© 2014 The Texas Lawbook.
By Chrysta Castañeda – (July 14) – A few weeks ago, the State Bar of Texas issued an ethics opinion that sent shock waves through the hallways of Big Law (Opinion No. 642, May 2014). As The Texas Lawbook and The Dallas Morning News reported recently, scores of the big firms are challenging it.
The ethics committee ruled that Big Law can no longer give their non-legal administrative staff Big Titles, like Chief Operating Officer or Chief Marketing Officer, because it implies that those folks have managerial control over the firms they support.
Why did the committee rule that way? And if you’re not in a Big Law firm, why should you care?
Perhaps you’re skeptical about how giving non-lawyers Big Titles make legal services unaffordable. Bear with me — while it’s certainly not the only factor driving the problem, its role in the crisis certainly bears attention. The committee’s opinion reflects the concern.
Its decision is based on the rule that law firms must be controlled by lawyers and not by those without a law license. The rule exists to protect the integrity of the profession and to provide a buffer from the financial influence of people who aren’t governed by the ethical rules that lawyers must follow. The State Bar ruled that it was misleading to give these titles to non-lawyers because it implied that non-lawyers are controlling the management of the firm.
The reality is much worse: the non-lawyers actually do control Big Law and the Big Titles are the proof.
It wasn’t always this way, but ever since the non-legal managers gained power starting in the mid-to late-1990s, the hourly rates for lawyers have skyrocketed to the point that even the biggest corporate clients feel the pain.
Hourly rates have gone up because that is how you increase profits in a law firm, and what the business school graduates who run Big Law know how to do is to measure profits. Increasing profits is how they get paid big bonuses (a potentially unethical practice, according to the opinion).
There is only so much cost-cutting you can do to increase profits, and the hourly rates have to pay for the Big Titles of the ever-increasing non-lawyer management ranks. As a result, every lawyer needs to bill more hours at a higher rate each year for the firm to look profitable in the year-over-year metrics that the non-legal managers live by. They have trained the lawyers to live by them too. Et voila: sky-high billing rates that only the most profitable corporations can afford.
Even corporations who will pay the rates refuse to pay for the work of young lawyers in Big Law firms, because their rates are considered disproportionately high to the services they are capable of performing.
This means that the on-the-job apprenticeship that actually teaches lawyers how to practice law no longer happens because clients refuse to pay for it. Fewer quality trained lawyers exist as a result, because law school doesn’t teach those skills. And individuals without large bank accounts go without trained lawyers.
The State Bar of Texas believes this system is a violation of the ethical rules and I agree. The lawyers in Big Law firms aren’t intentionally unethical in allowing this to happen. To the contrary, I know most are decent, hardworking, ethical people. But I also know that too many of them have become slaves to a system where managers focused on accounting and profits-per-partner metrics control the livelihood of the lawyers whom they are supposed to support.
To my knowledge, there is no metric currently being used that measures how well lawyers perform their tasks or how satisfied their clients are with their work. Rather, the only numbers that currently matter in Big Law are the dollars generated by the lawyers who collect the most for their time and get paid more as a result. At the end of the day, the only way to survive in Big Law is to be counted among the most profitable lawyers. Those who aren’t profitable are marginalized or forced out.
What is the solution?
For lawyers to take back their law firms. For the State Bar to enforce the rule so that the rank-and-file lawyers regain a role in managing their firms.
Lawyers are typically thought to be horrible business managers, and I think it is probably fair to say that most lawyers don’t really want to manage the mundane aspects of their practices. But to say that “don’t want to” is the same as “can’t” is just wrong. Lawyers usually go to law school caring about others and with the notion that they will serve their communities.
Then the reality of law school debt and the challenge of measuring up at a law firm sinks in, and soon even the idealist is on a quest to associate ever-higher dollar figures with his or her name.
If becoming good at self-managing, self-financing and self-marketing bears fruit, lawyers will do it. There is an important role for the specially-trained business, financial and marketing professionals in Big Law.
But the true Holy Grail for lawyers should be to find a way to reward client service and legal excellence as much as Big Law currently values collections and profitability.
In my opinion, only those trained in the law can create a system that does that. Hire the financial analysts and the marketing professionals, but keep the CEO and other titles for the lawyers who are supposed to be in charge.
I spent more than two decades in Big Law and know that there are many things it does very well. But the demand for ever-increasing hourly rates is ruining both the firms themselves and the profession’s adherence to its public mission.
The State Bar is right to police this rule and to enact other reforms to turn the tide on good lawyers being forced to bill far more for their time than is comfortable.
The rule exists because being a lawyer is a calling and lawyers have ethical duties. And the founders of the modern state bar association knew that putting profits first puts ethics second or even farther down the list.
Chrysta Castañeda is an attorney and legal communications advisor. Formerly a Big Law partner, she can now be reached at her own company: Chrysta@canterburycommunications.com.
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