
Things your lawyer won't tell you - y2002
http://www.openforum.com/idea-hub/topics/money/article/16-things-your-lawyer-wont-tell-you-will-chen
======
andrewljohnson
If you are looking for a start-up lawyer, I would highly recommend my lawyer -
George Grellas:

<http://news.ycombinator.com/user?id=grellas>

I have had none of the problems listed on this form. I don't get sneakily
billed or over-billed, I get personal attention from two lawyers (including
George whose name is on the door), and I get what appears to be very sound
legal advice.

I have had two friends hire lawyers to set up their companies, and Grellas's
hourly rate was much lower, and the final cost overall was half of what one
friend paid and less than half of what the other paid.

Moreover, unlike a lot of Valley lawyers, Grellas's firm only represents
start-ups - they have no VC clients. This means they know about the issues I
face, and I can be comfortable there are no conflicts of interest when I look
for VC money.

~~~
joshu
I've been thinking about talking to him about backup counsel (my current
lawyer, whom I love, is sometimes on the other side of deals from me) mostly
on the strength of his commentary here. Good marketing!

~~~
andrewljohnson
Talk to him for sure! He'll certainly meet with you for free, and he's just
down the road from MV (in Cupertino).

------
y2002
"While 45,000 law students graduate from law school each year, fewer than
30,000 attorney positions are available for these graduates."

What a wasteful brain drain. How much better off would our country be if more
of those students went into engineering or became entrepreneurs?

~~~
jrockway
Depends on the area of law. Divorce lawyers and corporate lawyers may be a
waste, but what about prosecutors and defense lawyers?

And, if engineering is so much more important than law, why not pay engineers
more than lawyers?

~~~
WarDekar
Because engineers don't go to an extra 3-4 years of school and go into 200k of
debt to get there.

Someone has to prop up the "higher" education system.

~~~
idoh
Law School programs are all 3 years. Graduating with 200K of debt is really
unusual.

~~~
ibsulon
Count the undergraduate costs as well. It's certainly possible to do it on the
cheap, but those eight clubs, 4.0, and volunteer work that help you make it
into a top 10 school likely means you're not working with the lowly peons,
especially if you're a product of the Ivy system.

~~~
WarDekar
Not to mention the cost of living in addition to law school itself. And don't
forget a lot of the top law schools (you _did_ go to a top law school to
"guarantee" a top salary (or you know, _a job_ ) when you got out, right?)
aren't exactly in the boondocks.

~~~
idoh
I don't want to belabor the point but it goes against evidence. For what it's
worth I went to law school and graduated with less than 100K in debt, as did
most of my peers. And this number is also in line with national averages if
you cared to look it up.

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wglb
This is really not a useful article. All of my experience with lawyers has
been contrary to what is shown here.

~~~
dschobel
The article was completely worthless. It's a revelation tantamount to
"unethical experts have the ability to abuse their clients' trust".

~~~
argv_empty
I would say it's more like "unethical experts have the ability to abuse their
clients' trust _in the following ways: ______."

------
abalashov
While certainly interesting, not all the things the author paints here as
sordid, unethical business practices actually are, at least to the extent
that's intersubjective.

If you're doing a startup, you may want to take some lessons from the eons of
microeconomics and management wisdom condensed into some of these things
instead of cheering at the burning effigy of the man with the briefcase. It's
a much more pithy, intuitive introduction to concepts like economies of scale
and capital investment than a theoretical overview:

1\. _Charging for modifications to document templates instead of original
forms as though original_ \--

It is common to leverage technologies, procedures and and/or existing assets
as part of a service offering. Who does anything from scratch more than 5
times before they get tired of it?

This is no different than one of us building an API or a framework so that
programming tasks that used to take 20 hours can now be done in 5 hours.

In our world, that does _not_ mean you should now be billing the customer 5
hours for the same task, at least, not if you have any business sense. If you
do that, you derive no economic advantage from the up-front work you put into
building that framework, nor do you even make back the time (money) you spent
building it. There's no incentive to do that; in that case, you're better off
doing everything from scratch and billing for it.

The proper thing to do is to transmit _some_ of the advantage of your lever
into the price. If the task used to take 20 hours, now takes 5, bill the
customer 15. It's cheaper for the customer and improves your competitive
position while allowing you to earn a return on the up-front investment you
made in developing your efficiency-enhancing technology, which can sometimes
be hundreds or thousands of man-hours.

