Legal.

• Position: Industry Outlook - Discussion

The legal industry has experienced its own set of challenges and successes in recent years. This group of leading lawyers discusses industry trends such as changes in billing methods, influx of recent graduates, social media challenges and courtroom ethics.

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We'd like to give a special thank you to Lori Nelson, partner at Jones Waldo and president of the Utah State Bar, for moderating the discussion.

PARTICIPANTS:

Back Row:

Rand Bateman, Bateman IP; Scott T. Evans, Christensen & Jensen; Lynn Davies, Richards Brandt Miller Nelson; Kevin Pinegar, Durham Jones & Pinegar; Hal J. Pos, Parsons Behle & Latimer; Dave Epperson, Epperson & Owens; Arthur Berger, Ray Ouinney & Nebeker; Bill Fillmore, Fillmore Spencer

Front Row:

Lorin Barker, Kirton McConkie; Heidi Leithead, Parr Brown; Steve Clyde, Clyde Snow; Peggy Tomsic, Magleby & Greenwood; Brent Lorimer, Workman Nydegger; Brian Babcock, Babcock Scott & Babcock; Edgar Cataxinos, TraskBritt; Mark R. Gaylord, Ballard Spahr; Brian Burnett, Callister Nebeker; Kevin Anderson, Fabian & Clendenin

Seated:

Paul Harman, Jones Waldo; Gregory Williams, VanCott Bagley; Ellen Maycock, Kruse Landa Maycock & Ricks; Catherine Larson, Strong & Hanni; Lori Nelson, Jones Waldo; Robert Rapp, Austin Rapp & Hardman

Not Pictured: Eric Maxfield, Holland & Hart

What do you think the economy has done to fundamentally change how we do business now?

CATAXINOS: We specialize in Intellectual Property (IP) law. What we have seen, mainly from in-house departments, which we deal with pretty much 100 percent of the time, is during the recession you had a lot of pullback from accounting departments which were overseeing the IP departments. You're still seeing some of that today, but some of the panic is gone now, although some of the restrictions still apply with regard to budgets.

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TOMSIC: We do litigation only, and complex commercial litigation. A lot of businesses do a lot more competitive bidding for different cases and try to really get law firms to come down in terms of the number of people they're putting on cases or negotiate their hourly rate.

At the end of the day, though, when you get into large litigation, even through the recession, businesses are a little more willing to pay a higher price if you have demonstrated that you have a good track record of winning.

PINEGAR: One of the things it's caused us to do is to be more careful in the client selection and intake process than we have been in the past. We are more aware of our accounts receivable. We're more likely to get retainers. We're just more careful in the whole process than we were before.

Have any of you seen clients demand different billing methods because of the change in the economy?

WILLIAMS: We're seeing a lot of clients in corporate or real estate transactions require a maximum fee right from the beginning, which is kind of hard because you don't know much from the beginning. That's fairly common--as are reduced rates for certain aspects of work.

POS: With lots of clients we go through discussions about alternative fee arrangements. But what it seems like we see is discounts. That seems to be one of the big changes coming out of the recession. While there's an uptick in business and some of the concerns about business growth are lessened, there's still a strong control over budgets. So we typically get into discussions about discounts with lots of clients, both new and existing clients.

LEITHEAD: One of the interesting things we've seen with a couple of large cases we're working on is the notion of buy-in with the client. We negotiated something of a discount and we'd say to the client, "You can hold back 10 percent of your fee. And then whether or not we get paid, that depends on the outcome of the case."

TOMSIC: One of the things that we have done in litigation that tends to gather momentum, which we didn't anticipate at the beginning, is work out some type of a deal that you get a lower hourly price, but if you win at the end of the case, you'll get two times your hourly rate. That divides the risk a little bit with the client so that it gets more result-oriented.

Is flat-fee billing becoming more common?

LORIMER: We have basically two sides to our shop. One is the prosecution, which is the obtaining of patents, the other side litigation. Patent prosecution has gone largely flat fee. The difference in what we have now versus what we had before is what clients are asking that we include in the flat fee. They're now requiring--some of them--to have the drawings included in a flat fee and not a separate charge for that. Some of them are not allowing charges for interviews at the PTO. So they're just cramming more and more into less and less.

On the litigation side, we are having some flat-fee requests, but they're still mostly negotiable. We set the rate and then we have regular updates with a client about what it's costing, what the burn rate is. And then they look at whether we can mush some stuff into the next month or whether we can put more into this month. But we try and give them a monthly budget on a flat-fee basis.

GAYLORD: We do flat fees with many of our real estate and business transactions. It's very simple in many respects because you know what you're dealing with up front. You can never really anticipate everything, but with a flat fee it's there.

With litigation, we find it much more difficult, although clients are demanding at least some potential for flat fees. Just because of the nuances in litigation, it's very difficult to go from an hourly rate to a flat-fee rate. What we do in those instances, oftentimes, is say, "If you can guarantee a payment to me, then you're going to get a better discount potentially on an hourly rate." That gives you an assurance that every 10 days you get your bill and you get paid, versus the client that says, "I'll give you a retainer' and then the next thing that happens is the retainer is exhausted or they're not paying on a regular basis. So the idea is to give them a better rate on an assurance of payment.

HARMAN: Some of our larger clients have required that we provide an estimate each month on what our fees are going to be on each matter so that they can budget. We didn't have that requirement before the downturn. Obviously, every month there's fees. We haven't had a lot of caps, but we've had more control from clients. No question.

PINEGAR: Can I ask a question of the litigators around the table? Have you seen clients who might have brought a lawsuit five years ago now not coming to you, but instead trying to find other ways to resolve the problem so the volume of litigation is down?

GAYLORD: No.

LEITHEAD: No. I don't think the volume of litigation is down.

BARKER: Our litigation volume is up. It was flat for a few years, but this year we've seen a significant increase in litigation.

We had a couple of big fixed fees and we've gotten pressure to extend the time of those. We've done them previously on an annual basis or sometimes on a project basis, and we now have clients who would like to go three to five years. There's some positives of that, but it's a little scary sometimes not knowing what's going to happen to rates and the volume of work. So we've tried to be very careful about carving some things out that are a little more unpredictable. Has anyone else seen that trend?

PINEGAR: We've seen that, especially with banking clients, for example.

EPPERSON: The healthcare industry is rapidly changing. I've been doing nothing but defending doctors for 35 years in malpractice actions, so my practice has been very narrow. Nationally, claims are down about 40 percent over the last few years. I attribute that to plaintiff's counsel triaging their cases a whole lot better. We're seeing a lot less frivolous lawsuits that would get nowhere. I think they're realizing they're expensive to bring and they're being more selective.

CLYDE: In the water law arena, we're seeing some fixed fees in terms of very routine administrative things like filing certain kinds of applications with the state engineer.

The other thing we're seeing on transactional work is that clients are insisting that senior lawyers be the ones doing the work; there's a lot less tolerance for young lawyers. Even though it may cost them more initially, they believe they're getting a quicker, better product by having the experience. They are willing to pay for it, and are less tolerant for educating new lawyers.

How has the change in the economy changed the way you hire new lawyers into the firm?

CLYDE: We've done more strategic, lateral transfers rather than hiring new graduates to fill the client demand to get that expertise in the firm.

BARKER: We've seen a very similar phenomenon. It's been a little hard. While we're kind of back from a couple of flat years--the economy is better--I...