Tuesday, January 27, 2009

Death of the Billable Hour: Relationship First, Billing Method Second

As many interested in this topic would know, a couple of months  Time is Money-smallago, the ABA Journal published an article by Scott Turow entitled The Billable Hour Must Die.  The article has created a buzz in legal circles about the use of the billable hour as a means of getting paid.  Like all attorneys who have had to bill by the hour and track their time tediously, I have struggled with the billable hour.  However, I am not so sure that the method of charging is the real issue.

Recap of Turow’s Article

Turow’s article starts with the attorney prospective.  Specifically, the billable hour is a prison because making more money means charging more, or working longer hours.  Because there are only so many hours in a day and so much one can charge, the limits can be problematic. 

Second, Turow suggests that the billable hour puts the attorney adverse to the client by creating an incentive for the attorney to be less efficient and to prolong the engagement—particularly in litigation.  For example, attorneys often talk about the opposing attorney doing things just to run up the fees.

Not a Unique Problem

People-small In thinking about this, the problems underlying the billable hour are not unique.  For example, do not the same problems apply to every wage earner in the workforce?  If I make an hourly wage, the only way I can make more is to work overtime.  And do not hourly wage earners have an incentive to be inefficient or to prolong their workload in order to fill the time with work?  Yet I don’t hear cries to end the hourly wage.

Alternatives Not Really Different?

And what about the problems with the commission based payment system (i.e., contingent fees for attorneys).  Interests are aligned to get the deal done, but not necessarily in the same way.  An extra $10,000 to a client may be a big deal, but because the agent only gets a fraction of the amount, the value of working more hours to get an extra amount becomes marginal.    This does not even address the potential problems associated with an attorney who has in interest in the deal when they are supposed to provide objective counsel.

Similarly, a flat fee system just means that the attorney has an incentive to try to get the work done as efficiently as possible.  This does not promote quality.  Instead, it promotes speed, potentially to the detriment of clients. 

One alternative identified in the Turow article was doing the work and coming to an agreement on the payment at the end based on what the client thought the value was.  And while this picture, assuming it works, is nice, the same can be done with an hourly rate system.  This is because the client is free to offer more, and the attorney is free to write off parts of the bill—the billable hour can be the starting point.   

Relationship First, then Billing Method

Which brings me back to relationships.  It seems that the discontent with the billable hour is in part a discontent with the fact that a fee-for-services system is inherently incapable of perfectly aligning the economic interests of clients and attorneys. 

But, the billing method is not the issue.  The problem is Shaking Hands-smallthat attorneys and clients have to deal with each other, and cannot rely on their billing systems to make them buddies.  The emphasis, as with any business deal, should be on the relationship first like getting expectations out early, identifying interests and goals, and then taking the time to address these before engaging in representation.  The billing method will become less and less  material when the parties are focused on having a good relationship with communication and trust that is aimed at being mutually beneficial. 

Attorneys are not mechanics, they are advisors and counselors.  If an attorney is having a hard time addressing the advantages and disadvantages of the billable hour with their clients so they can work together toward a mutually beneficial understanding of the relationship, there is a serious underlying problem which will exist regardless of the billing method.  In short, how can a client trust that the attorney is going to be honest and straightforward on any aspect of their case if the attorney is embarrassed about their own interactions with their client?   

The billable hour may not be the holy grail of billing methods, but it is not the cause of disharmony between attorneys and their clients.  Instead, the billing process is an opportunity for clients to learn about their attorney’s basic mode of operation and bring the parties together.  It is an opportunity for an attorney to demonstrate to the client the kind of honesty, integrity and responsibility the attorney practices.  When this discussion and communication is a normal part of interaction with clients, the billable hour simply becomes the starting point for the parties to reach a fair compensation system. 

Saturday, January 17, 2009

The Importance of ESI in Litigation

Binary Field E-Discovery has become an important topic in litigation in recent years.  As people have moved toward electronic means of documentation and communication, much of what was traditionally found in a paper file such as notes, correspondence, financial accounting, memoranda and the like are now in one or more file formats on a computer or server somewhere.  Not a case goes by these days where a significant portion of the pertinent information is located in a Quickbooks(TM)  file, an Excel(TM) spreadsheet, an email message, or pdf document.

