J. Randolph Evans is a partner in McKenna Long & Aldridge's Atlanta office, where he is the chairman of the financial institutions practice.
Shari L. Klevens is a partner in McKenna Long & Aldridge's Washington office and is the chairwoman of the firm's law firm defense practice.
By most accounts, 2013 will be another challenging year for attorneys. Like the economy as a whole, the legal business continues to struggle, with many law school graduates not meaningfully employed and law firms struggling to secure their positions in an increasingly challenging and competitive marketplace. There are exceptions in some areas that show promise for the coming year.
Overall, the challenges and risks inherent in the pursuit of a profitable law practice will manifest themselves in 2013 in some of the following ways.
Clients continue to press for "cost containment." In many areas, cost containment translates into little more than a downward pressure on rates, more deductions, and slower payments for amounts outstanding.
In-house counsel, now directly accountable in many cases for legal expenses as a budget item, are pushing for alternative fee arrangements with varying degrees of complexity. In some situations, these consist of tighter litigation management guidelines. In others, in-house counsel are insisting on stricter attorney accountability for budgeting with shared consequences when actual legal expenses exceed budgeted expenses.
For attorneys, these additional restrictions implicate a host of ethics rules, most of which are aimed at protecting attorneys' independent professional judgment. In some circumstances, the concept of "shared consequence" gets dangerously close to some of the prohibitions that exist in the context of "fee sharing."
Law firm general counsel and in-house counsel now must operate as ethics police officers, making sure that any alternative fee arrangements—which are implemented to keep clients happy —do not translate into a concern for the State Bar of Georgia. That is no easy job.
For other attorneys, the problem is not with keeping their clients happy. Instead, their challenge is just finding enough clients to pay the rent in a marketplace where demand for legal services is on the decline. When these problems occur, it becomes more tempting to accept representations free from regular client intake procedures that would otherwise apply. Desperate times typically lead to desperate measures.
One of the first client intake procedures typically eliminated is the limitation on matters within the attorney's area of expertise. For example, until the real estate market recovers, many real estate attorneys find themselves in the collections business, attempting to collect debts, foreclose on property, or protect client rights in the bankruptcy context. Because collections (including the Fair Debt Collection Act), foreclosures and bankruptcy involve technical areas of the law, they are fraught with risks for the general practitioner. The net effect has been a significant increase in the number of legal malpractice claims being asserted for errors in these areas.
For other attorneys, including plaintiffs' attorneys, it means relaxing the criteria that should be applied before accepting a new client. This can mean accepting matters outside of the attorney's area of expertise, or accepting clients that would otherwise be rejected based on application of established client intake procedures. For example, in some instances, attorneys discover belatedly that they are the sixth or seventh attorney that a client has hired, notwithstanding the overwhelming risks of such a representation. In the end, the short term gains from such representations are typically far outweighed by the risks.
Many attorneys and law firms have made the adjustments to remain afloat in this era of economic uncertainty. However, that has meant layoffs and departures for many of their colleagues as law firms downsize or restructure to meet the economic realities of modern-day practice. Standard operating procedures along with checklists for departing partners, associates and employees have never been more important.
