The Legal Intelligencer Blog

Fresh Ink: Inside Today's Legal

Welcome to your Tuesday morning round-up of stories in today’s edition of The Legal Intelligencer, which also includes this week’s edition of Pennsylvania Law Weekly. All of the links below will take you directly to today’s stories, or you can head straight over to The Legal’s homepage. (Some stories may require registration or a paid subscription.)

Today’s top story is the third and final installment in a series looking at law firm growth in a no-growth market. Reporter Zack Needles writes that midsized firms are mining their existing client base as a method for revenue growth, seeking to provide the most value to existing and prospective clients.

Also above the fold on Page 1, reporter Amaris Elliott-Engel writes that Philadelphia Common Pleas Court Judge M. Teresa Sarmina has denied the latest defense motion to dismiss charges in the priest sex-abuse case. Prosecutors called the motion to dismiss charges “a press release … [that] spews false information that serves no purpose other than to pollute the pool of jurors.” The case is in the second week of jury selection.

Below the fold on Page 1, reporter Gina Passarella writes that a federal judge’s comments affected sentencing in a $74 million fraud case. The 3rd U.S. Circuit Court of Appeals has remanded the case for resentencing.

In more Regional News on Page 3, reporter Ben Present writes that a RICO claim has survived an early motion in the “kids-for-cash” suit. A federal judge allowed the claim to move forward, but dismissed claims under the Civil Rights Act because they were barred by the statute of limitations.

As always, our People in the News section is on Page 2, and the top stories from our sibling publications across the country make up the Page 4 National News section.

On Page 5 today is a Commentary written by Troy Crichton, who writes about the Barristers’ Association of Philadelphia celebrating its “Meet the Judges and Legislators” event.

In a Litigation column on Page 7, Harrie Samaras and Judy Weintraub write about determining whether mediation is the right choice for your dispute.

As it is Tuesday, it’s also your chance to read this week’s Pennsylvania Law Weekly. The lead story for PLW comes from Ben Present, who writes an analysis of the campaign funds for the Pennsylvania attorney general race. Former Lackawanna County prosecutor Kathleen Kane has more cash in her coffers, but former U.S. Rep. Patrick Murphy has a wider array of supporters.

Below the fold on Page 1, Amaris Elliott-Engel writes about a Pennsylvania workers’ compensation certification process that is set to launch in the fall.

On Page 3, reporter Dan McCormick writes that a judge has denied a grocery store company’s request for a plaintiff’s cellphone records in a slip-and-fall case.

There’s much more inside this week’s PLW, including Samuel C. Stretton’s Ethics Forum, in which he discusses lawyers making campaign contributions to judges; Sam Pond and Allison Wheeler’s commentary on proposed utilization review changes that they believe will prove unfair to injured workers; the state Superior Court ruling that a deactivated e-mail account can still be searched; and David Mandelbaum’s Environmental Law column on tracking environmental debts.

If you have questions or comments about any of today's stories, or our coverage as a whole, we invite you to e-mail any of the reporters directly. We hope you'll enjoy today's Legal.

Fresh Ink: Inside Today's Legal

By Jaime Bochet
Of the Legal Staff

Welcome to your Monday morning round-up of stories in today's edition of The Legal Intelligencer. Click the links below to access stories directly, or head to The Legal homepage.  (Some stories may require registration or a paid subscription.)

Leading the front page this morning, U.S. Courthouse Correspondent Shannon P. Duffy has an interview with Reginald T. Shuford, the new executive director of the ACLU of Pennsylvania. Also available on our website as a complement to the article is a videotaped portion of the interview -- simply click here to view it, or head to the homepage and click on "Featured Video."

Sharing the top of the page, senior reporter Gina Passarella has the localized results of the AmLaw's midlevel associates survey. According to Gina, "The bulk of Pennsylvania firms did a better job keeping their midlevel associates happy this year than they did last year. That comes amid a national picture that presented the lowest associate satisfaction score since 2004, according to the magazine’s 2011 Associates Survey."

Below the fold, reporter Amaris Elliott-Engel writes that a Philadelphia judge has ruled the $27.6 million awarded to a woman and her husband who said she was injured while taking part in a promotional video for an artificial knee implant should not be reduced.

Reporter Zack Needles has today's Page 3 Regional News story, reporting that Philadelphia-based Hangley Aronchick Segal & Pudlin is now Hangley Aronchick Segal Pudlin & Schiller, marking the firm's first name change since its founding in 1994.