The Federal Rules of Procedure were amended in 2006 to include specific guidelines and requirements regarding Electronically Stored Information or ESI.  While each individual state has its own set of rules governing the discovery process, the Federal Rules are currently setting the standard, as is Federal case law on the issue.

Perhaps the best known opinions on the issue come out of Zubalake v. UBS Warburg LLC, 217 F.R.D. 309 (S.D.N.Y. 2003), 220 F.R.D. 212 (S.D.N.Y. 2003), and 2004 WL 1620866 (S.D.N.Y. July 20, 2004).  This was a gender discrimination lawsuit before the Rules were amended.  The plaintiff believed that there were emails which would show she had been fired for discriminatory reasons.  The defendant produced paper copies of some emails but failed to include certain key emails because they had been deleted or destroyed.   Eventually, the court granted sanctions against the defendant for willfully destroying emails which likely would have related to important facts in the case.

What came out of Zubulake (and now the Federal Rules) includes the duty that the attorneys for parties make efforts to ensure that their clients locate and preserve relevant information which is in electronic form.  The sanction that can be allowed for failure includes an adverse inference regarding the missing information and even the possibility of a default judgment against the offending party.

ESI has become an important part of litigation.  Counsel for parties are now required to make efforts to ensure that their clients can access and produce such information as soon as there is a possibility that the information will be required in litigation.  This has led to what are called litigation freezes regarding both physical information and ESI.

Recently, my firm has been involved in federal litigation regarding this very issue in Smith v. Slifer Smith & Frampton/Vail Associates, et al., No. 06-cv-02206-JLK-MJW, D.C.Colo.  As plaintiffs, we sought ESI regarding a real estate transaction in Vail.  It was determined that such information would likely be on the work and personal computers of a defendant broker.  However, the broker apparently wiped the hard drives of the computers using a wiping software after litigation had begun.  After several months of expert forensic analysis and related motions, the magistrate judge Watanabe issued an order and recommendation which found that the defendant had likely destroyed the relevant ESI.  The judge then recommended that an adverse inference instruction be given to the jury regarding the missing information and that the defendant pay for the cost (including attorney fees) of establishing the situation.  The Order is at Document 111 and is dated January 12, 2009.

The point is that ESI and its management are vital aspects of litigation in the modern age.  It is important to have appropriate policies and procedures in place regarding this form of information and to have counsel capable of properly addressing it should litigation ensue.

Sunday, January 11, 2009

Yes, Bloggers Can be Sued

There were a couple of posts on Twitter this past week about a blog from the Philippines concerned with bloggers being sued for the content of their blogs: "Suing a Blogger?" The blog asks the question whether a blogger can really be sued for their story and the comments on their site. (We are not going to get into international law or Philippine law.) In a kind of initial response, there were some tweets on Twitter simply stating "not in the US." To support this assertion, there was a link to another blog discussing the Communication Decency Act or "CDA" on Blog for Profit: "Blog Protection 101: The Communication Decency Act and Your Blog." While the CDA is applicable, the blog itself notes as follows: "Keep in mind that the CDA will not protect you for information that you create and publish on your blog." In other words, the answer to the question of whether a person can be sued for their comments on their blog is definitely yes.

First, the CDA only protects companies that provide hosting services, not the content providers. In general, that means Google is not liable for what people blog simply because they host the space for the blogs. It also probably means that a blogger is not liable for the comments made by third parties about their blog posts. However, regardless of Google's liability, bloggers are still responsible for what they put on their blog.

Second, even if someone is not liable, that does not mean they are immune from being sued. Hopefully the suit gets knocked out early for lack of a basis or because some defense is applicable. But, that does not mean the Clerk at the Court is going refuse to accept the filing. Furthermore, it is fairly easy to make adequate allegations to overcome a Motion to Dismiss and force at least some litigation.

