Tag: Legal

Popular Legal Network staffing firm moves into management consulting

“It’s not my grandfather’s law firm anymore,” a law firm partner recently joked to Karl Schieneman, managing director of Legal Network.

Legal Network had just helped that firm — whose identity it cannot disclose — staff a short-term project and obtain space fully equipped with computers and a high-speed modem, a capacity the firm didn’t have. It did so in a matter of days.

Until recently, Legal Network has primarily been a provider of temporary lawyers, helping law firms manage and staff short-term projects. It’s been a sorely needed service as a sluggish economy has law firms fighting to keep overhead low by keeping permanent employees at a minimum.

But now Legal Network, which was formed in 1995, is branching into a whole new area, launching a consulting practice to help firms manage their own businesses more effectively.

Schieneman believes the time is ripe for such a service as fluctuations in the economy, advances in technology and increased competition for clients have all conspired to force lawyers to think like business people. It’s a role they’re not trained for and one many are uncomfortable taking on.

“Lawyers are not taught business or management principles in law school,” said Jim Jarrell, who was just brought in to head Legal Network’s new consulting practice.

“Lawyers are generally not encouraged to develop business knowledge,” he said. “This lack of exposure has definite consequences. Law firms often miss opportunities to build and maintain their client base by failing to fully understand business processes.”

Formerly general counsel of Columbia Gas Transmission Corp., Jarrell had revamped that company’s legal department, saving it more than 12 percent in legal costs by, among other things, carefully selecting outside law firms, choosing those that operated most efficiently.

Jarrell also streamlined the company’s in-house legal department, involving his legal staff in the company’s business so that lawyers were not seen as impediments to business, but rather as active participants in the shaping and building of the business.

This is the crux of Legal Network’s consulting service: to teach lawyers that they need to understand the intricacies of their clients’ businesses. The consulting practice also will help law firms operate more efficiently, helping them maximize profits and generally operate in a way that will give them a much-needed edge in an increasingly competitive legal marketplace.

“Clients will, given the choice, choose firms that demonstrate an understanding of business,” said Schieneman, 37, a University of Pittsburgh Law School graduate who also holds a master’s degree in industrial relations from Carnegie Mellon University.

As consultants, Legal Network won’t be just foisting a business model on law firms but will be working within a law firm’s corporate culture.

“A distinguishing feature of our consulting division,” Schieneman said, “will be to offer focused and specific advice for regional clients as opposed to leveraging similar solutions to a large number of customers.”

Even when its business primarily was legal staffing, Legal Network enjoyed a first-rate reputation in the Pittsburgh legal community, representing 23 of the city’s top 25 law firms.

“Legal Network has a very innovative approach to the problem of obtaining lawyers for particular projects,” said Fred Egler Jr. , president of the Allegheny County Bar Association, which has endorsed Legal Network as a provider of temporary legal help.

“They understand economics,” he said, “and the difference between throwing large numbers of people at a project as opposed to structuring a project in a way that benefits the client and the lawyers.”

Even before it formally launched its consulting practice, Legal Network had already begun advising law firms on economic matters. Among other things, Legal Network developed software known as StaffRite, a program that enables law firms to measure the economics of using temporary workers vs. hiring additional permanent staff.

“It ties into my CMU geek-side that has been a bit undernourished,” Schieneman jokes.

Legal Network knows how to manage its own business: It’s been ranked No. 204 on the Inc. 500, a list of fast-growing companies compiled by Inc. magazine that ranks firms that are “notable as exemplars of financial fitness in a fitful economy.”

While many companies are laying off personnel or filing for bankruptcy, Legal Network is thriving.

“If we closed our doors today,” Schieneman jokes, “we’d still have had our best year ever.”

Legal Malpractice and the Contract Attorney

77% of Pennsylvania law firms indicate they are now using contract attorneys in the 1997 PaLaw Survey and the New York Times recently estimated contract attorney use is a $500 Million industry growing 30% annually. Yet despite this growth, there is still some confusion on how legal malpractice is provided for these services and the legal malpractice risks associated with using contract attorneys.

