Wednesday, October 14, 2009
CALL FOR PAPERS
SEARLE CENTER - THIRD ANNUAL RESEARCH SYMPOSIUM ON THE ECONOMICS AND LAW OF THE ENTREPRENEUR
Northwestern School of Law -- Thursday, June 17th, 2010 Friday, June 18th, 2010
The Searle Center on Law, Regulation, and Economic Growth is issuing a call for original research papers to be presented at the Third Annual Research Symposium on The Economics and Law of the Entrepreneur at Northwestern University School of Law. The Symposium will run from approximately 12:00 P.M. on Thursday, June 17th, 2010 to 3:00 PM on Friday, June 18th, 2010. The goal of this Research Symposium is to provide a forum where economists and legal scholars can gather together with Northwestern's own distinguished faculty to present and discuss high quality research relevant to the economics and law of the entrepreneur.
Papers for the conference should be submitted to the following email address: email@example.com . Potential attendees should indicate their interest in receiving an invitation at: firstname.lastname@example.org . Authors will receive an honorarium of $1,200 per paper to cover reasonable transportation expenses. Government employees and non-US residents may be reimbursed for travel expenses up to the honorarium amount. Authors are expected to attend and participate in the full duration of the symposium. If more than one author attends the symposium, the honorarium or travel reimbursement will be divided equally between the attending authors. The Searle Center will make hotel reservations and pay for rooms for authors and discussants for the night of Thursday, June 17th.
Wednesday, September 16, 2009
An ethics opinion from North Carolina concludes that a lawyer or law firm may include information about prior results on a web page:
The consumer of legal services benefits from the dissemination of accurate information in choosing legal representation. See D.C. Legal Ethics Comm., Op. 335 (2006). Lawyers also benefit from the dissemination of accurate information when seeking to enlist the aid of co-counsel in a particular matter. A consumer researching law firms on the internet expects a law firm's website to include information about the firm's past successes, and many firm websites currently include a "verdict and settlements" section. The law firm's duty is to provide that information to the consumer without creating an unjustified expectation about the results the lawyer can achieve. However, the requirements set out in 2000 FEO 1 may be so burdensome that they discourage lawyers from providing any information about verdicts and settlements and thereby effectively prevent consumers from getting helpful information.
Therefore, a website may include a "case summary" section if there is sufficient information about each case included on the webpage to comply with Rule 7.1(a). Some of the required disclosures set out in 2000 FEO 1 should be included in the case summary section of the website. The summary should reference the complexity of the matter; whether liability and/or damages were contested; whether the opposing party was represented by legal counsel; and, if applicable, the firm's success in actually collecting the judgment. Providing specific information about the factual and legal circumstances of the cases reported, in conjunction with the inclusion of an appropriate disclaimer, precludes a finding that the webpage is likely to create unjustified expectations or otherwise mislead a prospective client.
An earlier opinion was modified to the extent it was inconsistent with this opinion. (MIke Frisch)
Saturday, September 5, 2009
Blogging, the Difference Between Talking and Writing, and How Blogging as Writing Supports Scholarship
Posted by Jeff Lipshaw
One of the reasons I like blogging is that it forces me to write my thoughts instead of speaking my thoughts. I worry about e-mail, and instant messaging, and Tweet, because they all blur the distinction between what is meant to be read and what is meant to be heard. Many years ago, I argued a case in the Michigan Supreme Court, and not to put too fine a point on it, the appellee's brief was moderately incoherent. I thought then the reason was it clearly had been dictated and transcribed, and not written. That was talking when it should have been writing.
On the other hand, blogging as though you're writing can be boring. There's certainly a lighter and more conversation style. I'm using it right now. But there is something about seeing the letters appear magically in the text box that imposes (on me, at least) a certain discipline. Unlike my spoken words, which evaporate as they are spoken (be quiet!), the written ones, even in cyberspace, live on.
