There’s another kind of pro bono, if you will. And that’s part of our firm’s culture. We are based in Provo, probably two-thirds of our clients are Utah County. We make a very concerted effort, as part of our law firm’s culture, to place every lawyer in our firm on various community boards, committees, commissions. And that’s a form of pro bono, I believe. It’s really good for us. It’s kind of an old-school marketing device, if you will. It’s good for the lawyer. It’s good for the community. It’s been very good for us.
REYES: When we do things institutionally, as a firm, it seems to galvanize and create a stronger spirit of camaraderie, but also focuses resources into a very meaningful operation. We are about to roll out a veterans pro bono program, or low bono. So this is just a notice to all of you: I will be calling probably each of you to ask if your firms will give so we can bank a set amount of hours, because so many of our vets have needs that are being unmet. They are committing suicide at a rate of 29 lives a day. It’s a program that Nevada has rolled out very effectively. We would like to adopt it in Utah, as well.
WRIGHT: The Utah State Bar already has some really robust pro bono programs. And Kirton McConkie is involved in the Tuesday Night Bar. We are also signed up with the Utah State Bar pro bono initiatives where we get cases directly from the Bar that have been vetted, which is helpful.
As a firm, we give our associates credit for those hours. They sometimes are so concerned about, “Wait, am I meeting my expectations to the firm? I really don’t have time for this.” If we want attorneys at our firm to make time for pro bono, we have to make sure that we don’t harm their compensation, otherwise forgiving that kind of pro bono. Now, there’s a limit. We will give credit up to a certain amount, and we give oversight and help mentor and participate in that pro bono.
GAYLORD: At Ballard, we take our pro bono very seriously. We expect lawyers to do 50 hours or more of pro bono work a year. And like Lee says, they are credited for it. So we have some who spend a substantial amount of time. And we have a pro bono director. She is a lawyer but her sole responsibility is to identify opportunities for the firm to provide pro bono opportunities. And it might be a national pro bono project. For example, we had a very active role in the Clemency Project that was going on, and had a number of prisoners released because of the efforts that we undertook for the benefit of those who had been jailed for a long time. That’s the kind of focus we take.
TAYLOR: At Dorsey, we learned years ago that unless you adopt an institutional approach to this you can’t sustain a year-over-year focus on pro bono work. So we have an international director of pro bono. Associates are given 50 hours of bonus credit for pro bono hours. We give out annual pro bono awards to partners for work that they have done. And we have exceeded the ABA challenge, which is 3 percent of total billable hours for a lawyer for 20 years. So unless it is institutional value, it’s difficult to sustain.
JOHNSON: We sometimes think of pro bono as being something that we encourage associates to do. But we have a junior shareholder who does a lot of bankruptcy work, and he has asked the firm to commit to the pro se debtors clinic, which is being run by the Third District Court. We have a very senior shareholder with decades of trial experience who has gotten extremely involved, and he loves it. He goes down there every week.
Is Utah adequately preparing its graduates? What ideas or sources of action would you recommend to better prepare law graduates for successful legal practice?
ARGYLE: Utah law schools do an excellent job with the clinical capabilities that students are getting. They are coming out of law school having spent considerable amount of time with clients and in courtrooms. That gives us a distinct competitive edge over a lot of work groups that you might get from other places.
One major shortfall that I see, as the unofficial incubator for the state of Utah, is that I’m not allowed to teach my clinical placement students how to run a law firm. I’m not allowed to teach them accounting, how to get a 99 percent collections rate like we have, or how to manage a business.
Most of us at one point in our career will be a solo or part of a small firm or start a firm, and these are skills that are desperately needed. The schools in Utah have started adding classes to kind of get them started, but there needs to be clinical hands-on training for QuickBooks and ethical trust accounting practices. They need to see what the numbers look like and how to build their practice around what their costs are. How to be creative and innovative and better at running a business.
HAFEN: I want to talk about the fact that applications to law schools are down. What that means as far as the quality of lawyers coming out of law school is that a lot of highly qualified potential lawyers are choosing to do other things.
One of the things that is going to be critically important for all of us as lawyers is to do things like civics education in junior high and high school, and really let people know what it means to be a lawyer. We need to, as a profession, get the word out to these younger folks that being a lawyer is not just about making money, because clearly that is less important to the rising generation than maybe it was to a lot of us. Let them know that it is a wonderful opportunity to serve others and it is very fulfilling and we really can make a difference.
We have an excellent legal market here. But if we don’t do a better job with our Utah students that are deciding what direction to go, then we may not have quite as good of an experience in 10 or 20 years from now.