This is a form of amortisation; a fraction of the cost of the capital outlay
in producing the technology is distributed into the cost basis of every
application, deployment or instance. Big companies do this all the time; it's
one of the key points that guides their pricing decisions on services that
capitalise on internal tool chains, utilities, etc. For example, if the IT
department at Nortel spent $1m building a new CRM and case management system
for all the support people to use, you bet the cost of that $1m is going to be
distributed into the cost of support contracts by people figuring out the
bottom line. This is not only normal, but _prudent_.

So, while it may be deceptive to _claim_ that a document was literally
prepared from scratch and bill as if it were, charging money corresponding to
the literal amount of time spent on something even with the efficiency
advantage of a lever you had to build is dumb. The lawyer did, at some point,
have to actually build those documents; they're entitled to recoup their
investment and build fat margins into it on top.

How much is a question for price competition; the market-affirming answer is,
"as high as they can get away with."

2\. _I hand off work to peons but charge you a lawyer’s rate_ \--

Mostly, clients do business with a law _firm_ and pay for the services of that
firm as a whole, in the aggregate. This includes a cost basis consisting of
overhead.

Again, to bring this back to our industry, this is no different than charging
the customer $100/hr as a web design/development company, despite the fact
that parts of the project might pass through a range of people with widely
varying skill, credential and compensation levels. Some of these people may be
internal, others outsourced, etc. Hourly billing is not a continuously
variable transmission; it doesn't jump up and down depending on whose exact
eyeballs are on your project at this exact moment. Compensation is for the
company as a whole.

Besides, it requires up-front and residual investment to find, qualify, hire,
train, and continuously employ a paralegal, assistant, clerk, etc., and there
is no reason why their work on your behalf as a lawyer can't fetch much higher
hourly rates than what you pay them. This is no different than the reason why
project-based contractors earn more hourly than permanent employees. You want
to pay $50/hr for the services of a paralegal instead of $300? Fine, then hire
them on full-time at $60k (~$30/hr) + benefits yourself, and figure out how to
direct their efforts and utilise their capabilities yourself.

It's $1 for the nail, $199 for knowing where to put it.

There is absolutely nothing wrong with billing a composite rate in
consideration of all the time, money and expertise put into creating a firm -
together with the right people, management, process and assets - that produces
useful results as a cohesive whole.

Why would we hold law firms to different standards than we hold technology
consultancies and service firms?

3\. _I hope you don’t look too closely at the expense report_ \--

Making margin on expenses is a normal and accepted practice in many other
industries; it offsets the overhead of procuring them and dealing with them,
as well as a certain amount of small, but calculated risk that you won't be
remunerated for expenses incurred on the client's behalf.

4\. _You’re always on the clock_ \--

That's also normal across the board in professional services.

5\. _Your bill is only a guesstimate_ \--

Also normal, within a reasonable margin of error.

6\. _I’m training junior attorneys on your dime_ \--

How is this different from, "I'm training junior software engineers on your
dime?" Normal.

...

I'm not saying lawyers don't do seedy stuff; you'll find no disagreement from
me. But let's be realistic here; law firms are businesses -- it's not fair to
praise everyone else's fiduciary astuteness when they do these things and
vilify lawyers for them just because we all love to hate lawyers.

The presence of the particular points I mentioned above in the article
basically says to me, "Law firms are so evil, look at all the business-savvy
and commercially normative things they do!" This is stupid.

~~~
abalashov
Oogali posted a response to my post on his Tumblr blog. I feel that in many
respects it is an orthogonal and/or supplementary response rather than a
diametrical rebuttal, but all the same, it is quite a good one:

[http://pseudonym.tumblr.com/post/408523735/abalashov-a-
rebut...](http://pseudonym.tumblr.com/post/408523735/abalashov-a-rebuttal-to-
your-rebuttal)

~~~
abalashov
And here is my response to Oogali, as I lack a blog:

 _1\. This isn’t pizza delivery: just because a lawyer has passed the bar, it
doesn’t mean that they can whip up legal documents in 30 minutes or less. How
“standard” is the document you’re requesting?_

 _If it’s as standard as you think it is, then order it off LegalZoom.com and
be done with it (or take said LZ document, and have your lawyer make
modifications to it that fit your business situation)._

 _I put together my first contracts by reading contract law books, BarBri
material, and reviewing a variety of other contracts (both client, and
vendor), and adapting it all to fit into my needs. That process took me a
total of 10-12 days._

 _Now, using the example of my first contracts I did, take that same number,
with 8 hours a day, and count the revenue I’ve lost out on by doing it myself.
In the months after that, I met with various clients, who needed different
legal clauses, and I spent no less than 1 day for each client, sometimes 2,
making said modifications, researching them, and reviewing them._

 _And while my contracts always passed the client’s gauntlet of internal
counsel, I never felt comfortable with it until I took it to a lawyer. You are
paying for more than a document. Outsource your risk._

This is good advice for what the client should do. However, that is the
client's choice. If they instead opt for the more expensive option of getting
a standard document from a bricks-and-mortar law firm, for whatever host of
psychological and practical reasons, that is their prerogative.

