Law firm management under the new rules.

• Author: Campbell, Richard P.
• Position: It's a Whole New Ball Game: Playing by the New Civil Rules

SINCE August 1991, when the extensive revisions of the Federal Rules of Civil Procedure were first aired for public consideration, the bench and bar have focused on their effects on the judicial process and the rights and obligations of litigants and counsel. Little, if any, consideration seems to have been given to the practical implications of the new rules for defense law firms, their clients and the public. But the substantial modifications in the way the courts will mandate or permit defense trial lawyers to perform their craft have a direct bearing on law firm size, structure, income and culture.

It is vitally important to keep in mind the fundamental reason for many of the new rules. Civil litigation is too expensive, slow, contentious and uncivil for the public to support any longer. The sad truth is that many lawyers and law firms did not respond in a timely fashion to the changes in circumstances brought on by the economic downturn of the late 1980s. If they recognize the purposes and objectives behind the new rules and their likely practical implications, defense trial lawyers can adjust their practices and conventions so as to avoid the disasters experienced by commercial and corporate law practitioners.

Defense counsel could do well to look to the plaintiffs' bar for guidance. Contingency fee lawyers, unlike defense counsel, accept the fiscal wisdom of minimizing the number of equity partners and associates in their firms, of maintaining modest law offices, of keeping overhead low and of working on a fee basis that is reasonably defined in amount for the client to understand, appreciate and pay. While defense counsel do not have a ready equivalent to the contingency fee, the new rules dictate that we learn from other practitioners and profit from their methods, goals and past successes and failures.

After all, Rule I of the Civil Rules instructs all lawyers to conduct their clients' business with the same goal - "just, speedy and inexpensive determination of every action." Law firms that are structurally burdened will have to change in order to meet this mandate.

LOOKING AT CURRENT PRACTICE

1. Is the Past Prologue?

   It is dangerous to stereotype the trial practices of thousands of idiomatic, skilled defense trial lawyers and their firms practicing in hundreds of jurisdictions. But it is essential to start from some baseline, however inexact it may be. Defense trial firms, as well as litigation firms or litigation departments of multifaceted firms, that engage in repetitive or generic litigation for institutional clients operate on a philosophy that seems to have four basic supporting tenets:

   1. The vast number of lawsuits settle at or near the commencement of the trial.

   2. Partner time should be expended on cases undergoing intensive preparation for imminent trial and at trial because that (a) is the best utilization of the partner's skills and (b) is the occasion that affords the best opportunity to cement the bond between the firm and the client, leading to repeat business.

   3. The inventory of pending cases should be handled by junior partners or associates because that (a) frees the senior partner to work on cases at or near trial, (b) permits the firm to build and maintain an inventory or backlog of pending cases that assures future work and (c) allows the finn and the originating partner to earn extra profits through "leveraging" the work effort of other professionals.

   4. The relatively low transactional costs of handling large numbers of inventory cases by leveraged professionals offsets and marginalizes the steep transactional costs of those few cases resolved only after a full trial by high-priced partners. The firm is able to maintain an image of providing services at low cost.

   The model that unfolds from this philosophy calls for the lowest cost, lowest skilled lawyers who are yet capable of performing the assignments to handle the great bulk of the day-today work. The highest cost, highest skilled lawyers, presumably the firm's senior partners, spend their time either working on cases that are on trial or in the final throes of preparation for an imminent trial, or in supervising junior lawyers.

   Under the old rules, the firm-wide work effort was acceptably uniform with each partner and associate meeting firm productivity standards. Partners exhibited their talents to the institutional clients at critical, high-risk periods and built strong relationships for repeat business. Associates churned away at the inventory cases, protecting clients' interests, resolving many short of trial and producing leveraged profits for the firm. Partners usually divided the firm's profits on the basis of some consideration of the billed and collected fees produced by the personal labor of the partners, the leveraged profits arising from billed and collected fees produced by junior partners and associates, credit for originating new business, and such "soft" accounting factors as firm management activities, pro bono work and standing in the community.

2. How Things Win Change

   The new rules surely will change the status quo for defense trial firms, particularly if the state courts follow the federal courts' lead, as is often the case, in these areas:

   * the uniformity of work effort among lawyers in the firm,

   * the firm's cash flow patterns,

   * the timing and events in the handling of individual cases when institutional clients make judgments about lawyers and law firms that lead to repeat business,

   * the distribution of firm profits,

   * the incomes of individual partners, and

   * the firm's commitments to professional employees, support staff, space and equipment.

   A CLOSER LOOK

   In order to envision the new rules' potential impact on defense law finn management, it is necessary to look more closely at the way our sterotypical firm's handles cases.

   The institutional client typically informs its lawyer - usually a senior partner - about a new lawsuit either by telephone call, letter or direct transfer of the summons and complaint. After preliminary discussions with the client and review of the pleadings, usually involving a few hours at most, the senior partner assigns the case to a subordinate lawyer - usually an associate - for day-to-day monitoring.

   The amount of activity the associate devotes to the file will vary considerably, depending on the size and type of case, the client's instructions and the tenacity of the opponent. Nonetheless, the associate "prepares" the case for possible trial by the partner. Preparation begins with drafting and serving the answer and initial discovery pleadings. Informal discovery is usually done by an independent investigator or claims adjuster, although some firms have their associates and paralegals perform those tasks. As the informal investigation develops, typically a period of relative somnolence envelops the formal discovery process, as evidenced by a series of redundant stipulations whereby each side grants the...