December 12, 2006
Procrastigrading or Procrastiblogging? Solomonic Reflections on Block Billing
It's sitting there. The stack. Waiting to be graded. Why does the trip to Bed Bath & Beyond seem so urgent now? How does one accessorize bachelor-living squalor? Why is there air? What is a tort?
On a lighter note, the Wall Street Journal yesterday reported on the request by two congressmen that the Justice Department look into the billing practices of some of Amtrak's outside law firms. In particular, the firm of Manatt, Phelps & Phillips LLP is said to have engaged in block billing, "in which they lumped tasks under one entry of an invoice, rather than itemizing the cost of each task. Block billing is prohibited by Amtrak, according to the report."
Let's review the bidding here. Nobody is accusing Manatt of falsifying the bill. Indeed, Manatt is not even being accused of sending the lawyer's dream bill, which says only: "For Professional Services Rendered: $1,000,000." No, the issue here is "block billing," which I presume means something like the following entry:
Drafted acquisition agreements. Reviewed due diligence material. Conference with client re due diligence material and deal issues. Review and revise Hart-Scott-Rodino filing. 4.2 hours.
At my daughter's wedding this weekend, I got to be chatting with a couple, both lawyers, who are among our oldest friends. He, call him Solomon, is a corporate lawyer in a mid-sized firm outside Detroit; she, call her Sheba, is on the general counsel's staff at one of the largest health care systems. Sheba and I were trying to explain to Solomon what we, as general counsels, wanted and didn't want from outside counsel.
1. We don't want lunch.
2. If we want to be your friend, we will let you know. Don't call us, we'll call you.
3. We want to be able to know how much work-in-progress you have accumulated on a hours' notice, and have it accurate through the preceding day.
4. We don't want to hear how difficult it is to get your lawyers to record their time on a daily basis so as to accomplish #3.
5. We don't want financial surprises, like getting a bill on December 15, showing time from the first week of November that goes over your budget by $500,000, and is actually significant enough to impact our reported earnings.
6. If truth be known, we really don't care what the time entries say if the total amounts comport with our heuristics about the value of the services. If we want a discount, we have far more direct ways of getting it than ankle-biting about the entries on the bill.
Never once did the subject of outrage over block billing, standard fare from my days as an hour-biller, come up.
December 11, 2006
The Availability Heuristic Strikes Again: Generalissimo Francisco Franco is Still Dead,* But May Have Backdated Some Options
This is the "availability heuristic." You are in a rush to get some place. It seems like you hit every red light. You get to the destination, and say "my god, I hit every freaking light on the way over here." In fact, you didn't hit lights any more frequently than you normally do, but because you were focusing on it, it seemed like you did. I have already ranted as to the way in which scholars are apparently no less immune than others to the availability heuristic, at least when it comes to corporate governance.
The option backdating issue is a perfect example. I'm not condoning backdating for a minute. I don't know whether it's right that a general counsel takes the fall for option backdating, but I'm on record as saying that it was either wrong or colossally bad judgment for a GC to listen to somebody propose backdating an option grant and say "well, yes, there's an argument in favor of that...." (Or in Nixonian terms, we could raise $1,000,000 in hush money, but it would be wrong, wink wink.)
And, of course, it's not news to say "952,788 citizens here in Metropolis were not the victims of crime today," or "Paul Newman and Joanne Woodward remain happily married." So news itself plays to the availability heuristic. But we owe it to our constituencies as scholars rather than shills (for any position) at least to struggle with whether it's our theory or the facts that are the dog and the tail and which is doing the wagging.
Joann S. Lublin, who I think is a good reporter over at the Wall Street Journal on career matters, has a story today on several companies that have announced they will only issue options at a set time every time. What a shock! As I have pointed out, there are over 9,000 public companies in the U.S., and as Ms. Lublin observes, "There's no precise count of how many companies unaffected by the scandal are altering option-grant policies. But several executive-pay specialists estimate that more than two dozen [ed. note: two dozen equals 24 which is something like one quarter of one percent of all public companies] have acted so far. Option-backdating has sparked regulatory investigations at more than 130 concerns [ed. note, let's see, that's 1.5% or so] . . . ."