That gray area between talking and writing has an analog in the production of scholarly thinking. I'm not sure if it's passe now, but only a couple years ago there was a whole day colloquium at Harvard on whether blogging counted as scholarship (I remember sitting in my home office in Indianapolis, which means it was early 2006, listening to a web cast and hearing Kate Litvak dis it, and Larry Solum promote it). Not that I would ever go out of my way to do an ego-search on Westlaw (cough, cough), but as long as I was there, I noticed that the last several citations to my work have been blog posts, not articles!
Over at The Conglomerate, Darian Ibrahim scribed some interesting thoughts on rational actor economics and behavioral economics as the theoretical bases of regulation, particularly comparing entrepreneurial markets and public markets. I wrote a comment, and when I got done, I realized that I had capsuled a point better there than I had in my paper to which I referred. It was, I am sure, the discipline of writing, even if ephemerally. This morning I just got done modifying it into the concluding paragraph of the introductory section of The Epistemology of the Financial Crisis: Complexity, Causation, Law, and Judgment (happily soon to appear in a prestigious law review near you!). For what it's worth, here's the paragraph:
The overriding theme is that regulation needs to have an epistemological modesty about it, a certain lack of presumptuousness, all of which is belied by disciplines that think that critical causes can be reduced to (a) simple utility functions (rational actor economics), (b) complex functions that can actually model the world's almost infinite contingency (behavioral economics), or (c) an after-the-fact ascription of blame (law). The right answer, I suggest, is that broad policy requires relatively simple models, the necessary downside being there is only so much regulation of a complex world can accomplish. The crisis of epistemology in 1755 was that even after Newton's accomplishments in physical science, an earthquake still destroyed Lisbon, and the crisis of epistemology in 2009 is that all the algorithms in the world are not going to stop financial bubbles. The problem is endemic to all forward-looking judgments. Nobody knows until after the fact whether the entrepreneur is a peerless visionary or a self-deluded wacko, any more than I really know until after the fact that today is the day I should jump ship from the public securities markets because today they became a bubble.Hmm. I wonder if the law review editors are going to want to take out "wacko"?
Wednesday, September 2, 2009
[by Bill Henderson, co-posted to the ELS Blog]
As the fall progresses, many law students and law school administers will be trying to assess the direction of three market trends: (1) the number or percentage of summer associates who receive offers of permanent employment; (2) the prevalence of deferrals among those lucky enough to be offered jobs; and (3) the volume of summer offers coming out of this year's OCI process. Nobody expects cheery numbers. But as the market information comes in over the next few months, law schools will be in a better position to assess the new landscape.
- Naivete. The modal student entering law school is not homo economicus. Rather, he or she is young, inexperienced, and overly impressed with branding--largely through US News--and the opinions of peers. IQ does not shield the young from overconfidence and the reflexive desire to impress others through the acquisition of positional goods. Indeed, sometimes intelligence in the absence of commonsense can make matters worse.
- Poorly Priced Credit. Banks have lent students funds without a sharp eye to repayment risk. The terms of loans are largely the same regardless of law school attended, geographic market conditions, and law school performance. Yes, historically law students have repaid their loans. But that is the same sloppy logic that created the housing bubble. The only way the math works is if the vast majority of law school graduates, despite low or no starting salaries, experience a steady, multi-year surge in income. This is a foolish assumption for anyone who understands the current state of law firm economics. Of course, just like most home mortgages, student debt over and above the Federal Stafford Loans, often get bundled together, turned into securities, and sold.
- Law Schools are Self-Interested and Locked in a Positional Competition. This is not a criticism; it is a statement of fact. Law schools work very hard to manage their market position, including their US News rank, because students and alumni can be completely demoralized with a significant decline. It does not matter if the decline in quality is illusory; stakeholders will declare the patient sick. This may surprise naive law students, but law schools cannot be counted on to be an objective broker. We need a regulator to level the playing field and force us to be transparent. Which brings me to my fourth point ... .
- Failure of Self-Regulation. The ABA Section on Legal Education and Admission to the Bar bears some responsibility here, but not become it has accredited too many law schools -- the antitrust implications of barring market entry are real. Rather, the Section has become too focused on the comfort of its law school members. If the Section collected and published detailed employment outcome information in a way that facilitated school-to-school comparisons--yes, just like US News--the information would trickle down to potential law schools. It is not helpful to say that 15% of a school's graduates work in business -- they need to know how many of those 15% are waiting tables, driving a cab, or selling insurance. Re jobs in private practice, how many are working as contract attorneys? Nobody really knows, and the issue is not on the Section's agenda. If these data are published, some law schools would probably go out of business.
