Thursday, June 27, 2013

The more things change, the more they stay the same.

There are lots of stories about the DLA Piper partner who has been charged (not yet adjudicated, though--just charged) with charging clients for unusual expenses while he was a partner at Sidley Austin (see here, here, and here).  They remind me of the dynamic surrounding John Gellene at Milbank (see my paper reviewing Mitt Regan's book, Eat What You Kill, here). 

All organizations get the behavior that they reward. 

Monday, June 24, 2013

New studies on rate increases at law firms--UPDATED

The Wall Street Journal's Jennifer Smith reports that law firms are increasing rates again (here).  I'd love to see those studies mentioned in her article.  The issue of raising rates is, of course, tied to whether those higher rates are collectible.  I could raise my rate to $10,000/hour, but I don't think I could collect any fees at that rate.  And in those practice areas in which rates are reviewed by courts (like my own area of bankruptcy law), raised rates are not a slam dunk.  I'm looking forward to following this story.

Now compare that story to the one that just broke about Weil, Gotshal & Manges laying off sixty associates (here).   That leads credence to my suspicion that, although rates may be going up, the ability of any law firm to collect 100% of the bills based on those new rates may not be going up. 

Friday, June 14, 2013

Best Practices for Working with Fee Examiners

Lois Lupica and I just published an article in the ABI Journal on how best to work with fee examiners in chapter 11 cases (here).  Given the recent publication of the new USTP fee guidelines in larger cases, we think that our article is particularly timely.  We hope that you do, too.

Monday, June 10, 2013

Today's post on Credit Slips--the ABI National Ethics Task Force's Report on compensation via section 328

Here.

This morning's Wall Street Journal article on the costs and benefits of bankruptcy examiners.

Here.  Among the article's points is that the cost of an examiner has to be compared to the benefits.  That's different, I hope, from demanding that the examiner find enough "bad things" to completely offset his costs.  The idea of "funding by bounty" creates a bad incentive to look at trees instead of forests.

But I've seen good examiners (and good fee examiners) in action.  The ability to figure out what went wrong is a necessary part of a reorganization that's successful in the long term.  And to do that, someone needs to be tasked with taking a good, hard look at what happened to create the need for a bankruptcy filing.

I particularly enjoyed the quotes from William Snyder, now at Deloitte, who's been one of the best CROs I've seen over the years.  His common-sense approach, and his ability to deflect what is often very nasty and personal comments as he's working out causes and solutions, is what makes him good.

But back to costs and benefits.  I'm an occasional fee examiner (yes, and a law professor who studies fees, among other things).  I don't think of myself as saving a lot of monetary costs.  Do I find things that should be cut or reduced?  Sure.  Professionals make mistakes, either clerical or in judgment, and typically they're comfortable fixing those mistakes themselves before I have to bring them to the court's attention.  What I do save is time--the amount of time that my team and I spend going over fee applications is time that a busy and understaffed court really can't devote to the same line-by-line review.

That time savings is also true of examiners generally.  If they do their job well, and if they're mindful of what they are costing the estate, then they can get to the bottom of things in a way that other players in a bankruptcy case just won't have the time or financial resources to do.  There is a law of diminishing marginal returns, of course, and examiners who chase down rabbit holes for too long are overspending other people's money.  But a court can take a gander at interim reports versus fees to see whether an examiner is getting out of line.  (And yes, fee examiners can chat with examiners about their bills, too.)

Bottom line?  Look at the need for an examiner and figure out in advance what goals you want that examiner to achieve.  Make sure that those goals are in the order authorizing employment, and monitor the progress of the examiner's work.  And make sure those goals are aligned with the incentives for compensating the examiner.  Avoid a bounty approach, and you're likely to get what you need to get from your examiners.