On Guns, Liability, Societal Change and the Role of Plaintiff Lawyers

There have been a number of tragedies in the news recently, including the shooting at Sandy Hook school in Newtown, CT, the luring and shooting of volunteer firemen in Webster, NY, and the shooting massacre of moviegoers in Aurora, CO, among many others.  These events have provoked a national debate over America's relatively easy access to guns, with a particular hue and cry over those type of weapons designed for military action rather than for recreational hunting.

CNN newsman Piers Morgan, among others, has become a highly visible and vocal advocate for gun law reform (and has become a target for vitriolic attacks and an unrealistic grass roots effort to deport him as a result), sales of the assault weapon used in Newtown have skyrocketed and the FBI reports a record number of background checks -- necessary in many states for the purchase of handgun -- in late 2012.  The latter two are presumably a reaction to an expected tightening of gun laws.

I don't profess any expertise in Constitutional Law generally or the Second Amendment specifically.  However, it seems to me that the phrase "A well regulated militia being necessary to the security of a free state, the right of the people to keep and bear arms shall not be infringed" reflects the founding fathers dual beliefs that guns should be available to citizens and that such availability should be regulated.  Others have opposing views, and frankly unless or until we develop the technology to reanimate the founding fathers and inquire directly, we may never reach consensus.

Still, one cherished hallmark of a free society is to engage in vigorous debate, advocating for or against a view.  As the fictional President Andrew Shepherd once said:

"You want free speech? Let's see you acknowledge a man whose words make your blood boil, who's standing center stage and advocating at the top of his lungs that which you would spend a lifetime opposing at the top of yours. You want to claim this land as the land of the free? Then the symbol of your country can't just be a flag; the symbol also has to be one of its citizens exercising his right to burn that flag in protest. Show me that, defend that, celebrate that in your classrooms. Then, you can stand up and sing about the "land of the free."  (The American President, © 1995, Universal Pictures, Aaron Sorkin, screenwriter)

There is without question a troubling and growing trend of mass shootings using military-style assault weapons.  Do we blame the guns?  Do we point to insufficient mental health care?  Regardless of your particular stance on gun control, we can all agree that society benefits from a reduction in mass shootings.

I have no idea where the idea first germinated, but the Twittersphere has been abuzz of late with the novel suggestion to require liability insurance for gun ownership, in much the same way that automobile owners must carry liability insurance.  While such action wouldn't eliminate guns, it would shift the economic costs of misuse from society generally to those most associated with guns.

As Cornell economist Robert Franks said in a recent NPR interview, "Nothing in the constitution grants people the right to expose others to serious risk without compensation. Insurance sellers are skillful at estimating the risks posed by drivers with specific characteristics, and we could expect them to be similarly skillful at assessing the risks posed by gun owners."

But others are taking a different approach to drive societal change. Plaintiff lawyer Irving Pinsky has floated the idea of a massive lawsuit against the State of Connecticut for the Sandy Hook incident.  An interesting twist is that his client is reportedly a child who was not a victim, but a survivor who was traumatized as the events unfolded.  According to Pinsky, there are multiple additional parties who could become defendants as more evidence is uncovered. 

A spokesperson for Connecticut Attorney General George Jepsen responded that such a claim is misguided, and that "...a public policy response by the U.S. Congress and the Connecticut state legislature would be more appropriate than legal action."  Other responses to Pinsky's action have been livelier, including multiple death threats and a communication from the state's trial lawyer association scolding Pinsky for the timing of his action.  A local newspaper discusses the folly of suing the state rather than Newtown, the municipality which has domain over the implicated school. 

The blogosphere and many Facebook walls have exploded with commentary declaring the lawsuit frivolous and equating it with other misguided tort actions - notably the McDonald's hot coffee lawsuit in which a woman received nearly half a million dollars in damages after spilling hot coffee on herself.  But as with most issues that engage and enrage the populace, there is more nuance and complexity than meets the eye.

In the McDonald's case, the jury was shown evidence that McDonald's had multiple opportunities to address a clear trend of scalding coffee injuring customers, yet business leaders chose, based on a microeconomic cost-benefit analysis, to quietly settle cases as they occurred rather than implement a company-wide solution.  Similarly, in the early part of this century ample evidence, including statements from Ford engineers, established that the auto manufacturer was explicitly aware that its SUV had a tendency to roll over and kill passengers, yet Ford's leaders chose, based on a microeconomic cost-benefit analysis, to quietly settle cases as they occurred rather than implement a company-wide solution.