Tuesday, September 1, 2009
From the web page of the Ohio Supreme Court:
The Supreme Court of Ohio will accept public comment until Sept. 30 on a proposed rule change about lawyers’ duty to safeguard client funds and property in which third persons claim an interest.
The proposed amendments to Prof. Cond. R. 1.15(d) and Comment  are based on a 2007 Advisory Opinion issued by the Board of Commissioners on Grievances & Discipline and recommendations issued in late 2008 by a special Ohio State Bar Association committee.
The current rule requires a lawyer to protect the interest of a third-party in client funds and property held by the client, unless the claim is frivolous. The proposed rule changes specify that a lawyer must have “actual knowledge” of a third person’s interest and that the claimed interest must be “a statutory lien, a final judgment addressing disposition of the funds or property, or a written agreement by the client of the lawyer on behalf of the client guaranteeing payment from the funds or property.”
Changes proposed to the comment portion of the rule offer guidance about a lawyer’s ethical duties depending on whether the funds or property is in dispute and whether the client or third person’s claim to the funds or property is lawful. Where there is a dispute over interest in the funds or property, a lawyer must hold the funds or property in a trust account separate from the lawyer’s funds, until the dispute is resolved.
Update: go to this link and click on Opinion No. 07-007 to find the Advisory Opinion.
Thursday, June 18, 2009
Posted by Jeff Lipshaw
At the end of April, I attended a fascinating day-long symposium organized by fellow blogger Dave Hoffman and two of his colleagues at Temple, Jonathan Lipson and Peter Huang, on issues of complexity arising in the current financial crisis. One of the questions that kept occurring to me was the context of the complexity issue - what exactly were we trying to fix, if anything? My analogy was this: if law is a "science," and something about the financial crisis (whether complexity or something else) reflects a disease, then what is the relationship between what we know about the disease and the regulatory medicine we would want to prescribe? I liken financial boom-and-bust to bipolar disorder - is there a regulatory equivalent of lithium that we are assured will tamp down the peaks and valleys? And even if there is, do we want to prescribe it? Maybe we like the booms enough to bear the busts! There's a good chance Tchaikovsky and Van Gogh were bipolar - would we have their art if they had been medicated?
Anyway, when I get to thinking, I usually get to writing (particularly when ensconsed in our Michigan house). This seemed like grist for the mill on one piece of a longer work on the difficulties in forward-looking judgment, namely, the difference between looking backward and assessing causation as a matter of attributing blame, and understanding what is going on as a descriptive matter sufficient to make a good forward-looking decision in real time under conditions of significant uncertainty. The result is The Epistemology of the Financial Crisis: Complexity, Causation, Law, and Judgment, which I've just posted on SSRN. (I apologize for the use of the word "epistemology" but I like it.) Here is the abstract:
The focus on complexity as a problem of the financial meltdown of 2008-09 suggests that crisis is in part epistemological: we now know enough about financial and economic systems to be threatened by their complexity, but not enough to relieve our fears and anxieties about them. What marks the current crisis is anxiety that the financial world has evolved to the point that there are hidden structures, like concentrated "too big to fail" institutions and mechanisms, or like credit default swaps, that have widespread and adverse downsides. I propose an analogy between medicine and law in the sense of "regulatory technology." If bubbles are the disease, then the analogy is to bipolar syndrome - exuberance, or even a little hypomania is okay on the upswing, but true mania is bad, as is the resulting swing to depression. Good regulation, then, would be something like lithium, which keeps us on an even keel. The question is really whether we understand the forces well enough to regulate them. Regulation is a function of prediction; prediction is a function of observed regularity; observed regularities invoke the problem of causation; causation raises the issue whether the process being analyzed is reducible. Complexity in itself relative; what seemed inordinately complex to ordinary people, much less deep thinkers, in 1787 or 1887 might not seem at all complex to us now. What we are dealing with instead is a crisis of confidence in those who purport to be experts in what we cannot fathom merely through common sense. The conundrum, of course, is that if it takes an expert to see the problem caused by complexity, how are we, possessing merely common sense, supposed to do anything but rely on their judgment? The epistemological crisis arises from our own judgments to rely on, believe in, trust, or have faith in, that judgment.
