Tag: Contract

The Case For Using Contract Attorneys in Pittsburgh

The Current Legal Marketplace

It is no secret that practicing law in the 1990’s has become more challenging than perhaps any other time period. The competitive business climate of Corporate America forced service providers, including law firms, to provide more for less. This economic pressure has caused many law firms to downsize, limit growth, and/or stretch out partnership tracks for many associates. Adding tension to this environment is the growing population of practicing lawyers. Recently, several articles in the Pittsburgh Business Times have observed similar difficulties exist in the Pittsburgh legal marketplace . This article, however, will not focus on the problems illuminated in the other articles, but will suggest an opportunity for law firms to acquire a competitive advantage in the current market place.

Contract Attorneys as Part of the Solution

A partial solution to the competitive demands on Pennsylvania law firms suggested in Pennsylvania Law 1994: the State of the Profession, is that “law firms will need to innovate in order to compete and survive, let alone succeed, in this new environment. The first “Innovative Solution” suggested by this analysis is to use outsourcing to reduce costs. The article states:

Costs will need to be controlled as never before. Staffing ratios must be revisited, benefits packages streamlined, part-time and temporary employment and “outsourcing” explored, with the concomitant reductions in space requirements and, therefore, occupancy costs, through heralded “virtual corporation.”

In fact, one might argue that the solution of “contract attorneys” is no longer an innovation; it is commonplace in most large metropolitan centers across the country with some of the largest law firms and Fortune 500 companies using contract attorneys. Currently there are established contract attorney services in Boston, New York, Philadelphia/Wilmington, Baltimore, Hartford, Northern New Jersey, Washington D.C., Chicago, Milwaukee, New Orleans, Houston, Dallas, San Francisco, and Los Angeles. Pittsburgh now through Legal Network Ltd joins the growing list of metropolitan areas in offering such a solution.

The Benefits of Contract Attorneys

The following is a list of documented benefits realized by organizations which utilize contract attorneys:

Enhances Profitability: The economic benefits of using contract attorneys are easily observable. The costs of contract attorneys, including service fees, is often less expensive than hiring a full-time attorney. They do not carry overhead costs such as taxes, benefits and staff support. In addition, the cost of paying attorneys for nonchargeable hours does not exist because contract attorneys are matched directly with work needs. Furthermore, unlike some associates who respond to competing demands in a law firm, contract attorneys can stay focused on completing assigned projects. Then when the work is completed, the attorney leaves with no hard feelings. The result is that law firms become more profitable and often improve client service by passing on the savings.

Quick Response: With the use of contract attorneys, it is unnecessary to turn down projects when current staffing is insufficient to handle a sudden increase in work. Contract attorney agencies can quickly identify skilled and experienced attorneys to meet staffing needs.

Fill Gaps: The staffing difficulties most firms experience when faced with a maternity leave or illness can be easily solved with contract attorneys.

Leverage Core Competencies of Partners: Attorneys who are experts in their fields sometimes struggle with how to market the their expertise, yet still get the work done. Contract attorneys free up partners’ time to review work-in-progress and concentrate on attracting additional projects. Many times a significant portion of a legal project can be delegated to a contract attorney while the partner performs the more technical aspects of the project.

Professional Concerns of Using Contract Attorneys

Quality: Similar to the national trend, the Pittsburgh legal marketplace has experienced the impact of downsizing and the desire for more free time for all attorneys. As a result, a high number of experienced and specialized attorneys seek temporary assignments as a full-time career. In fact, Pittsburgh has the second highest percentage of attorneys to the general population next to Washington D.C. In many cases these attorneys are specialized sole practitioners or members of small firms who look to contract assignments to fill out their schedules. Finally, the feedback from clients in other cities where contract attorneys have been rigorously tested is very positive.

Conflicts of Interest, Confidentiality of Information and Disclosure to the Client: Importantly, these concerns in the context of temporary attorneys have been addressed by the American Bar Association in Formal Opinion 88-356, Temporary Lawyers. The opinion observes that the use of temporary attorneys is growing and provides guidance on these issues. The opinion notes that:

The use of a lawyer placement agency to obtain temporary lawyer services where the agency’s fee is a proportion of the lawyer’s compensation does not violate the Model Rules or predecessor Model Code as long as the professional independence of the lawyer is maintained without interference by the agency, the total fee paid by each client to the law firm is reasonable, and the arrangement otherwise is in accord with the guidelines in this opinion.

Why Use an Outside Organization to Identify Contract Attorneys?

