October 2011

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Welcome to the Autumn season! While events outdoors would suggest a time of slowing down, many of us have experienced increases in the demands on our time as school begins again, and clients and patrons return from vacations and turn their attentions back to projects and needs. There is no better time to turn our awareness toward efficiency and mindful attention of our professional relationships.


You can review past issues of the newsletter at these links:  How to Choose a Law Firm  Part IPart II, and the final issue in that series on managing your legal counsel. 


This month we'll explore the common practice of law firms passing along the cost of training new lawyers to their clients, and how you can protect yourself from these fees. I was delighted to see an article in the Wall Street Journal on this topic, just as I was penning the article for publication. I look forward to your feedback on this and previous issues.







An article in this Monday's Wall Street Journal has prompted me to postpone this month's planned post on how to monitor your legal bills until next month.  Read on and you will understand why.  The article which I am referring to is entitled "New Lawyers' Costs Spark Objections."  It could have been written years ago. 


Another Dirty Little Secret


As reported by the WSJ, U.S. law firms have been passing along the cost of training their youngest greenest lawyers for decades.  Law firms often treat the first one or two years of an attorney's career as a sort of apprenticeship, one paid for by the firm's clients.  In the larger firms, new associates are paid well for this privilege - often up to $160,000 a year.   Figure, the average new associate is required to bill somewhere between 1600 and 2200 hours per year, depending on the size of the firm and its location.  Rates are generally between $200 and $300 per hour for young associates in any metropolitan area.


Let's say you have just hired a mid-sized law firm that requires its new associates to bill 1800 hours per year.  Let's assume the new associate's rate is at the low end of the scale, $200 per hour.   Based on these figures, your law firm is billing out an incredible $360,000 per year for the work of each of its new associates!  Even with a salary of more than $100,000, and a reasonable allocation for overhead, the firm is making good money on its clients, while training its attorneys for free.  Nice business model if you can get away with it, but the fact is that most new associates are not yet equipped to provide value to clients.


The article goes on to quote the chair of a large firm rationalizing the practice by telling clients that they should "step back" and take a longer view.  "It's a bargain made throughout the generations that has served democracy and capitalism well."  It is also a practice that has made a lot of senior partners, a lot of money as they pocket a share of the firm's profits at the end of each year.  I can see the cartoon in the New Yorker. 

New Trend on the Rise


In the U.S., where clients of all sizes have been paying the apprenticeship bill, a new trend is on the rise.  In the wake of the recession, many General Counsels are pushing back and refusing to pay for on the job training.  They are making new demands on law firms and are increasingly challenging legal bills inflated as a result of the learning curve of new associates.


The WSJ reported that a recent September survey by the Association of Corporate Counsel found that more than 20% of 366 in-house legal departments polled are now refusing to pay for first and second year attorneys, in at least some matters.  The reporting companies have annual revenues of $25 million or less to $4 billion.  If law firms don't cooperate, many companies are either farming work to their own employees, or hiring contract lawyers.


The Learning Curve


The greener the associate, the more careful you need to be.  Recent hires, are for the most part, ill equipped to practice law. Young lawyers can handle basic work but not complex tasks.  Law school trains you how to think the law, but not how to practice in a specialized area of law.  Only mentored experience can provide a new lawyer with the skill set and efficiency needed to make him or her valuable to the client.   Culling documents, proof reading and legal research are not tasks that clients should generally be paying $200 to $300 per hour for.  Lesser paid paralegals are trained for these tasks.


There are a number of public policy solutions to the issue of who should foot the lawyer training bill.  We could simply choose to pay teachers more, and lawyers less, but that is hardly realistic in a society based around complex laws and regulations created for the most part by lawyers. Another solution is to lower the salary expectations of first year associates. We could also look to foreign models.  In the UK, solicitors are required to undergo year long intensive training programs followed by an apprenticeship. 


Are you Getting Best Value for your Money?    


The following is familiar to anyone with experience hiring law firm counsel.  You call a specific partner picked for his or her expertise, or maybe upon the recommendation of someone you respect like a CEO or another lawyer. After an initial phone call with the partner, often with members of his "team" on the line, you are told that is to your great advantage to let other attorneys supervised by the partner do "as much of the work as possible" because they bill at a much lower hourly rate.


Be mindful that this practice is often to your great disadvantage.  Check firm bios to make sure that the attorneys the partner wants to assign to your matter have the requisite experience.  In many cases, you will find that proposed "team" members have very little specialized experience.  Often they are the attorneys at the firm who are slow and need billable hours.  Often they are the youngest associates who need to be trained.  They go where the work is, and they may not the best attorneys for your matter.  Remember, you do have the right to dictate to the firm which attorneys can work on your legal matter.


In my opinion, the problem is worse for small business. Remember that law firms must cater to big clients with repeat business.  If the trend continues, and more and more of the larger clients begin refusing to pay for the work of new associates, the pressure will be on large and midsize law firms to shift at least some of the burden to their smaller clients. 


Next month we will discuss how to monitor your legal bills and address issues such as this.



Issue: 4

mark winter
In This Issue
Are You Paying to Train Your Outside Counsel?
New Trends


Welcome to the Law Firm of  Mark Garfinkel, Esq.



We are a boutique business law firm that proudly serves both international and domestic clients.  Our office is located in an old Victorian in downtown Berkeley Springs, W.V., which is about an hour outside of the WDC metro area. 


The founding partner, Mark Garfinkel is admitted to practice in the District of Colombia, Maryland, Pennsylvania and West Virgina.  Prior to founding the firm, Mark was the General Counsel of OPIC in WDC (www.OPIC.gov).  
Prior to founding his law firm, Mark was the VP and General Counsel of OPIC in WDC where he was responsible for closing hundreds of overseas projects.    
Mark is an experienced business and corporate attorney with both domestic and international clients.  He is also a commercial mediator who relishes solving business disputes without legal fighting.  See his website at www.garfinkellaw.com to find out more about his practice areas. 


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