Thursday, May 21, 2009
The New York Appellate Division for the First Judicial Department affirmed a judgment on behalf of a departing lawyer against his former law firm but remanded for a recalculation of damages. The court held:
The finding as to the fair value of petitioner's equity share in the firm was substantiated by the evidence offered by petitioner's expert appraiser, which included his report, with supporting documentation, and testimony. The asset values recommended by the expert were based on a cost/asset analysis, and the basis for the final values proposed by the expert can be gleaned from the record. Respondents elected not to submit a counter appraisal.
However, petitioner's expert's inclusion of the Pension Answer Book, that was co-written by Stephen J. Krass, one of the respondent partners, prior to formation of the firm, as an asset of the firm is unsupported by the record. The Referee found that while, during their 1984 discussion about merging their firms and forming a new law firm, petitioner and Mr. Krass discussed the book becoming an asset of the firm, that was never reflected in the firm's financial records. Krass not only owned and controlled the royalties paid on the book, and was taxed individually for the book's earnings but, although the royalties were listed on internal firm documents as a line of fee income, the firm's distributions to him were reduced by the amount of royalties he received. The fact that several of the firm's lawyers contributed legal work (on firm time) to subsequent revisions of the book, which was deemed a marketing tool for the firm, does not render it a firm asset.
Additional cash assets of the firm that allegedly had been earmarked for bonus compensation and other incentive payments to be distributed within a month after the filing of the petition on November 20, 2001 were properly treated as assets of the firm and subject to valuation. These cash assets remained within the firm's control to dispose of as necessary.
Tuesday, May 12, 2009
The New York Appellate Division for the First Judicial Department has held that an oral fee-sharing agreement between non-affiliated lawyers is enforceable in the courts:
Plaintiff attorney alleges that he assisted defendants in a contingency fee case for which they paid him 20% of the fee they realized on settlement, in breach of an oral agreement calling for a division of the fee as the parties "had done in the past," and that in all previous contingency-fee cases procured by defendants on which plaintiff had worked, they had paid him 50% of the fee. Contrary to the motion court's ruling, the complaint alleges a course of dealing sufficient to establish the terms of the parties' oral contract. Equally unavailing is defendants' argument that the parties' alleged fee-sharing agreement would be void under Code of Professional Responsibility DR 2-107(a)(2) (22 NYCRR 1200.12[a]). Defendants are also bound by the Code of Professional Responsibility, and cannot avoid a fee-sharing agreement on ethical grounds if they freely agreed to be bound by and received the benefit of same. (citations omitted)
Friday, May 8, 2009
Posted by Jeff Lipshaw
Richard Posner published an eminently sensible analysis of the bursting of the credit bubble in the Wall Street Journal the other day (a prelude, I assume, to his new book, The Failure of Capitalism, which he no doubt wrote in a couple nights of intense work). I'm not sure what's going on in his thinking, but the virtue of having what appears to be very few unpublished thoughts is that we ankle-biters have all sorts of grist for the mill when we find changes in thinking or contradictions. For some reason, it got me thinking about some of the, well, (how should I say this?) odder results of the combination of economics and law, such as Judge Posner's 1993 comment that "[a]t the heart of economic analysis of law is a mystery that is also an embarrassment: how to explain judicial behavior in economic terms. . . .” In the spirit of Thomas Kuhn's The Structure of Scientific Revolutions, it seemed to me fair to trace this particular convergence of philosophy, science, and economics. (I've done it before, but more people will read this post in a couple hours than have combined read the essay!)
