July 2006

This issue contains the following articles:
  1. Does Mandatory Malpractice Insurance Disclosure Really "Protect the Public?"
  2. Should Lawyers Face a Statute of Limitations?
  3. LawBiz® Value: Practicing What We Preach
  4. Managing the Check Deposit Process


  1. Does Mandatory Malpractice Disclosure Really "Protect the Public"?

    I have long contended in my blog posts and other writings that, as bureaucratic institutions with no performance measurement sticks or profit incentives, State Bar Associations have a tin ear when it comes to "The Business of Law®."

    The State Bar of California recently declared its intention to focus energy on member benefits. But, last month, this Bar reverted to "old form" by sending out for public comment its proposed new Rule of Professional Conduct requiring every California lawyer to disclose at the start of an engagement, and for the State Bar web site to disclose generally, whether the lawyer has malpractice insurance coverage. The American Bar Association adopted its own resolution along similar lines and has now enlisted nearly one third of all states to follow in one form or another.

    The mandatory malpractice disclosure rule is being touted as a way to "protect the public." I have been vocal on the point that it does no such thing. Only a program (such as exists in Oregon) that would enable all lawyers to obtain affordable malpractice insurance before disclosure takes place would do that. What this proposal actually does is hurt the very persons any State Bar should be trying to serve: its lawyer members. In California and most other states, that specifically means the solos and small firms that make up the majority of State Bar members. These lawyers typically don't earn much more than $50,000 a year, and find the $4,000 to $7,000 plus (minimum, oftentimes more) annual cost of malpractice insurance to be prohibitive.

    This reasoning explains my comments that have been quoted in various statewide media outlets. As I stated in the Daily Journal: "If the bar really wanted to protect the public, they would not stop at disclosure, they would mandate insurance. But if they did that, they know they would have a riot on their hands." And in calling mandatory disclosure "outrageous" for The Recorder, I added: "This program makes a demand without the ability to fulfill it." Certainly someone is going to profit from mandatory disclosure (insurance companies and insurance consultants, of course), but lawyers and the public will not. My colleague Carolyn Elefant, who is an advocate for solos on her web site www.myshingle.com, made this comment on my position: "Ed is the first law practice management expert I've read who apparently isn't looking to profit off the rules by accepting them and then charging solos to comply. Rather, he's using his expertise to help our profession achieve the right results."

    I wanted to offer this explanation to anyone who may have seen my comments and wondered about my stance. For almost 40 years I've believed that running a law firm in a businesslike way improves the professionalism of what we do as lawyers and ensures the best possible results to clients. Proposals that jeopardize the financial viability of law practices serve neither the public nor the profession.

  2. Should Lawyers Face a Statute of Limitations?

    As a lawyer of a "certain age" (and recently returned from cycling camp with Lance Armstrong's coach), two recent items on the topic of age and the practice of law caught my eye. An article in The Seattle Times about the "graying of the bar" was noticed by blawgers around the country. Noting that 66% of the members of the Washington State Bar are 41 or older, and that 10% are over 60, the article declared that "incompetence due to declining skills, failure to keep pace or dwindling mental acuity may soon rise in the legal profession." That seems overblown enough, but a second item described a new regulation in India (where legal work is increasingly being outsourced) stating that if you are not licensed by the age of 45 you cannot become an advocate. "We don't want the Bar to become parking lots for retirees," one official was quoted as saying.

    The natural conclusion seems to be that older lawyers are more careless, have too many pressures in their mid life that distract their attention and cause them to make errors leading to discipline. By implication, younger lawyers have neither so much business nor handle such complicated matters as do older lawyers ... and therefore stay out of the "system."

    I disagree. In my consulting I've seen little difference in the number and complexity of matters that older and younger lawyers alike handle. Factors such as geographic setting, size of firm, etc. are more important regarding complexity of matters handled. Regardless of lawyers' ages, the majority of the complaints against them to Bar Associations relate to careless dealings with clients poor service, failure to return phone calls, inaccurate arithmetic on the billing statements. These are all management issues, not technical or substantive issues of law. Poor client service is a problem at every age.

    Far more important, it seems to me, is that older lawyers should plan for successfully transitioning their practice well before the time comes that they choose to retire or are forced by ill health to retire. Failure to plan for how your clients will be taken care of as you approach the age of retirement can, according to some authorities, be construed as reckless disregard for client welfare a true ethical violation. As we've written before, planning options can include simply closing or selling the practice, but other options are just as viable: for example, grooming a successor by hiring an associate to learn the practice, or merging with or hiring a lateral with the option to sell the practice to him or her.