According to Donald Ivol, Jr., RPLU, Director at Colburn Insurance, “as recently as two or three years ago, insurance carriers were unsure of the risks involved with insuring independent contractors that were being utilized by larger law firms. As a result, some carriers often were reluctant to offer coverage terms providing insurance protection to both the firm and the independent contractor. Today, however, the risks are better understood and more easily insured. Most carriers have methods to address the independent contractor situation and offer coverage either in the basic policy form or by endorsement.”

The reason for the shift in now offering law firms insurance for contract attorneys is experience has shown that the risk of malpractice with contract attorneys is arguably less than the risks which can occur when busy law firms stretch their resources to handle projects. Legal malpractice often occurs when busy law firms staff projects with attorneys who are juggling too many projects and/or not adequately experienced with the particular area of law required. Contract attorney use involves less risks due to adequate experience, less time pressures, superior oversight, and they are used in less risky areas.

EXPERIENCE: Inexperienced attorneys cause a high percentage of legal malpractice claims filed in Pennsylvania. Drawing from large pools of available contract attorneys, agencies often have little problem locating contract attorneys with applicable experience in performing the type of assignment requested.

LESS TIME PRESSURES: Administrative error is the number one cause of malpractice claims, largely caused by overworked attorneys juggling too many projects. Contract attorneys do not deal with the same pressures of juggling assignments that overworked partners and associates encounter. They are typically focussed on a limited number of assignments.

OVERSIGHT: Under the ABA Formal Opinion 88-356 for temporary attorneys (the “ABA Formal Opinion”), law firms are required to supervise the work of the contract attorney which further reduces the risks for legal malpractice.

PROJECT RISK: Contract attorneys are seldom in the highest risk areas of a legal project such as issuing securities and leading large real estate transactions. When contract attorneys are used in these types of projects, they are usually subjected to substantial oversight by the law firm but can often bring partner level experience to tasks ordinarily performed by more junior attorneys.

Given these factors, it is not surprising that I have not been unable to identify any reported decisions of legal malpractice in which a contract attorney was named in the suit. The same result reached by an authoritative treatise on using contract attorneys. The Complete Guide to Contract Lawyering, by Deborah Aaron and Deborah Guyol at pg.135, Niche Press, 1995. In addition, as a result of these risk-limiting factors, law firms can now easily obtain legal malpractice coverage for contract attorneys. However, should law firms incur the cost of providing this insurance or are there other alternatives. The basic answer is in most cases, having the law firm insure the contract attorney is the only guaranteed insurance coverage available.

A myth in the contract attorney field is that contract attorney agencies can provide legal malpractice coverage. In fact, what we have seen is that agencies offer Errors and Omissions (“E & O”) insurance and not legal malpractice insurance. E & O policies will not necessarily cover a law firm if there is legal malpractice involving a contract attorney. They are generally limited to coverage if the agency was negligent in providing an inappropriate contract attorney at the time the placement is made. This will probably not provide coverage for a mistake made during the course of a project. Furthermore, the ABA Formal Opinion advises that agencies should not interfere with the independent judgement of the contract attorney on an assignment. As a practical matter, this makes it impossible for an agency to act as a law firm and oversee an attorney’s work. This inability to control the attorney would make it difficult for the agency to purchase traditional legal malpractice insurance covering the contract attorney.

Some contract attorneys who are also solo practitioners do carry their own legal malpractice insurance. However, many contract attorneys practice law primarily from contract attorney assignments where their fees are equivalent to salary wages. As a result, legal malpractice coverage equivalent to what a solo practitioner carries is too expensive for most contract attorneys. In addition, less expensive part-time legal malpractice insurance policies limit the hours an attorney works each week and will not effectively cover contract attorneys who accept full-time projects. Because the agency and contract attorney generally can not be looked to for legal malpractice coverage, it is essential for law firms to provide their own coverage to ensure they have coverage in place.

Finally, it makes sense for the law firm to provide coverage because the contract attorney is providing legal services in the name of the law firm. Contract attorneys are akin to subcontractors working under the supervision of the law firm and producing work product in the law firm’s name. Essentially, the law firm is accepting and adopting the work product as its own work product. In fact, under the ABA Formal Opinion, the law firm has discretion on how much to charge the client for these services. Short of passing the risk directly to the client by having the agency and contract attorney contract directly with the client, it appears difficult for the law firm to avoid being looked to for malpractice coverage if a malpractice claim occurs.