As always, our People in the News section is on Page 2, and the top stories from our sister publications across the country make up the Page 4 National News section.

Today's Page 5 "Family Law" column is by Albert Momjian of Schnader Harrison Segal & Lewis, who asserts that while family law may not make the practitioner a multimillionaire, it certainly is fascinating. Sometimes the facts of the cases are more unusual than the fiction created by soap opera writers. Sometimes the issues are more interesting than the tests created by law school professors.

Page 7 is where you'll find a "Commentary" article from our San Francisco affiliate, The Recorder. Frank H. Wu of Hastings College of Law writes, "I remain convinced that a Juris Doctor degree is an advisable investment. I'd like to explain why. I know, of course, that as a law school dean I have an interest in the matter, yet I have the role that I do because I believe in the professional training we offer and not vice versa."

Have questions or comments about any of today's stories, or our coverage as a whole? E-mail me or any of the reporters directly. We hope you'll enjoy today's Legal!

Jaime Bochet is the Magazines & Supplements Editor for The Legal. Follow her on Twitter at @JaimeBochetTLI or e-mail [email protected].

Will Uncertain Client Demands Continue to Fuel Turbulence in IP Marketplace?

By Anthony S. Volpe
Special to the Legal

We have seen an increase in the amount of movement, both locally and nationally, of IP attorneys in and out of general practice firms and out of IP boutique firms into smaller IP boutiques with a more limited focus on certain practice areas.

The question raised by these movements is whether they reflect client needs or the shifting needs of the attorneys in view of what they perceive to be the new order in IP practice.

There has been a continuous increase in the demand for lower costs, while at the same time there has been an increase in the demand for value-added IP services. Many of the clients searching for new firms or a new arrangement within an existing firm are stressing the need for the selected IP firms to have a firm grasp of their business models and to deliver IP services, especially patent and trademark prosecution, at commodity pricing. 

These client demands are more frequently finding their way into discussions of the firm's licensing support and litigation services, where clients are increasingly demanding defined cost controls.
So, how does the shifting client demand influence or translate into the movement of IP attorneys between and among existing firms with IP practices and newly created IP firms?

Some of this movement may be driven by the often-repeated statement that a particular lawyer moved to gain a larger/smaller platform that is a better fit for the demands of existing clients.  The size of the practice group the lawyer required to meet client needs seems to be determined by the size of the group available at the successor firm; this size is almost always the size that best fits the public relations story accompanying the move. 

My guess is that these moves are being driven more by personal views of the desired practice management than by client demands. If the attorney or group does not have the necessary level of influence within the firm's management group, the move is more often driven by the attorney's need/desire for more control in billing arrangements, or the realization that others with more influence are driving conflict decisions that hamper new client development or cross selling opportunities. I see these movements as being more attributable to the circumstances within a firm than to client demands for change.

Some of the movement may be driven by the more recent trend among some clients to view everything as a commodity that can be competitively priced by market pressures on supply and demand.

If prosecuting firms need a certain volume of work to achieve efficiencies that produce profits, unit pricing can be negotiated against a given volume of active cases. This type of economic model has lead to the creation of low-overhead firms that offer unit pricing without regard to subject matter. In these arrangements, there is often very little attention paid to a particular matter until it has demonstrated value within the IP rights portfolio.

This belated determination of value is a major problem associated with this volume/price model, and it may be a direct result of the model. If the attorney or firm has decided to price services on the basis of volume, there is not likely to be much time for consideration of anything that is not focused on the immediate task. Since the basis of the bargain is price for volume, and volume demands throughput to achieve profits, there is an operational dynamic that works against added value. This may be acceptable to the client, but it seems to be against the client’s best interest.

Because companies are increasingly aware of the importance of securing and protecting IP rights and are increasingly under pressure to control cost, there will be a continuing tension between spending on IP services and the creation of added value in the portfolio as a result of those services.  Companies will continue to search for the right model and IP attorneys and firms will continue to modify their approaches to address their perception of the clients' needs.  Since there is currently no uniform direction of the demand from clients, the currents will continue to shift according to the client's philosophical approach to cost and value. Reaction to those currents will produce continued turbulence.

Anthony S. Volpe is a founding partner of Volpe & Koenig. He can be reached at [email protected].

Will Non-Lawyers Investing Destroy the Legal Profession?

By Anthony S. Volpe
Special to the Legal

The fight over allowing non-lawyers to become investors in law firms is heating up, and there are now at least three suits challenging the current prohibition against non-lawyer investment. In no small way, this bears a striking resemblance to the fight over lawyer advertising, with the big exception being that investing will not be immediately apparent, as is the case with an advertisement.