I understood the issue with template derivations to concern common documents.
If the attorney provides a form document that is too generic to suit the
specific requirements of an idiosyncratic business situation that truly merits
a custom document, _that_ is the essential problem - call it deception,
incompetence, etc. In any event, the problem there is altogether distinct from
the concept of billing higher than literal time spent on template derivations.

 _2\. Your web design analogy doesn’t apply. Law firms have different rates
for partners, associates, and paralegals, and based on who works on your task,
you are billed accordingly._

I did not know that. If that's in fact the case with a given firm, then
billing you attorney's rates for a paralegal's work is wrong.

But again, it is wrong because that's not what they claim to do, not because
it's wrong to bill out all work by all personnel out at a standard firm rate.

It may be unethical, but for a different reason than the one that appears to
be given by the original author.

 _The partner is still 100% on the hook for any work that these folks churn
out, so it better be right the first time. They don’t have unlimited time, and
certainly not unlimited billing time. So any contract work that requires them
to come back to and defend due to uncertainties/errors, is work they shouldn’t
have done at all._

Agreed, but again, that's the attorney's problem, not because it's wrong to
bill out a paralegal's work at $300/hr _ipso facto_.

 _And I’m pretty sure, the associates and paralegals don’t want to be called
“peons”._

I'm pretty sure of that too. :-)

 _There’s an acceptable amount of margin, but even then, it’s not really
margin. A copy doesn’t cost 5 cents. A copy costs man-hours to a) interrupt
your existing train of thought, b) go to the copier, c) make said copies, d)
potentially troubleshoot why the copier doesn’t work and correct it or find
and alternative, e) collect copies, f) resume work._

 _Think about the cost of “context switching” next time you say you can make
copies cheaper than the next person._

Strongly agreed. All the more reason to mark up the hard costs or charge a
separate service fee for the end result of utilising the product.

 _Continue to look at it from a consulting/professional services view. Sure
your client may call you up with some basic questions, and you can answer them
no problem, but once the questions start getting complex, you start to get a
little uneasy with giving them something valuable for nothing in return._

Personally, I give away a great deal of free advice, consultation and general
communication to my clients.

But I don't fault someone else for being a little more practically minded than
I about these things.

 _Your bill should not be a guesstimate. Everyone, and I mean, everyone is
required to record the number of hours they spent on a task or project. IT
consultants do it, and lawyers do it. No exceptions._

It should rather closely reflect actual time spent in the grand scheme of
things, but there is an allowable margin of error and rounding, especially
considering the impracticality of accounting for a few minutes here and a few
minutes there in the context of human task switching.

------
radley
We had a very good attorney who not only told us when he was "talking
shortcuts" (forms, paralegals), he actually advised such methods to save costs
when appropriate.

------
gamble
#17 - "There's no legal risk in doing XYZ"

~~~
noonespecial
Sure there is. There's also plenty of risk for _not_ doing XYZ. In America,
anyone can sue at any time for any reason. You are _always_ at legal risk. So
the advice that lawyers give "always talk to your attorney before..." is
technically correct no matter what. It just happens to be self-serving (for
the lawyer), impractical and needlessly expensive. Kind of like "you are
always at risk of a head injury, never leave the house without wearing a
kevlar helmet".

~~~
aaronblohowiak
Gamble was suggesting that is something that a lawyer would not say. so you
are in agreement.

~~~
noonespecial
A lawyer wouldn't say ostriches can fly either. It goes further than that. The
article was things a lawyer won't tell you but are true nonetheless. From a
lawyer's standpoint, everything is a legal risk of some form or another, so
I'd argue that this fits in the ostrich category, not the article's category.

------
Confusion
It's the same problem that haunts the software industry. It's hard for people
outside the industry to judge the quality of people in the industry and as a
result, they choose their partners based on everything but the thing that
matters: the quality of their work. As a result, they pay $200 an hour for
'software consultants' that wouldn't recognize a memory leak if their life
dependended on it. As a further result, the industry doesn't even try to
compete based on quality.