In conclusion, there are many reasons why contract attorney use can reduce legal malpractice risk when a law firm’s attorneys are over worked or they lack adequate available resources for a project. Nevertheless, despite factors indicating limited risks, a law firm should still provide legal malpractice insurance for contract attorneys they deploy for a number of reasons. First, clients will most likely look to the law firm for coverage if there is a malpractice claim. This is because the law firm is the organization, which has been directly engaged to provide legal services, and the contract attorney is the equivalent of a supervised subcontractor. Also, such insurance coverage is readily available. In addition, there are few alternatives to having the law firm provide coverage. The insurance industry has not yet provided an affordable insurance policy which all contract attorneys can afford. Lastly, agencies providing contract attorneys are not law firms and can not obtain umbrella legal malpractice coverage for their contract attorneys.

By: Karl A. Schieneman, Esq. Managing Director of Legal Network Ltd., a Pittsburgh based provider of contract attorneys and paralegals and frequent lecturer and author on issues relating to contract attorney use.

Pittsburgh’s Use of Contract Attorneys: A Journal From Legal Network Ltd.

During the last seven years, most metropolitan localities in the United States have experienced an explosive growth in the use of contract or interim attorneys. In the last two years, the Pittsburgh legal community has begun to experience a similar growth in the use of contract attorneys. This article will provide a number of examples of how contract attorneys have been successfully used by Pittsburgh law firms and in-house counsel in the last year.

DOCUMENT PRODUCTION & DOCUMENT REVIEW

In the practice of law, there are instances when a large number of documents need to be handled, analyzed and compiled. These labor intensive projects are costly but necessary part of areas such as complex litigation and large transactions. For instance, Todd & Silverberg, a local law firm, recently economically staffed up for a large litigation project with the use of contract attorneys to assist them in their trial preparation. According to Cindy Chambers, Office Administrator at Todd & Silverberg, “the use of contract attorneys enabled us to find the right people to fit our needs. We were looking for a certain background and we were able to find contract attorneys who matched our required qualifications.” Chambers added, “based on the positive experience, we anticipate using contract attorneys again.”

In addition to staffing up with the right candidate, there is a substantial cost savings involved with the use of contract attorneys. According to an in-house attorney at a local company, “we use a law firm in Pittsburgh for some of our litigation needs and value the expertise they provide. We have found we can realize substantial savings by hiring a team of contract attorneys through Legal Network to work with the firm and unbundle the labor intensive portion of the litigation from the strategic piece.”

HANDLING PEAK WORK PERIODS

Law firms and in-house counsel all experience periods when the work load exceeds the number of available attorneys. In those situations, contract attorneys have allowed some Pittsburgh legal organizations to better manage those peak periods. According to Keith Cameron, Executive Director at Houston Harbaugh, P.C., “in the case of a medium-sized firm, you get surges of work and it makes no sense to staff up yourself. By using a contract attorney agency, we were able to find qualified attorneys quickly, and reduced the pressure on our attorneys’ time to a manageable level.” Cameron cited a recent example where “we had a project that needed immediate attention and no one in the firm had the time to commit. We found a qualified contract attorney to do the work and were able to free-up our staff for other projects.” Cameron pointed out, “the contract attorney with oversight by our full-time attorney helped us to finish the project on time with a high quality work product.”

Peak work periods also affect smaller legal organizations. According to David Tyree Esq., “with a two-person firm there are periods where we have more work than we can handle, and it is helpful to get someone in quickly who is well suited for our needs.” Tyree explained, “recently when such a project came up, I was able to locate an attorney through a local agency for 20-25 hours a week.” Tyree has been impressed with the attorney’s services and has continued to use him to handle work overflow while assessing whether there is enough business to warrant making a full-time offer.

IMMEDIATE EXPERTISE

There are also instances where law firms and in-house counsel face projects which can not be serviced through the organization’s own attorneys. One example of this experience occurred at Rothman Gordon, P.C. where an impending project required an attorney with both a specialized background and an out-of-state bar license. Recognizing the need, the firm sought the services of Legal Network Ltd. and was pleased with the result. David Charnock, Office Administrator at Rothman Gordon, P.C. explained “Pittsburgh firms traditionally cannot warehouse lawyers, so there is a need not only for temporary attorneys, but for qualified temporary attorneys. The name of the game is to service a client in a timely manner with quality service.” Charnock added, “our experience with contract attorneys met both of those objectives.”