While the debate is one over changing a tradition, there are issues of transparency. And, if there is transparency, will the majority of the public or clients really grasp the meaning of the disclosed investor information?

Lawrence J. Fox, a respected ethics expert, has expressed the concern that non-lawyers will not understand that our duty is to the client and not firm shareholders. A valid point, for sure, but an overstatement of the issue.

Firms, especially larger firms, often have bank covenants that require certain cash flows, stabilities in the "rainmaker" ranks, and limitations on contingencies. While these are not "investors" as such, the banks are clearly making an investment. The demise of more than one firm has been tired to banking obligations and the exit of rainmakers when the banks impose certain conditions like personal guarantees for future financing.

When those lawyers leave the firm over financing issues, does it serve their clients? Are these banking considerations about their client service or personal interest? 

On the other hand, Fox is not a "Chicken Little." Concerns about attorneys serving their own financial interest by recommending outcomes that increase cash flow using client funds and the like are a constant blemish on the practice. 

Such self-serving practices bring out another issue: what will the public perceive as the motivation for the investments? Will this be seen as lawyers becoming "investment bankers" who are only concerned with huge salaries and bonus?

Much of the power of law comes from the public's view of the ends the laws are serving. Will non-lawyer investment look like greedy lawyers selling a share in the client's matter as a hedge against a negative outcome? Anything that further erodes public trust in lawyers will adversely reflect on all lawyers and the legal system as a whole.

Some advocate the non-lawyer investment pool as a way to finance small firms that will take on risky matters; the David and Goliath argument. Big firms are against new investment because it will make smaller firms better able to compete. In a nutshell, big firms raise concerns about ethics and client service as a way to protect their finances. The counter to that is that small firms want the investment so they can take less meritorious cases and have the investors bear the risk.

I have no strong view either way. For sure, lawyers already accommodate changing practice rules and economic conditions with guidance from experts like Fox. If we are honest about identifying the real concerns and address them honestly, perhaps through the use of professionals managers, like a COO or CFO, these issues may be resolved within the bar without the loss of public confidence in the profession. 

Anthony S. Volpe is a founding partner of Volpe & Koenig. He can be reached at [email protected].

Will Non-Lawyers Investing Destroy the Legal Profession?

By Anthony S. Volpe
Special to the Legal

The fight over allowing non-lawyers to become investors in law firms is heating up, and there are now at least three suits challenging the current prohibition against non-lawyer investment. In no small way, this bears a striking resemblance to the fight over lawyer advertising, with the big exception being that investing will not be immediately apparent, as is the case with an advertisement.

While the debate is one over changing a tradition, there are issues of transparency. And, if there is transparency, will the majority of the public or clients really grasp the meaning of the disclosed investor information?

Lawrence J. Fox, a respected ethics expert, has expressed the concern that non-lawyers will not understand that our duty is to the client and not firm shareholders. A valid point, for sure, but an overstatement of the issue. 

Firms, especially larger firms, often have bank covenants that require certain cash flows, stabilities in the "rainmaker" ranks, and limitations on contingencies. While these are not "investors" as such, the banks are clearly making an investment. The demise of more than one firm has been tired to banking obligations and the exit of rainmakers when the banks impose certain conditions like personal guarantees for future financing.

When those lawyers leave the firm over financing issues, does it serve their clients? Are these banking considerations about their client service or personal interest? 

On the other hand, Fox is not a "Chicken Little." Concerns about attorneys serving their own financial interest by recommending outcomes that increase cash flow using client funds and the like are a constant blemish on the practice. 

Such self-serving practices bring out another issue: what will the public perceive as the motivation for the investments? Will this be seen as lawyers becoming "investment bankers" who are only concerned with huge salaries and bonus?

Much of the power of law comes from the public's view of the ends the laws are serving. Will non-lawyer investment look like greedy lawyers selling a share in the client's matter as a hedge against a negative outcome? Anything that further erodes public trust in lawyers will adversely reflect on all lawyers and the legal system as a whole.

Some advocate the non-lawyer investment pool as a way to finance small firms that will take on risky matters; the David and Goliath argument. Big firms are against new investment because it will make smaller firms better able to compete. In a nutshell, big firms raise concerns about ethics and client service as a way to protect their finances. The counter to that is that small firms want the investment so they can take less meritorious cases and have the investors bear the risk.