The image that comes to mind is that game in which you start with one word, and by changing it one letter at a time into a series of different words, you finally end up at a word that is the opposite of, or an ironic twist on, the original word. Remember what Adam Smith's invisible hand was? The wealth of nations comes about from individual self-interest. "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest." That is, each individual doesn't worry about creating a better world, but a better world comes about regardless. (That's why Judge Posner correctly says that classical microeconomics doesn't try to get inside the head of each actor - it just assumes the actors, as a whole, are rational in seeking their self-interest, like rational frogs.) But the combination of law and economics has produced (incrementally, I think, like the word game) a "scientific" orthodoxy or paradigm (see Kuhn) in which it's assumed that the butcher, brewer, baker, or frog actually has societal welfare maximization inside his or her head when making decisions. (Steve Bainbridge expressed this in economic jargon the other day. Corporate boards don't generally make decisions based on pareto-optimality, i.e., making everybody better off; they make "Kaldor-Hicks" decisions, which means that they are looking to maximize the corporation's share of any consumer surplus without regard to its overall impact on society. That's what we all do every time we haggle with somebody over the price of the goods or services.) This transformation (or Kuhnian paradigm) completes itself in models like the justification of contract formalism proffered by Alan Schwartz and Robert Scott (contracting parties really do want to maximize the joint surplus, not their individual share of it), or Ronald Gilson's justification of lawyering, in which he theorizes the only reason lawyers are present is because they have to increase the value of the total deal, not just each party's Kaldor-Hicks share. I've criticized both of those models in other pieces.
Here's my Kuhnian thesis. About a hundred years ago, the dominant philosophy of science was logical positivism. (This was the Vienna Circle.) The idea was that only the observable had any meaning at all - metaphysics was meaningless, including any attempt to posit a priori concepts like causation in the explanation of the world. In other words, the only appropriate tools in the scientific tool box were observations of regularities, and the use of deductive logic. The logical positivists viewed any attempt to explain one event in terms of another by way of "causation," for example, as without meaning. From this basis, Carl Hempel developed his "covering laws" thesis, Popper rejected the verification principle in favor of falsification, and so on. The point is that philosophers of science were rejecting Kantian metaphysics in favor of a strict empiricism. What we want to do is identify the regularities, not try to explain why they are occurring.
I don't think it's a coincidence that the concepts of legal positivism were developing at about the same time. Hans Kelsen developed his "Pure Theory of Law" to identify positive law, but it turned on neo-Kantian metaphysics expressed in the fundamental Grundnorm, an a priori concept (i.e., one accessible to us merely by reason, and preceding our experience of the world) by which physical events took on legal consequence. H.L.A. Hart's positivism put aside the metaphysics, but substituted the Rule of Recognition, and the "internal point of view." That's the key move: the melding of the objective and observable (i.e., positive) with the subjective and internal. Note the paradox that is now simply ignored. We observe people stopping at red lights and going on green lights, but that only tells us there's a norm. What makes it law, objectively and positively, is the subjective view of the individual from the internal point of view - the placement of the traffic light traces back to a "Rule of Recognition" by which the subjective actor recognizes the light has having the force of law.
So, economics is a science in the logical positivist tradition. It ought not try to speculate why things are happening, but to explain or predict regularities. If marginal costs exceed marginal revenues, generally the firm will shut down production. If interest rates go down, generally demand for houses will go up. The explanation of law, on the other hand, in the positivist tradition at least, demands that we look at the internal point of view; otherwise we may be studying norms and not law. Note again that there is a metaphysical paradox that Hartian legal positivism just doesn't contemplate. The incremental result of combining the two - the external point of view of economics and the internal point of view of law - is the mish-mash in which, against all intuitive good sense, the theory demands (see Schwartz and Scott or Gilson as evidence) individual actors incorporate the external point of view in their internal motivations!
To me, reading these accounts of motivation is as strange as if reading a theorist in quantum mechanics who felt obliged to explain the individual motivations of the electrons versus merely predicting where they'd be.
Saturday, April 18, 2009
When It Rains It Poors: Now Texas Has Revoked License of Solo Practitioner For Unpaid Student Loan Debt
Posted by Alan Childress
As a follow-up to Mike's story Thursday on the New York bar applicant who was denied admission for student load debt, consider that even existing law licenses are at risk. The National Law Journal's Leigh Jones reports Monday (found here at law.com) on this harrowing tale:
He had been granted conditional admission in 2001 and an extension later, but still owed some $67,000.