With the marketplace indicating that contract attorneys play an important strategic role for law firms to increase profitability, the final issue is how to locate contract attorneys. The possibilities are for the law firm to seek contract attorneys on their own or use an organization specialized in the area. The latter method provides several advantages. First, continuous recruitment efforts and computerized database In addition, there are tax reasons for using an agency. The employment status of contract attorneys , has been analyzed by many in the private sector who have concluded that the manner in which law is performed makes it appropriate to categorize contract attorneys as independent contractors. These arguments are enhanced when a law firm uses an agency to find contract attorneys as opposed to ad hoc individual hiring because the agencys allow outside agencies to quickly find experienced and skilled attorneys from a larger candidate pool. Furthermore, agencies pre-screen and categorize applicants based on their skill level. This essentially eliminates the concern that a contract attorney will mold his/her background to a law firm’s advertised position. Agencies have also been successful when there is an immediate demand to locate several attorneys for sudden large projects. Something many law firms would likely be unable to accomplish. In a nutshell, the agency in most cases, will find the more qualified attorney in less time.

In addition, there are tax reasons for using an agency. The employment status of contract attorneys , has been analyzed by many in the private sector who have concluded that the manner in which law is performed makes it appropriate to categorize contract attorneys as independent contractors. These arguments are enhanced when a law firm uses an agency to find contract attorneys as opposed to ad hoc individual hiring because the agency’sattorneys are clearly making themselves available to work for the general public.

Conclusion Contract attorneys and the agencies which supply them are a fast growing tool utilized profitably by many law firms. The trends which have driven the emergence of this field are projected to be long term factors in the legal marketplace in Pittsburgh. Therefore, law firms should expect their use to proliferate. Consequently, the law firm which learns to use contract lawyers most effectively, will clearly have a cost advantage over those which do not.

Benefits of Contract Employment

Closely held businesses, Fortune 500 companies, and law firms, locally and internationally, look to Legal Network to solve their placement needs.

As an attorney, do you have clients and are you considering a move? Let us coordinate the move by quickly and confidentially contacting law firms and partners who would be interested in adding you to their firm.

Are you a former in-house attorney or experienced attorney with an interest in being a general counsel at companies who do not currently have an in-house lawyer?. We have pioneered the use of temp-to-perm hiring General Counsel so that middle market companies may evaluate the benefits of having an in-house attorney.

Are you an associate who is disappointed with the direction your career is taking at your law firm or corporation or your compensation? Let us match you to a firm or company that values your experience.

Are you available for legal assignments while conducting a job search, building a practice, or simply practicing law part-time? Legal Network can match you to projects which match your background and/or interests.

Legal Network is a full service provider of legal personnel. We focus our efforts on attorney and paralegal contract and permanent placements. As attorneys with over fifty years of combined legal experience, we understand the technical legal requirements necessary to satisfy staffing concerns.

Legal Network provides comprehensive and targeted searches for our candidates. We get to know our candidates and their employment objectives. We provide a solid reputation, confidentiality, and professionalism.

Billing Clients For A Contract Attorney’s Time

Contract Attorney use has been estimated in early 1998 to be a $500 Million industry growing 30% annually. “More Law Firms Hiring From the Temporary Pool”, NY Times, Feb. 24, 1998. This growth was corroborated locally by a recent survey of Pennsylvania law firms showing 77% of Pennsylvania’s law firms are using contract attorneys and their numbers are growing. “Managing Partner Survey”, PaLaw 1997. Based on these statistics, if you are an attorney or client of law firms, you have probably already encountered the billing or payment issue surrounding the use of contract attorneys. In addition, if you are a client, you might not even be aware that you have used contract attorneys if the law firm has not told you. Is nondisclosure of contract attorney use legal or appropriate? This article will attempt to answer these two issues.

The majority of guidance governing the use of contract attorneys is found in the American Bar Association’s (“ABA”) Formal Opinions which support law firms profiting from their use of contract attorneys even without client disclosure. As this article will explain, there are also business reasons why this is the correct decision even though it might initially come as a surprise to some attorneys and clients.

ABA Formal Opinion 88-356 (the “ABA Opinion”) provides general guidance on contract attorney use. It advises that law firms need not disclose the use of contract attorneys to the client “where the temporary lawyer is working under the direct supervision of a lawyer associated with the firm”. ABA Opinion, Page 10. The ABA Opinion goes on to add that “the fee paid by the client to the firm ordinarily would include the total paid the [contract] lawyer and the agency, and also may include charges for overhead and profit.” Therefore, it is permissible under the ABA Opinion for clients to pay a law firm for a contract attorney’s services without being informed that a contract attorney is being used. Further support for this position is gained from ABA Formal Opinion 93-379, Billing for Professional Fees, Disbursements and Other Expenses Pgs 9-10, which states:

In the absence of an agreement to the contrary, it is impermissible for a lawyer to create an additional source of profit for the law firm beyond that which is contained in the provision of professional services themselves. The lawyer’s stock in trade is the sale of legal services, not photocopying paper, tuna fish sandwiches, computer time or messenger services.