Old Republic Insurance Co. (“Old Republic”) also looked for specialized contract attorneys to work on several projects which in-house attorney did not have time to address. Instead of sending the work out to a law firm, Old Republic engaged a local contract attorney organization. According to Martin Bertocchi, Associate Counsel, “it would have been too expensive to use an outside law firm because of the time they would require to get up to speed on the intricacies of his business.” However, Bertocchi found a contract attorney agency to locate an attorney with the necessary insurance defense skills specific to Old Republic. Bertocchi was extremely pleased with the final outcome explaining “the attorney, because of her specialized skills, was able to familiarize herself with the intricacies of [Old Republic’s] business quickly at a cost that was less than the basic paralegal charge from most outside law firms I employ.”

Besides satisfying the need for immediate expertise, contract attorneys have proven to be very profitable for law firms. For instance, Keith Cameron noted “Houston Harbaugh had one project where a contract attorney was plugged into an on-going operation to fill a surge of work. The contract attorney, benefiting from 25 years of related experience, has handled the matter extremely efficiently and correspondingly has been extremely profitable for us.”

STAFFING DISCRETE PROJECTS

Often there are a number of related burdensome projects which can be removed from a permanent attorney, bundled into a project, and outsourced to a contract attorney. This strategy has been implemented at a Pittsburgh-based Fortune 100 company. A number of similar environmental projects were packaged and assigned to one temporary attorney. According to the in-house counsel at this company, “by outsourcing through Legal Network, we identified a qualified environmental attorney interested in handling all of these projects on a part-time basis. Our goal is to gain efficiencies from having one attorney handle these similar projects to free in-house attorneys’ time to focus on other issues.”

MATERNITY LEAVE & OTHER ABSENCES

Almost every legal organization faces unplanned instances where members of their full-time staff become unavailable. Situations such as maternity leaves, disability, leaves of absence and other related temporary circumstances can put a strain on a legal organization’s ability to service all of its current projects. A local law firm recently faced a maternity leave in one of its practice areas. They contacted a contract attorney agency to find an experienced and qualified attorney to assist for a three and a half month period. At the conclusion of the assignment, the law firm had met their client’s needs without any disruption and gave the attorney an opportunity to utilize her maternity leave without undue pressure for a precipitous return.

TEMP-TO-PERM PLACEMENT

Contract attorneys often receive offers of permanent employment after having impressed a client with their professional ability. One local example of this occurred at Nils H. Ljungman & Associates. Nils Ljungman explained, “I like to see how a candidate will perform in my organization before I make a patent attorney a full-time offer. Employing an attorney for a short period under this arrangement has worked out very well for me.”

However, local experience has also illustrated that some employment situations are not always appropriate for a temp-to-perm contract attorney. One of the area’s largest law firms, which asked to remain anonymous, attempted to use a temp-to-perm arrangement with disappointing results. The law firm found that it proved difficult to attract contract attorneys who had (i) impeccable academic qualifications, (ii) impressive work experiences, and (iii) a willingness to join the firm full-time as a contract attorney. It was finally observed that attorneys with these credentials are usually already employed full-time and do not wish to work on a contract basis.

Engaging a qualified contract attorney agency can often eliminate most of the frustrations noted above. The use of an agency familiar with the local market and law firms should be able to properly understand what the organization needs and set appropriate expectations with the contract attorneys.

CONCLUSION

As recent as the December 1996 edition of the ABA Journal, the use of contract attorneys was reported to be an effective delegation tool. The article stated that in the information age, law firms can’t afford to be isolated citadels jealously guarding clients. Rather, they should adapt to the freer movement of people and information in order to better serve clients through alliances and networks.

The use of contract attorneys is also a development which mirrors an evolution in the American workforce. Locally, contract attorneys are now being successfully used by many organizations to enhance efficiency and profitability. Based on the documented success in Pittsburgh and the growth nationally, contract attorneys will probably be used with increasingly frequency in the Pittsburgh marketplace.