A year later, the board found that he had not taken care of his debt and recommended the revocation of his license. A trial court later affirmed the decision.
In arguing against the revocation of his license in the appeals court, ... [he] argued that the board erred in finding that he lacked good moral character. The appeals panel was not persuaded ... Santulli, who represented himself, said that he plans to hire a lawyer to appeal the decision.
As Mike has pointed out many times on this site, based on his experience as a bar prosecutor, there's wisdom to that last sentence. And in other news, PBS is just finishing up its Masterpiece Classic's presentation of Dickens' Little Dorrit.
Compare Mike's post last month on an Illinois hearing board that "concluded that a lawyer's license should be 'monitored rather than revoked' in a case where the attorney had diverted to himself over $30,000 in fees, half of which were due to his firm." The lawyer's explanation: behind on house note and bills, from paying debts including "repaying about $65,000 in student loans" and credit cards. Hmmmm. Not repay loans = untrustworthy = revoke license. Repay loans by stealing from firm = worthy of redemption = nine month suspension then probation. But do not try this at home. Especially if the home sits in Texas.
Tuesday, April 14, 2009
The New Jersey Supreme Court has held that the third-party exception to the American Rule governing counsel fees does not apply in a circumstance where the tortfeasor and the putative third party are effectively the same. The case involved an action to vacate a foreclosure in which an individual was alleged to have breached a fiduciary duty to his entity co-defendant partners. The plaintiffs had prevailed on the theory that the individual and the entity were one. Thus, the entity "was the instrument of [the individual's] deceit, not a separate and distinct party." The plaintiffs may recover attorneys' fees for its legal action against the entity defendant. (Mike Frisch)
Monday, April 13, 2009
A decision from the New York Appellate Division for the First Judicial Department in a fight over legal fees between two law firms:
Order...in a dispute between plaintiff's outgoing and incoming counsel as to the division of a $1,000,000 contingency fee earned in a personal injury action, apportioned 70% of the contingency fee to plaintiff's incoming attorneys Finkelstein & Partners, L.L.P. (Finkelstein) and 30% to the outgoing attorneys Trief & Olk (T & O), unanimously affirmed, without costs.
The motion court's apportionment of the contingency fee was a provident exercise of discretion. The court analyzed the relevant factors including the amount of time spent by the attorneys on the case, the nature and quality of the work performed and the relative contributions of counsel toward achieving the outcome. The record shows that T & O laid the foundation for the case in the eight months that they represented plaintiff, and obtained a $900,000 settlement offer, which plaintiff rejected. Finkelstein then handled the case for three more years, adding additional defendants, and obtained a settlement of $3,000,000 prior to the jury publishing its verdict following a 10-day trial. The motion court appropriately recognized the relative contributions of the attorneys in awarding 30% of the contingency fee to T & O. (citations omitted)
Friday, April 3, 2009
An attorney admitted in Nebraska and South Carolina was contacted by the attorney of a person who wished to sell real estate in Costa Rica. The seller agreed to pay a 4% finder's fee to the attorney if he was able to find a purchaser. The attorney (named Wiseman) introduced the seller to one of his clients, who eventually made the purchase. The attorney did nothing to facilitate the transaction other than a single phone call. When the seller died, the attorney sought payment of the 4% from his estate.
The Nebraska Supreme Court held that the attorney was not entitled to any fee for legal services to the seller as his claim that he had represented the seller "is not supported by the record." Further, the attorney did not have a real estate license and was precluded by statute from payment for services performed as a real estate broker. (Mike Frisch)
The New York Appellate Division for the First Judicial Department upheld a judgment for legal fees and dismissed malpractice counterclaims. As to fee entitlement:
The record shows that in December 2003, each defendant signed an agreement with [law firm]plaintiff, acknowledging that it owed plaintiff a certain sum of money for their legal representation and agreeing to pay it within a certain amount of time. Although defendants contend that there is a triable issue of fact as to whether these agreements were signed under duress, "[r]epudiation of an agreement on the ground that it was procured by duress requires a showing of both (1) a wrongful threat, and (2) the preclusion of the exercise of free will" Here, defendants have admitted that the December 2003 agreements resulted from significant negotiations with plaintiff during which they were represented by separate counsel, and even if plaintiff threatened to cease representing defendants unless it were paid, that is not a wrongful threat (id.). There is no need for discovery as to whether the December 2003 agreements are enforceable, as the existence of a wrongful threat and the overbearing of defendants' free will are both matters within defendants' knowledge.