BATEMAN: We had about a five-year gap, the lost generation of law graduates who just vaporized. Didn’t have jobs. Some of them are working at Target. Some of them are working at an Apple store. Some of them are paralegals, whatever. We have an obligation to go back and look for those people and get out of this mind-set, “Well, gee, if you’re not working, you’re not worth talking to.” There’s a lot of really bright kids who because of the economy didn’t get jobs. I think that’s part of the reason that we have a downturn in the really qualified candidates, because if you know somebody who went through law school five years ago and spent $100,000 getting a law degree and is working at the Apple store, you are probably not all that motivated to go to law school.
The law firms ought to be working with law schools and asking, “What graduates do you have that aren’t in the legal community who would like to be?” And look to those, train and integrate those people in some way. Because there’s a lot of talent that’s unused that we ought to be using.
MORSE: We are seeing the low quality of law school graduates. Very recently the pass rate for the February Bar exam was never lower. Disturbingly low. My firm can’t cure that, but what we can help ourselves with is training young lawyers. So we have started a very vigorous mentoring and training program where we expect lawyers to achieve certain things, have certain experiences as first years and as second years, third, fourth, fifth—so that by the time they are considered for shareholder, they know what they are doing, they can handle a case from start to finish, take an appeal, deal with clients, deal with billing issues, be marketers. Just throwing an associate out and saying, “Do your best. See if you can establish a relationship with some shareholders,” does not work. We have people who don’t know what they are doing. They are not qualified to handle cases.
WALKOWSKI: When people start as summer associates at our firm, we give them tasks that are suitable for their technical background because we are a bunch of patent lawyers. And once they get through that initial bundle of tasks, then you go out and you market yourselves to the associates and to the partners so that there’s always this idea that you have to go out there and do customer service, satisfy your customers.
But in so doing, as part of the summer program, we have a career path and we go through the numbers of, “If you go to work for big law, this is what you are going to get paid. But this is what you have to bill. These are your billing rates and this is when your firm breaks even.” And we tell our people, “You may not want to be in a big firm. You may not want to be in a small firm. You may want to go into government practice. But these are your options.”
We also have a seminar called Effective Law Firm Living, which is how you deal with staff, what the staff can do for you; how do you deal with partners, how do you approach them; how to say no when you really don’t have the time, because otherwise your credibility is going to be damaged if you take something that you can’t really accomplish. You just see the light bulb come on that now they have at least a set of rules to operate under.
NATE: I have been out only about five years; in terms of education, one of the things I have really liked is the clinical programs up at the University of Utah. I graduated from there and participated in them and I thought they were excellent. I would like to see a little bit of a shift where there is more practical application, where you have a class that teaches you how to propound discovery, how to respond to discovery, what kind of objections are proper in a deposition, things that teach you a little bit more than nuts and bolts of practicing law. I think it could be done fairly easily in that third year of law school.
I think it’s so important that when the new lawyer comes into the law firm that they have that mentor, someone who steps in and says, “I’m going to take you under my wing and teach you the nuts and bolts of practicing law and teach you how to navigate the law system and how to start building clientele.”
CLINGER: Approximately 10 years ago I had the opportunity to be part of the founding committee for the mentor program at the Utah State Bar. I’m just curious how you perceive that working with your young associates and the new law grads?
BATEMAN: I have mentored two attorneys through that system. One in my firm and one out of my firm. So a little different perspective. But it’s nice for the one out, because they get to see a different way of doing things. They see their firm’s way and then the way I have been trained. I think it’s a great program.
HAFEN: If you have a mentoring culture, that’s better for everybody. Because what all of us want on the other side are lawyers that know what they are doing. That makes things better for everybody. I can tell in litigation now if a younger lawyer has been mentored or not just by how they interact with you. Maybe they are feeling insecure and they have to get a little aggressive and do things that make no sense probably to me or to them.
So by the state Bar stepping up and being the second state in the country that says, “This is mandatory. We care about mentoring,” that helped all of the firms say, “Great. First year you have a formal mentor.” But let’s think about mentoring on a longer term and really mentor these lawyers to be great lawyers, because that is a value-add to our firm.
ARGYLE: At LOS we have practitioners come in during our Friday staff meeting and do trainings with us, pro bono trainings from people who have been there and done that work. And that mentoring program is so envied by every bar that I present to all over the country. Every time I talk about it I have people just salivating that they wish they could have something like we have here.
FILLMORE: One of the most important things we could do for young lawyers is to acquaint them with an axiom that is attributed to Oliver Wendell Holmes, which is, “The law is a grand profession but a sorry trade.” There’s so much that is circumscribed in that axiom. If we can convey what’s behind that, we have done a great service. It’s certainly exemplified by people around this table. One of the reasons I enjoy coming here every year to listen to the discussion is the caliber of lawyers that we have.