I have no strong view either way. For sure, lawyers already accommodate changing practice rules and economic conditions with guidance from experts like Fox. If we are honest about identifying the real concerns and address them honestly, perhaps through the use of professionals managers, like a COO or CFO, these issues may be resolved within the bar without the loss of public confidence in the profession. 

Anthony S. Volpe is a founding partner of Volpe & Koenig. He can be reached at [email protected].

Scranton Firm Announces Merger With Phila. Nonprofit Law Boutique

By Zack Needles
Of the Legal Staff

Scranton, Pa.-based general practice firm Myers Brier & Kelly has announced a merger with three-lawyer, Philadelphia-based nonprofit law boutique Lundy & Flynn.

While the merger became official on Jan. 1, the two firms made the announcement last week.

The combined firm, which now has 14 lawyers, has continued under the Myers Brier & Kelly name.

"We had been working closely with many Myers Brier & Kelly attorneys," said Joseph E. Lundy, a founding partner of Lundy & Flynn and now a partner at Myers Brier. "They still have a very strong nonprofit practice within two or three other practice groups. We were being asked to work with them on a number of matters in Northeast Pennsylvania, in particular."

Lundy said the move has been mutually beneficial because his former firm, which did most of its work in federal courts, gives Myers Brier a more national practice, and Myers Brier gives the former Lundy & Flynn lawyers a bigger base and a wider statewide presence.

"We concluded that one and one would equal three and not just two," he said.

According to Lundy, the nonprofit law practice remained "very steady" throughout the recession.

"Nonprofits do have issues with the economy going one way or another. In some ways, they need to turn up their game in a way that’s different than for-profits," he said, explaining that nonprofits don't typically have the ability to reduce manufacturing or services in a down economy. 

"They need, more so than for-profits, to find ways to work through it and we help them do that."

Zack Needles is a reporter for The Legal. He can be contacted at [email protected] or 215-557-2493. Follow him on Twitter at ZNeedlesTLI.

Reporter's Notebook: More Billable Rate Info for Philly Firms' PHA Work

By Gina Passarella
Of the Legal Staff

The firms mentioned in the article in today's Legal titled "Attorneys Forced to Defend PHA Billing, Staffing Practices" were just a few of the many that did work for the Philadelphia Housing Authority since 2005.

Below is a list of those other firms and the rates they charged for a variety of legal work. All contracts have a two-year base period and allow for three additional one-year option periods, totaling a maximum of five years. The ranges provided are the rates the firm agreed to for the two-year base period through the third one-year option period.

- Schnader Harrison Segal & Lewis: The firm was awarded two contracts: one for general legal services in April 2007 for a possible total of $7.5 million, and one for regulatory and administrative work in December 2005 for a max of $5 million. Under the 2007 contract, the firm charged the same amount for senior partners, partners and associates over the life of the contract. That range was between $310 and $335. Paralegals made between $125 and $140 an hour over the life of the contract.

Under the 2005 contract, the firm charged between $375 and $435 an hour for partners, between $225 and $275 for associates, and a blended rate of between $295 and $320 an hour. Paralegals billed between $125 and $140.

- Blank Rome: The firm was awarded a regulatory and administrative contract in December 2005 for a possible total of $5 million. It charged between $340 and $400 for partners, $295 and $355 for associates and a blended rate of between $325 and $385. Paralegals billed between $150 and $210 an hour.

- Hangley Aronchick Segal &Pudlin: The firm was awarded four contracts since 2005 for a total possible amount of $18.25 million. For the regulatory and administrative, labor and employment and one of the general legal services contracts, the firm provided a blended hourly rate of $285 to $330 an hour over the life of the contracts. All three contracts were signed in 2005.

The general legal services contract the firm signed in 2007 provided rates between $300 and $345 equally for senior partners, partners and associates. Paralegals made between $145 and $175 an hour.

- Wolf Block: The firm was awarded five contracts for a total possible award over their lifespan of $25.2 million. The general legal services contract signed in 2005 provided partner rates ranging from $270 through $315 and broke that down depending on whether the partner was consulting or attending hearings. Associates charged between $240 and $285. The firm offered a blended rate of between $250 and $295.

The 2005 regulatory contract had partners charging between $240 and $280, associates charging between $175 and $210 and a blended rate of $215 to $245. The 2005 labor and employment contract provided blended rates of between $220 and $260, and a $400,000 title review contract signed in 2005 was based on a blended rate of between $260 and $280 over the life of the contract.