The affidavit of defendants' principal, which claimed that he orally protested plaintiff's services, does not serve to defeat plaintiff's motion. A client's "self-serving, bald allegations of oral protests [a]re insufficient to raise a triable issue of fact as to the existence of an account stated" and defendants do not need discovery as to whether they ever protested plaintiff's bills, since that is also a matter within their own knowledge.
Defendants' contention that the December 2003 agreements cannot form the basis of an account stated because they are not itemized billing statements, is raised for the first time in their reply brief and is not entitled to consideration. In any event, plaintiff's account stated claims are not based solely on the December 2003 agreements, but also on the detailed billing statements dated from January 2004 through August 2004. (citations omitted)
Tuesday, March 31, 2009
In a dispute between lawyers over a $1.9 million award of attorneys' fees in a medical malpractice action, the New York Court of Appeals held that an attorney who had brought in co-counsel to try the case was entitled as a matter of contract to the agreed upon one-third of the entire fee.
Attorney Simal contacted attorney Samuel to serve as trial counsel. They agreed that Simal would get "one-third of the entire legal fee." The client was notified of the arrangement in writing and consented to the agreement. Samuel brought in another attorney to assist in the trial. After three weeks of trial, the matter settled for $6.7 million, resulting in a statutory attorneys' fee of over $800,000.
The two trial counsel moved for an enhanced fee and were awarded $1.9 million. Samuel then sent Simal a check for 1/3 of the fee his firm had received but nothing from the fee award to the firm of the second trial counsel. Simel rejected the amount, demanding one-third of the entire fee. Samuel then sought a declaratory judgment that Simal had violated fee-sharing ethics rules and should get nothing.
The Appellate Division concluded that Simal had complied with ethics rules (the court here agrees) but should only get paid from Samuel's share. The court here concludes that the lower court erred in disregarding the express language of the agreement between Simal and Samuel: "...it is of no moment that Simal did not contribute to that part of the work that resulted in the award of the enhanced fee. In the realm of fee-sharind disputes, 'courts will not inquire into the precise worth of the services performed by the parties.' " The court also noted that Samuel should not be heard to complain about the ethics of an agreement to which he had freely accepted. (Mike Frisch)
Monday, March 30, 2009
The Legal Ethics Committee of the District of Columbia Bar opines as follows:
A lawyer may accept credit cards from a client for payment of fees, including unearned fees (commonly referred to as a retainer or advance fees), so long as the lawyer ensures that she complies with applicable District of Columbia Rules of Professional Conduct, including ensuring that she does not enter into a merchant agreement with the credit card company that violates the Rules.
The committee notes the issues presented where the fees are paid in advance:
Before accepting credit cards for an advance fee, the lawyer must have a complete and detailed understanding of the agreement imposed on her by credit card companies. In many cases it may prove impossible for the lawyer to deposit advance fees paid by credit card into trust accounts and adhere to the terms of the agreement. Funds in trust accounts belong to the clients, not to the lawyer. As such, they cannot be attached by the lawyer’s creditors. But because many credit card agreements permit the credit card company to invade the merchant’s bank account and charge back monies already paid the merchant if the customer disputes a bill, there is a danger that funds deposited in a lawyer’s trust account might be “clawed back.” Under some circumstances this could result in a situation where there are insufficient funds in the account.
For example, suppose a lawyer deposits an advance fee of $50,000 into her trust account and, as the fee is earned, transfers $40,000 to her operating account. If the client lodges a protest with the credit card company challenging the lawyer’s right to payment, the credit card company, under its standard merchant agreement, might invade the lawyer’s trust account, and claw back the entire $50,000, pending resolution of the dispute. This would mean that the lawyer had insufficient funds in her account to cover her obligations to other clients whose funds she is holding. In some circumstances, it could even result in the account being overdrawn.
