Category: Contract Law

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

February 18, 2018

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.

New Agency Connects Lawyers With Employers In An Over saturated Market

November 24, 2017

Pittsburgh is second only to Washington, D.C. in the number of lawyers populating the metropolitan area. And, in a town where the bar association boasts 7,200 members, many barristers’ resumes, even those overflowing with glowing credentials, may go unread by the people who matter most.

A new company called Legal Network is attempting to ease the burden of the legal job search by linking attorneys with firms on a part-time or contractual basis that could lead to full-time work.

Formed in 1995 by attorneys Brad Franc and Karl Schieneman, the company has compiled a database of 300 lawyers spanning 2,500 legal disciplines.

The company hopes to latch on to the corporate trend toward “outsourcing” – in which companies hire outside contractors to perform duties from accounting to photocopying.

There is no fee to have a resume placed in the Legal Network database, but attorneys must go through a screening process to ensure their credentials are legitimate and that no disciplinary actions have been taken against them.

Mathew McGuire, a 35-year old attorney was in the database three months before finding work with a small firm Downtown. Mr. McGuire holds a master’s degree in business administration from the University of Pittsburgh as well as an engineering degree from Carnegie Mellon University. He obtained his law degree from Duquesne University.

He thought his education would put him ahead of the competition but the offers didn’t come as fast as he anticipated.

“I thought that when I finished with law school there would be some demand, but there wasn’t the demand I was expecting,” he said. His arrangement with Legal Network gives the prospective firm and the new lawyer a chance to see if a long-term commitment is something they both want.

“They have me come in for three weeks on a temporary basis and if they like the things I can do, they may make a full-time offer,” he said.

“It gives them the chance to see what I can do, and gives me the chance to see if I like working for them.”

The market has become so crowded that Mr. Franc says lawyers are willing to work as paralegals just to ensure income.

The majority of lawyers in Legal Network’s database are seasoned veterans.

An average attorney in the database, according to Mr. Franc has 10 to 30 years legal experience. He said the network suits attorneys who don’t have the expertise or funds to market themselves and those solo practitioners who don’t have enough work to sustain their business.

At least 15 other cities have similar organizations that offer placements for legal secretaries and paralegals. Legal Network, however, is devoted exclusively to attorneys.

The company makes money from the hourly rates charged for the attorney’s time. For instance, if the attorneys bill the network for their time at the rate of $25 an hour; the network might bill clients $35 an hour, and the matchmaking firm keeps the difference.

“We try to place 12 to 15 attorneys at any point in time,” Mr. Franc said. The founders believe this payment principle, which they borrowed from the temporary employment field will yield dividends for their company.

We are cautiously optimistic about our success,” said Mr. Franc. But he is also realistic in his expectations. “We are not going to get fabulously wealthy from this overnight.”

Billing Clients For A Contract Attorney’s Time

May 24, 2017

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.