Loan Forgiveness - Why Not For Solos?
This article, Debt Relief May Be In Sight for Lawyers (Chicago Sun Times 11/27/06) reports on the status of legislation proposed by Senator Dick Durbin back in 2003, that would grant student loan relief to public sector lawyers in the criminal justice system. From the article:
The average young lawyer from a private law school graduated with $78,763 in debt last year, according to the American Bar Association. The average graduate of a public law school owed $51,056. Durbin's office puts the numbers higher, with the average private law school graduate carrying $97,763 in debt, and public school graduates owing $66,810 . According to Murray -- who had $14,000 in debt when he graduated in 1983 -- the trend is forcing lawyers to leave the state's attorney's office, and persuading third-year law students not to apply. "It definitely weighs on me. I'm going to be paying it for the rest of my life," said assistant Cook County State's Attorney Jullian Brevard, who owes about $90,000.
Durbin's legislation would alleviate the burden of student loans, and help prosecutors and defenders offices attract and retain top lawyers, who often leave when "big bucks beckon" from private sector jobs (the Enron task force attorneys are a recent example of this phenomenon, most of whom fled government for private practice once their prosecutions had concluded) The Prosecutors and Defenders Incentive Act would pay up to $10,000 a year of the law school loans of any prosecutor or public defender. To qualify, a lawyer would have to commit to three years of service. Loan assistance would be capped at $60,000 per lawyer and would apply only to loans made through federal programs.
I've often wondered why lawyers going into solo practice don't qualify for loan forgiveness. Many new solos serve lower income populations (as I wrote here) or handle court appointed work similar to defenders' offices. Moreover, solo attorneys don't receive the same benefits as prosecutors or defenders, like health insurance or formal training, like trial bootcamp or CLE. Instead, they pay these expenses out of pocket. And because of student loan debt, some new solos feel pressured to run a volume practice, where they don't adequately serve lower income clients or to turn down lower income clients who can't pay the bills.
Many lawyers who accept prosecutor or defendants positions do so because they want the training, and are willing to make a financial sacrifice to get it. Loan forgiveness would make this choice easier, but I don't think that an extra $10,000 per year is going to give a lawyer set on earning $145,000 a year to think about a job with the Public Defender. By contrast, because fewer quality attorneys start their own solo practice, loan forgiviness would make a difference to those who choose to do so.
With Thanksgiving now over, it's time to start thinking about holiday gifts. And Reid Trautz has some interesting suggestions in his 2006 Holiday Gift Guide for Lawyers. Check it out!
48 Years As A Solo Come To A Close
"If you love what you do, you'll never work a day in your life."
That's the standard that Sauk Center, Minnesota attorney John Mayer has lived by throughout his 48 year career as a solo, which will now come to a close with his retirement, according to this profile from the Sauk Herald (11/21/06). Articles like this make me wonder where I'll be in 30 years (I've already been practicing 18) and what kind of career I'll look back on.
Virtual Office Space Options
If you're starting a firm and not sure that you want to work from home, but are concerned about the cost of rent, a virtual office might be right for you. This article from the Chicago Business Leader (11/20/06) gives an overview of the costs and services of HQ Global, one of the larger competitors in the virtual office space arena.
Keeping It Fresh
At the Legal Profession Blog, Jeff Lipshaw wonders whether it's natural to spend one's time "the same firm, doing the same kind of work, progressing in the level of oversight and client contact...." As a solo, I don't often feel that way, since I always have the opportunity to reinvent myself and my practice. Yet sometimes, inertia keeps me in the same place.
So I got to wondering what my solo colleagues do to keep it fresh. What do you do to ensure that you're always feeling challenged, that you're open to new possibilities? For a long time, blogging helped me keep my practice fresh, but after four years, blogging feels a little routine as well.
So readers, any ideas? Please post them below.
The best time to start....
Ivy League Solos
Whether you like Harvard Law School or not, you have to agree that virtually every HLS graduate can write their own ticket to whatever job they want. So it's gratifying to see that with so many career options, young HLS grads are still choosing solo practice, as reported in this article from the HLS Bulletin, The Coming Wave (11/5/06). The article profiles Luz Herrera and Eric Castelblanco, HLS grads who each opened solo practices to serve underserved, Hispanic communities. From the article:
For both Castelblanco and Herrera, there was no road map for an Ivy-educated lawyer to start a viable law practice for low-income clients. “Traditionally, if you want to do public service, you are directed to apply for a Skadden fellowship, work for the government or go to a civil rights impact litigation organization,” said Herrera. “But for me, none of those options seemed like the right choice. I did not want to spend 90 percent of my time doing research or working in a direct-service organization whose approach I did not completely buy into. Working in my own law office allows me to provide legal services to individuals who may not otherwise have an attorney and tap into my entrepreneurial spirit while being an active member of the community.”