But the bottom line here is that there is a liability possibility out there for bloggers, just like traditional print media or any other private citizen who "publishes" false and harmful statements. Now, you might say, "What about free speech?" Certainly there is a tension between free speech and defamation liability. But free speech does not mean one can lie about others to harm them. Free speech protection is primarily about public dialogue. For example, if Rick posts on his blog that George Bush is a war criminal who should be tried for war crimes (as seems popular these days), there is no liability even if Mr. Bush is innocent. On the other hand, if non-public figure Bob is trying to get a job, and his former employer has a blog in which he falsely states that Bob was embezzling money, thus preventing a potential employer from hiring Bob, there is a liability problem. And that liability exists whether the employer communicates the lie via a newspaper interview, a verbal reference check, a blog, or a comment on someone else's blog.

There seems to be a fear that bloggers will stumble into liability unawares. And the real issue is that a blog can potentially go everywhere, to everyone. It is by nature, a pulblic statement to everyone who cares to listen.

But rather than demand immunity from liability, maybe bloggers need to recognize and adapt to the media, i.e., be deliberate and thoughtful about what they post. Anyway, how can bloggers expect to be taken seriously as legitimate sources of information, if they do not have any responsibility for their statements. Instead, as Blog for Profit points out in the "How to (Try to) Stay Out of Trouble When Blogging" article, #2 is "Don't Defame."

The point is, yes bloggers can be sued, even in the U.S.

See also Bloggers and Section 230 Protection.

Tuesday, January 6, 2009

Copyright Law Not the Problem for Indy Film

Yesterday I read an article on techdirt.com entitled "Copyright Once Again Being Used to Hinder Culture, Not Enable It." I posted a comment on Twitter starting out "Wrong-don't use songs." Then I got concerned that I might have broken some unspoken taboos or etiquette on Twitter by being so confrontational. Partly as a result, I think it is worth pointing out my objections to the point of view being presented by the blog.

First: What was the fact situation the blog addressed? Well, according to techdirt.com it appears that an independent film maker used some 1920s jazz music by Annette Hanshaw in her film. The film is reportedly really good. But the film will not be widely distributed because the licensor of the jazz music wants an incredibly large amount of money before she will give permission to use the music in the wider distribution. The film maker can't make any money that way and is bemoaning the misfortune. Notably, the film critique Ebert liked the film and noted the way the copyrights were being used to prevent the film from being distributed and that this likewise limited the public's knowledge of the music.

Second: So what's the problem? According to techdirt.com, a good movie is not getting out to edify the culture because some relatively unknown music author (or their representatives) is using their hefty copyrights to hijack the movie.

Third: So how do I see it? Under the U.S. Constitution Art. 1, Sec. 8, copyright law is "[t]o promote the Progress of Science and useful Arts…." Authors are therefore given "the exclusive Right" to their writings. The general idea is that the exclusive control of ones works will promote the creation of such works by giving author's a monopoly in order make money off the works, i.e., incentive.

Now there may be problems with the system in place, most notably, how long do copyrights exist. Every few years, Congress extends the length of copyrights, in large part because Disney lobbies to extend its protection of Mickey Mouse. The length of the copyright means that it takes longer for works to fall into the public domain so we can all use them and build off of them.

It seems people approach copyright from one of two positions. Either one believes that material should be available for use in order to promote art, or one believes the materials would not exist unless they are only available after the author gives permission. The first position is too shallow for me and seems more a product of our culture than good policy.

Specifically, the argument for availability almost always skips the foundational question of whether the work would exist if the exclusive rights did not exist. But more importantly, I think, is that the position has a sense of entitlement. For example, in the above fact example that spawned this discussion, nobody seems to care about the jazz music, the emphasis is on how we want access to the movie. The only reason we even discuss the jazz music is because it is a roadblock to getting the movie. That impliedly minimizes the music. And if the music is so unimportant, why don't you use other music and bypass the offending author?