    With a succession plan in place, older lawyers who keep up with evolving professional rules and trends through MCLE and who continue to apply the client service lessons presumably learned throughout their careers should have no trouble remaining in practice as long as desired.

  3. LawBiz® Value: Practicing What We Preach

    As a consultant I continually urge lawyers and law firms to think in terms of value: providing advice that means solutions to the client. For us at LawBiz®, providing you with value means developing new products that will make your firm and practice more profitable. I'm proud to say that we've been on value overdrive in the past few months, and would like to give you an update on the latest tools that we've put at your disposal:

    • Webinars: On Tuesday, July 18, LawBiz® Management has scheduled our first webinar online coaching session. Titled, "An Introduction to Business Competency for Lawyers," it is based on the first in our series of special reports (see below) and aims to provide small firms and solo practitioners with real life guidance on the basics of business planning and performance. The webinar format allows us to take questions from participants in a chat room session immediately following my formal presentation. My friend Lisa Solomon and her venture Legal Research & Writing Pro are sponsoring the webinar, and signup is available on Lisa's web site (www.legalresearchandwritingpro.com)

    • Podcasts: We have added interviews with a number of impressive speakers. Ron Baker, principal of the Verisage Institute, had a provocative session describing how customers make purchases to satisfy a want. Litigator Jeff Riffer gave practical tips on how to use Microsoft's new OneNote software for case management, while attorney Rick Simses shared ideas on alternative billing approaches in which lawyers and clients share the risk. Dr. Gayle Carson explained how better time management can help anyone pick up 22 eight hour days in the course of a year. And Steven Lauer, Director of Research at Integrity Interactive Corporation, shared secrets on how in house counsel pick outside counsel. Intrigued by these topics?
      Click here to visit the get started!

    • Books: More Secrets of the Business of Law, the sequel to our highly praised original Secrets book, is ready to give you insider strategies that will make your practice more profitable. Collecting your fees, maximizing your technology investment, making the most of outsourcing, building a blogging strategy these and more topics are covered. Orders placed at our web site before the August 1, 2006 publication date will cost just $39.96, a 20% discount from the $49.95 cover price.

    • Special Reports: Our first special report on Business Competency for Lawyers will soon be followed by a second, new report on the lawyer banker relationship. The report will offer tips on how lawyers with sole practices, small firms or mid size firms can build the mutually beneficial and effective banking relationships that are critical for business success. Our Special Reports are practical yet sophisticated, an easy read that well repays its low $29.00 price. We've already begun work on the third report strategies law firms can use to prepare for and recover from a disaster. Watch this Ezine or our web site for more information coming soon!

  4. Managing the Check Deposit Process

    Most lawyers still get paid by personal checks from clients, and must physically deposit those checks with the bank. As revealed in our forthcoming special report on the lawyer banker relationship, lawyers should be aware of some special considerations that will help them manage the check deposit process more effectively. Here are three pointers to consider:

    • Never wait to deposit checks. This is the first rule of cash flow management. While a check is being held for deposit, too many problems can happen: the client may become angry and stop payment, or have insufficient funds when the check is finally presented for clearance, or become party to a lawsuit or other proceeding in which financial assets are attached or "frozen." Deposit all checks even if the amount paid does not match what you billed; negotiate or correct the variance later.

    • Cash, rather than deposit, certain two party checks. An attorney is not automatically authorized to endorse the client's name to checks. This can be an issue with a two party check in which one of the parties is not available (out of the country on business, for example) to endorse it. Banks may refuse deposit of such checks, feeling they may have liability if there was a dispute between the parties. But by cashing rather than depositing the check the liability for any dispute is on the account holder, and the bank believes it does not assume liability. As long as you have the funds in your account to cover the check, it should go through. Any hold can only be until the check actually clears, which is usually midnight the same day according to the newest check clearing rules, although some banks will hold checks for more than $5,000 slightly longer.

    • Use an endorsement stamp on all your checks. The USA Patriot Act requires financial institutions to verify the identity of each person who opens an account. Some banks, however, reportedly use the Patriot Act to refuse deposit of checks made out in ways other than the exact name of the checking account (for example, to "John Smith Law Offices" when the name of the account is "The Law Offices of John Smith"). An endorsement stamp that says, "Pay to the Order of The Law Offices of John Smith, For Deposit Only," and that includes the bank name and account number, can avoid hassles over the multiple ways people make out checks.

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