The firm's 2007 general legal services contract had senior partners charging between $320 and$340, partners between $285 and $305, and associates between $235 and $260.

- Cozen O'Connor: The firm was awarded a general legal services contract in 2007 for a maximum of $5 million and also took over the contract of Klett Rooney Lieber & Schorling when some of those partners joined Cozen O'Connor in 2006.

Under the general legal services contract, the firm charged between $275 and $325 for senior partners, between $250 and $300 for partners, between $215 and $275 for associates, and between $75 and $90 for paralegals. The Klett Rooney work for "ongoing legal matters" that was transferred to Cozen O'Connor was done at a rate of between $250 and $285 for senior attorneys, and between $175 and $225 for junior attorneys. Those were the rates negotiated by Klett Rooney.

- Kolber & Freiman: The firm handled labor and employment work under a $550,000 contract in July 2005 for blended rates of between $200 and $230. That was the same range that senior partners made over the life of a $2.5 million general legal services contract the firm signed in May 2007. Partners working under that contract made between $185 and $215 and associates billed between $175 and $205.

- Kelly Monaco & Naples:  The firm was awarded three contracts worth a potential $5.4 million.
For the 2007 general legal services contract, it charged between $225 and $275 for partners, between $200 and $250 for associates, and between $175 and $225 for paralegals.

Under the 2006 regulatory and administrative contract, the firm charged a blended rate of $185 to $215 and provided breakdowns for partners and associates separately. Attorneys on the $400,000 title review contract charged between $200 and $225.

- Greenberg Traurig: The firm was awarded a $2.5 million regulatory and administrative contract in 2005. It charged $250 for partners for the entire contract period, $225 for associates,  a blended rate of $238, and $90 for paralegals.

- Cohen & Grigsby: The firm worked with minority-owned firms Harvey C. Johnson P.C. and the Law Offices of Denise Smyler. In a $2.5 million general legal services contract signed with Denise Smyler, the firm charged between $290 and $320 for senior partners, between $240 and $270 for partners, and between $180 and $210 for associates.

Smyler agreed to charge under that contract the partner and associate rates charged by Cohen & Grigsby. Under her own $2.5 million contract with PHA for general legal services, Smyler charged between $200 and $215 for senior attorneys, $180 to $190 for partners, and $170 to $180 for associates.

Gina Passarella is the senior reporter for The Legal. She can be contacted at [email protected].  Reporter Amaris Elliott-Engel also contributed to this piece.

Midsized Firms Bulk Up Staff in 2007

In researching for a piece last week on how Pennsylvania midsized firms fared in 2007 and their projections for 2008, the majority of firm leaders I spoke to reported modest to significant increases in revenue and clientele last year.

Of course, more business often necessitates more staffing and many midsized firms across the state got a little bit bigger in 2007.

Meyer Unkovic & Scott bulked up its roster slightly with two new associates for its litigation group.

Managing partner Kevin McKeegan described the firm as “very cautious” when it comes to hiring.

Philadelphia-based IP firm Woodcock Washburn hired eight associates fresh out of law school, three trademark and copyright lawyers for its Philadelphia office and added three partners and an associate to its Atlanta office.

Executive director Jay Rose called the new recruits a “good synergistic fit” and explained that while some of the hires were made to assist with the workload or fill a void, others were made simply as a means of organic expansion and growth.

“The trademark and copyright group really fit something [we needed],” he said, adding that 2008 is slated to include even more new hires than 2007. “And we saw an opportunity in Atlanta to add to our critical mass.”

Harrisburg, Pa.-based McNees Wallace & Nurick added all four attorneys and their staff from Lancaster, Pa.-based Chesters & Miller to its Lancaster office as well as adding six associates to its Philadelphia office.

According to David M. Kleppinger, managing attorney of McNees Wallace, it’s standard protocol for the firm to hire five or six first-year associates every summer but it rarely brings anyone else on board unless absolutely essential.

“We’re not in a position to over-hire ahead of the need,” he said.

Kaplin Stewart Meloff Reiter & Stein hired two new associates, Tucker Arensberg hired five new attorneys to replace five departing attorneys, and Dilworth Paxson added thirteen new associates to replace ten that left.

Lancaster-based Hartman Underhill & Brubaker didn’t hire anyone new in 2007 but that’s not for lack of need.

“We’re very particular in terms of who we hire and about finding people who are interested in working in our part of the country [as opposed to the city],” said managing partner Alexander Henderson, III. “We probably would hire two right attorneys right now.”

-- By Zack Needles, Staff Reporter