By implication, the use of contract attorneys is providing legal services, and therefore it is appropriate for a law firm to profit from their use.

Allowing a law firm to fully profit from the use of a contract attorney also draws support from a California appellate court in a 1995 case of first impression. Shaffer v. Superior Court, 39 Cal. Rptr. 506 (1995). In this case, the law firm of Gibson, Dunn & Crutcher was sued for legal malpractice for inter alia unconscionable legal fees. The plaintiff sought to determine the rate paid to a contract attorney who had worked in spare offices and the firm’s library and had billed the plaintiff for1800 hours at rates ranging from $215 to $250 an hour. The California Court of Appeals held the profit margin realized by Gibson, Dunn & Crutcher was undiscoverable and would open a “veritable pandora’s box of questions and problems” if it was. Id. at 512-13. The court held the appropriate test is to look to whether the fees paid were worth what the defendant paid as measured in the legal marketplace. Id. at 513.

Even with the permissibility for law firms to make a profit using contract attorneys, does this make sense in all instances? The answer is clearly no. In many instances the client should be informed and the law firm would benefit from increased good will by sharing cost savings to the client. As the Shaffer case illustrates, an uninformed client might be upset if they find out contract attorneys were used and they were billed at the regular associate’s rate. However, in other instances, a law firm unable to bill a contract attorney profitably might elect not to use a contract attorney and inefficiently staff the project with available (or unavailable) internal resources. So what are the solutions?

In major litigation, it often makes sense to bill the client the costs of the use of contract attorneys as a disbursement. Law firms will still profit from the supervision of contract attorneys, and the large fees that occur in complex litigation. However, the opportunity to pass savings to a client which generally reach $100 an hour/$4,000 a week can create substantial good will. In a six-month project, one contract attorney provided at cost will save a client on average over a hundred thousand dollars and teams of attorneys can create hundreds of thousands of dollars in savings. Furthermore, this type of manual intensive work is generally not well received by associates at law firms who often attempt to seek out more interesting projects to work on. This can make staffing the project with a law firm’s attorneys a complicated calculation of how many pieces of several associates available time, which is constantly changing, will it take to complete the project? Therefore, the law firm and client both benefit by having experienced attorneys completely focussed on completing the document review task within set deadlines.

However, some projects require law firms to encounter overhead costs such as secretarial, office space, supplies and additional malpractice insurance expense from using contract attorneys. Law firms should be aware of these additional hidden costs and be entitled to recover them. Therefore in many cases some sort of cost plus an overhead mark-up is preferable for the law firm as opposed to simply passing the full cost through to the client.

Contract attorneys are also used for more specialized projects to fill in for maternity leaves, disabilities, sudden upsurges in workload, or to add a specialized skill to a project which would ordinarily require a law firm’s attorney to get up to speed in. In these situations, not allowing the law firm to fully profit from using a contract attorney creates the incentive to make do with the firm’s current resources. This can slow down the speed in which work is handled and ultimately reduce the quality of the work product. Both of these results are clearly not in a client’s best interest.

As a band aid solution, the law firm could attempt to hire a full-time attorney for a short term need. However, when the peak period ends, there are now extra attorneys at the firm trying to find projects to bill their time on. This can have bad consequences for the firm, clients and the individual attorneys.

Allowing law firms to staff up with appropriately skilled contract attorneys and make a profit, enables law firms to efficiently staff for peak periods or specialized projects with attorneys of appropriate skill and with available time to competently handle a project. Ultimately this is in both a client’s and law firm’s best interest.

This article has highlighted the broad discretion afforded to law firms in determining how to bill their clients for the use of contract attorneys. However, despite this legal discretion, law firms and their clients should realize there is no one correct answer to this business issue. There is nothing wrong with law firms using contract attorneys and clients do benefit from their services even when they do not realize cost savings. However, in some instances it might make sense for the law firm to pass on some of the cost savings to the client.

By Karl Schieneman, Esq., Managing Director and shareholder ofLegal Network Ltd., a Pittsburgh based provider of contract attorneys and paralegals.