It seems that there is more going on, like maybe the music is a key part of the film such that the quality of the film is intrinsically tied to the quality of that particular jazz music. And if this is the case, why should the filmmaker have any right to force the songwriter to license their quality music. And this brings up the main point in my mind. This "problem" is really about wise relationships and partnerships.

When one engages in a creative endeavor with other people, one is engaged in relationships and partnerships. Those relationships and partnerships are going to be directly affected by the personalities and character of the people. In copyright, the law provides only a backdrop of rights and responsibilities--namely, that the author has an exclusive right to their own work. This means the authors can be jerks if they are jerks. And it makes it extremely important that one develops a strong relationship with appropriate contracts, licenses, and negotiations. But, in the end, we are dealing with people, and one is being nearsighted to blame the law for the abuses of the author.

Too often, it seems we want to add a law or change a law because we cannot get what we want from someone, or because that person has used the law to defeat our interests. Copyright law is not the problem in this case. If we have ended up in a society where we have to change the laws in order to make the majority of people reasonable in our own estimation, we, as a society, are beyond any help the law could provide. Furthermore, such thinking is more or less a blame game where we evade taking responsibility for our own actions and decisions.

The filmmaker in the article has partnered with the songwriter and built her film on the back of the songwriter. (If this is incorrect, she should simply change the music and she would have no problem.) She must now engage that author and deal with the consequences.

Monday, January 5, 2009

Psalm 73 and Practicing Law

Sometimes, as a lawyer, I get the feeling like I'm a fool for trying to do the right thing, practice the right way, and advising my clients to do the right things. Too many times, justice is thwarted and the opposing counsel with the arrogant, confrontational, hateful attitude is the one that seems to get away with all of their lies, half-truths, and undermining. (Of course, to get this far, you have to believe that there is something like the truth, that there is a right way to act, and that you can know what those things are. Discussions for other posts.)

Psalm 73 really hits the spot for me. I sit there and really identify with the first few verses, thinking about how unfair it is when I am respectful and the other side takes advantage of it. When I am courtious and it is thrown back in my face. When I repress the urge to respond to someone with an equal measure of the venom that they have carelessly spewed out at me. But more than this, I have to confess that I get envious. I want the success of winning the case, of obtaining victory. I want the spoils of doing well - more clients, more income. And it seems like the attorneys who do wrong, who do not care about people or relationships, that they get these things.

So I love that last half of Psalm 73, how it brings the perspective back to my practice. I would rather do good and maintain my integrity, my service to my clients for their whole health. I will strive again today to be a testimonial favoring God, by how I practice my profession.

Sunday, January 4, 2009

Beginning of a Beautiful Thing

It only took me about three days of concerted effort, but I am now set up to blog on this site.  Of course, this is the start up phase and I have much to go.  I like the twitter posts because they are short and simple.  No real commentary necessary.  A blog on the other hand, requires more.  And while I am not alien to blogging as I have been doing so personally for a while now, this will be my first foray into blogging regarding professional matters.

So here is my goal: to create an inviting and informative business community related to my practice of law in Colorado.  I will work to engage both clients and colleagues regarding business (and some other) issues from a legal perspective.  And hopefully, if you know me, that means we get to talk about all kinds of truly important and practical issues and topics from a relational perspective.  Because law is about relationships, and relationships are worth pursing well (like with integrity, forethought, discernment, wisdom, grace, and sound judgment).

Looking forward to writing more.

Saturday, January 3, 2009

Blogger v Wordpress

Thought I had settled on Wordpress and then I realized that I cannot change the Wordpress templete by adding any information so I cannot put my twitter posts on there. However, I can do this in Blogger.

But Blogger's templetes are less attractive so I would have to figure out how to get it to look better. So now I am trying to figure out which one to go with.

Friday, January 2, 2009

Hokies Win the Orange Bowl

It's been a while, but the Hokies have finally pulled out a bowl game.  Of course, I would have liked to see the team play a little better.  The defense pulled off some spectacular plays with four turn overs.  But it always seems to me they should generally prevent the other team from moving the ball and shouldn't be counting on the interceptions as the basis of the defense.