Because the Committee does not and cannot know the details of all contractual arrangements between lawyers and credit card companies, we cannot conclude that credit cards can never be used to pay advance fees into trust accounts. But if a credit card is used in this fashion, the lawyers must ensure that under no circumstances can the credit card company invade her trust account. If that possibility exists, a credit card may not be used. Moreover, the lawyer must understand all the provisions of her agreement with the credit card company to ensure that entrusted client funds are safe and secure. Absent that assurance, a credit card may not be used to advance entrusted funds.
Friday, March 27, 2009
An insurance company is not obligated to defend claims brought against a law firm that do not involve allegations of negligence or malpractice, according to a decision of the New York Appellate Division for the Second Judicial Department:
Here, Liberty established its prima facie entitlement to judgment as a matter of law declaring that it was not obligated to defend and indemnify the Burkhart Firm in the underlying action, and the Burkhart Firm failed to raise a triable issue of fact in opposition. The basic coverage provision of the Liberty policy clearly limits coverage to claims which are caused by "any actual or alleged act, error, omission or personal injury which arises out of the rendering or failure to render professional legal services." Inasmuch as there is no allegation of negligence or malpractice arising out of the Burkhart Firm's performance, or failure to perform, legal services, the claim in the underlying action does not fall within the ambit of the policy. For the same reason, the Supreme Court properly denied that branch of the Burkhart Firm's cross motion which was for summary judgment.
The allegations against the firm are summarized in the court's order:
Wednesday, March 25, 2009
The New Jersey Appellate Division remanded a matter for a proper determination of whether the fees awardrd to class action counsel were reasonable. The underlying class claims had been brought by doctors who had rendered services to patient-members of the defendant health care plan alleging harm from unfair trade practices. The trial court had awarded $6.5 million in attorneys fees. (Mike Frisch)
Thursday, March 19, 2009
A case decided today by the Massachusetts Supreme Judicial Court holds:
It is well settled that an insured is entitled to recover reasonable attorney's fees and expenses incurred in successfully establishing the insurer's duty to defend under the terms of the policy. See Preferred Mut. Ins. Co. v. Gamache, 426 Mass. 93, 98 (1997) (Gamache ). What happens when the party incurring attorney's fees and expenses to establish the insurer's obligation to defend is not the insured but a different insurer that has defended and provided coverage to the insured? That is the question raised in this case. We answer that the exception to the American Rule in Gamache and its progeny does not extend to allow the prevailing insurer recovery of its attorney's fees associated with an action brought to establish the defense and coverage responsibility of another insurer.
The court found that a contrary Maryland decision was not persuasive on public policy grounds. The case is Callahan & sons, Inc. v. Worcester Insurance Company. (Mike Frisch)
Tuesday, November 18, 2008
Posted by Jeff Lipshaw
Several weeks ago, I was provoked (in a good way) by Usha Rodrigues' reference to Ronald Gilson's 1984 article on how transactional lawyers create value as the "reigning academic account." I wrote a quick little essay and let it sit until this weekend when Gordon Smith reported on a clever quip from Professor Gilson about lawyers who become professors, and in the classic line: "I resemble that remark." I decided to update the little essay a bit and it is now on SSRN as Beetles, Frogs, and Lawyers: The Scientific Demarcation Problem in the Gilson Theory of Value Creation. Here's the abstract:
Recently, Ronald Gilson described a transactional lawyer turned law professor as someone who was a beetle, but became an entomologist. This is not the first non-mammalian metaphor used by an economically inclined legal academic to demarcate those who study and those who are studied. As Richard Posner so colorfully explained rational actors as they appear to economists studying them objectively: "it would not be a solecism to speak of a rational frog." In this short essay, I suggest that both say something about the prevailing view of theorizing that is entitled to privileged epistemic status in the legal academy. I assess Professor Gilson's classic 1984 article on value creation by lawyers in terms of its implicit claims to (social) scientific truth.