But before Herrera could help people navigate the legal system, she had to figure out the nuts and bolts of running a law practice, including how to set up a billing system—problems that a first-year associate at a major firm would never have to worry about. “The first year is very hard,” she said. “No one tells you how to set up a practice in law school.”
Now, Herrerra has taken a break from her practice and has joined the Community Enterprise Project at Hale & Dorr to develop a fellowship that will help law graduates learn how to start law practices in underserved communities (a project which sounds similar to the Law School Consortium).
When You Value Bill, Be Sure To Tell The Client
Plenty's been written about the evils of the billable hour; how the billable system measures time rather than value and in so doing contributes to inefficiencies and bill padding. But criticism of value billing is harder to come by, and with the exception of David Giacalone's writings, you don't find much negative commentary about value billing in the blogosphere.
But just as the billable hour is not perfect, neither is value billing. Consider this recent case involving Greenwich lawyer Gary Cohen. According to this article, Cohen's former client has filed an a grievance against Cohen for allegedly forcing him to pay a $300,000 bonus for successfully mediating a dispute. The bonus bumped Cohen's $450/hr rate up to $1500/hr. The article also says that Cohen demanded payment of the bonus in the middle of the mediation, and that Cohen threatened to walk if he didn't receive it. Cohen denies that he ever threatened to abandon the client.
But Cohen has not reduced his fee requests. Rather, Cohen and his attorneys defend the fee on "value billing grounds." From the article:
Cohen says he was worth every penny in a complicated case involving more than $100 million and a very needy client. He says he accomplished Zimmerman's top goal, which was complete control of his company.
Katherine Callahan, Cohen's attorney, said the additional fee was justified because the mediation was extremely time consuming and avoided a trial that could have resulted in a loss of millions of dollars in assets for Zimmerman. She objected to the state's calculation of $1,500 per hour. "That is really an inappropriate way of looking at attorney fees," Callahan said. "Disciplinary counsel is dumbing down the argument to convince the panel something inappropriate occurred here."
Apparently, a jury did not buy the value billing argument. As reported here, it found against Cohen and ordered return of the bonus.
Having repaid the money, Cohen shouldn't be subject to disciplinary action as well. To me, that's just an added penalty. But the Cohen case highlights some of the soft spots of value billing, particularly that it can be a hard sell for clients. For example, despite what the value billing experts say, many clients and laypeople feel that when you pay a lawyer $450 an hour, you ought to expect a job well done and that you shouldn't have to pay $300,000 extra to get more value. And while value billing advocates would argue that Cohen's error wasn't to make clear that he'd take a bonus up front, my guess is that if he had, his client would have simply found another lawyer to handle the case.
The bottom line here, I guess, is that if you do decide to value bill, make sure that your client buys into your value proposition. If not, you may find yourself in Cohen's position.
MSBA Conference This Saturday - Would Love to Talk To You!
Readers - one last reminder that this Saturday, November 11, the Maryland State Bar Association is sponsoring its 8th annual conference on starting a law firm. The information can be found here in this earlier post.
I'll be speaking on blogging - you can view a sketch of my presentation as well as the more detailed one I gave three years ago, entitled What Blogs Can Do For Solo and Small Firm Lawyers. I'm sure if you're reading my blog, all of this is old news to you, but the conference agenda looks interesting and it's a great way to meet other solos in Maryland. And I'd love to meet you, of course. Hope to see you Saturday.
Great News for Law Firm Start Ups: 80 Percent of Dotcoms Survived!
I've always likened the rise of modern day independent practice (call it the Third Wave if you will) to the dotcom era. Before dotcoms, small entrepreneurship wasn't cool. But the success of little garage companies forced our profession to look at law firm start ups in a different light.
And because law firm start ups have much in common with tech start ups, from shoe string budgets, to competing in areas traditionally handled by larger players, I was thrilled to read this outstanding post by Jeff Lipshaw at the Legal Profession Blog. Lipshaw writes about a paper in the Journal of Financial Economics, authored by David Kirsch which suggests that the actual failure rate of dot.com start ups was far lower than perceived - roughly 20 percent. But the steady survival of smaller companies was overshadowed by massive failures of sites like eToys and pets.com. (the post goes on to discuss potential business development ideas that might follow from these statistics, so read the whole thing).
So what does this mean for potential law firm start ups? Simply, your chances of success are greater than you think! Get out there and get started.