Two additional points. Apparently the Council of Institutional Investors is doing some empirical work to find how pervasive this problem by writing to the 1,500 biggest firms by market capitalization, and asking (it seems to me the academic paper posted on the CII website is fraught with correlation versus causation issues, and hence suspect, but at least you can point out its flaws!). In the kind of anecdotal evidence that passes for learning in this area, the letter from CII provoked Becton Dickinson, a large cap pharmaceutical company, to write down what had always been a perfectly legal and common sense, but informal, practice of issuing option grants on an annual basis.
*I realize I may be dating myself with this particular reference to the Saturday Night Live Weekend Update.
Buttons in the Courtroom
The Supreme Court reversed the Ninth Circuit in a case where the trial court in a state murder case allowed the victim's family to wear buttons showing the victim in life. The Supreme Court held that that Ninth Circuit improperly concluded that the decision of the California Court of Appeals denying relief was "contrary to or an unreasonable application of clearly established federal law." The practice of courtroom buttons of support for a victim was not a state sponsored courtroom practice and was an open question under Supreme Court jurisprudence. Thus, habeas corpus relief was not available under the Antiterrorism and Effective Death Penalty Act of 1996.
The case is Carey v. Musladin. [Mike Frisch]
Iraq Study Group Dominated By The Legal Profession
Interesting point made by Georgia lawyer-blogger Mark Zamora here (and likely many others have noticed too): the Iraq Study Group is comprised of 8 out of 10 lawyers, and the co-chairs are lawyers. Zamora observes (his emphasis): " 'Lawyers' in general are an easy target of politicians, talking heads, and the populace. Until you need one."
The ISG Report is linked and downloadable from the USIP website here. [Alan Childress]
The Ethics Committee of the District of Columbia Bar has recently opined that D.C. Rule 5.6 prohibits settlement agreements that compel an attorney to treat public information as confidential. The lawyer who settles a case may agree to keep the terms of the settlement and other non-public information confidential, but cannot be prevented from disclosing public information about the case in promotional materials or on the firm's web site. The opinion is here. [Mike Frisch]
December 10, 2006
Vinson & Elkins May Be Dismissed From Enron Lawsuit
The Wall Street Journal's on-line site is reporting today that lead plaintiffs in a securities lawsuit over Enron have asked the federal court to dimiss claims against Enron's long-time attorneys Vinson & Elkins. Four years ago Kirkland & Ellis was dismissed because it had made no public statements. [Alan Childress]
Is Wealth All It's Cracked Up to Be?
As usual, the Sunday Business section of the New York Times has a couple of thought-provoking pieces, and perhaps it's just me that sees the thematic connection. Ben Stein (he of the world's most annoying voice - male category; Fran Drescher gets the female award) tries to reconcile the fact of rich and poor in a kind of Rawlsian way: there is nothing wrong with being rich, and justice doesn't necessarily mean "tax the rich," but there ought to be "a way that these people can be brought off the fairways of the nation's country clubs and put before the students of America to tell them how the world works and how to make their way in it." As I have mentioned before, the redeployment of the boomer generation will be an interesting phenomenon to observe. On Ben's point, I have friends who have participated in SCORE, the Service Corps of Retired Executives, a group that provides precisely that kind of advice to nascent businesses as a public service.
On the next page, Daniel Akst mulls the question: do we just work for money? He notes: "The American Bar Foundation . . . frets that fewer law school graduates are going into government work or public interest law." But he wonders:
[I]s this really a problem? Law school, for instance, has been diverting bright young people from becoming social workers or remedial-reading teachers for a long time. What's remarkable is how many smart people still turn their backs on financial gain to seek careers as unheralded poets, misunderstood video artists and itinerant philosophy instructors schlepping from campus to campus without hope of tenure.
His point is that we have a choice, and the world is probably better off that some of us grab the bucks, if for no other reason than the creation of wealth lets society afford more social workers and public interest lawyers.
A kind of rationalizing or compatibilism raising its ugly head, no doubt, but it works for me.