British Petroleum's Deepwater Horizon oil spill into the Gulf of Mexico was reportedly based on a series of cost-cutting decisions and a lack of a system to ensure oil well safety.  The space shuttle Challenger disaster shares some of the same characteristics, namely that groupthink decisions coupled with flawed economic analysis tend to underestimate the likelihood and impact of an adverse outcome.

We've leapt from gun control to hot coffee to astronauts.  What, you may ask, is the connection?

Simply put, organizations consistently fail to properly predict disasters.  Combine the inherent optimism of leaders with a tendency to underestimate financial risk, and most businesses will peg the expected value of an adverse outcome at near zero.  (At its core, Expected Value is the probability of an outcome multiplied by its financial impact.)  Government, via its regulatory bodies, almost by design enacts rules and guidelines only after a recurring pattern of incidents require it.  Note that the transportation, energy and food industries are regulated, yet this failed to prevent the aforementioned incidents.

In our legal system, a necessary role of plaintiff lawyers is to identify these gaps, publicize them and, where possible, change the underlying economics of organizations' Expected Value calculations.  Consider the optimistic McDonald's executive who calculated the bottom-line impact of a few hundred hot coffee lawsuits, each of which might incur a couple of thousand dollars in settlements annually, and contrast that with chagrined McDonald's executive who must factor in a $2.8 million punitive damages award on a single hot coffee case (the amount of the original jury award before a judge reduced it), and you can see the impact the plaintiff lawyers have on driving corporate change.

Pinksy, in a compelling interview with Bloomberg Law's Lee Pacchia in which they discuss the potential Newtown lawsuit, makes exactly this point:  when businesses or government can't or won't act, it's up to plaintiff lawyers to drive change.  Of course, there are numerous examples of abuse, leading over time to efforts at tort reform - capping punitive damages awards, making it harder to certify a class in a class-action lawsuit, etc. I won't pretend to defend frivolous lawsuits, though it's helpful to point out, as this Yale Medical Journal does, that one man's frivolous lawsuit is another man's biased media portrayal.

In one of my corporate roles, I ran a company that provided services to plaintiff lawyers, which was quite a change from my many years (before and now) working with mid-size to mega defense law firms and in-house counsel clients.  A key takeaway was an appreciation for the voice plaintiff lawyers give to people and issues that otherwise would not reach the light of day.  I met numerous plaintiff lawyers who were passionate advocates for the "little people."

And, yes, I met some who regarded the little people as mere pawns in an endless quest for ego gratification.  But I've met both types on the defense side too.  Say what you will about the brash plaintiff lawyers who have stepped up to the microphones after each shooting or other disaster, but I've come to respect the role such lawyers play in our legal system.  A topic for endless debate, no doubt, but surely another reason to love this country.

For some more fantastic and in-depth back and forth discussion of gun control, see the Becker-Posner blog, where Nobel prize-winning economist Gary Becker and esteemed Federal Judge Richard Posner offer insightful and often opposing perspectives on issues of the day.  Even the reader comments are far more educational than any of the pablum put forth on our Facebook walls by self-anointed experts!

Timothy B. Corcoran is principal of Corcoran Consulting Group, with offices in New York, Charlottesville, and Sydney, and a global client base. He’s a Trustee and Fellow of the College of Law Practice Management, an American Lawyer Research Fellow, a Teaching Fellow at the Australia College of Law, and past president and a member of the Hall of Fame of the Legal Marketing Association. A former CEO, Tim guides law firm and law department leaders through the profitable disruption of outdated business models. Tim can be reached at Tim@BringInTim.com and +1.609.557.7311.

The 2 Critical Questions that Lead to Continuous Improvement

If you want to improve your law practice, your business, your customer service posture, then you need to ask two simple questions, and ask them regularly: What are we doing well and what can we improve?

I believe in reducing complex ideas into bite-sized morsels that can be more easily consumed, particularly when it comes to something so fraught with peril and emotion as gathering candid client feedback to improve your business.

I recently engaged in a vigorous discussion with a consultant whose academic credentials in statistics and market research far exceed my own. She produces exhaustive reports on brand familiarity, relative market position, and statistically precise indexes of client satisfaction. But, she laments, her clients generally ignore her studies, filing them away in the proverbial circular file rather than formulating an action plan. My diagnosis was simple, and it reflects my own approach to assessing client satisfaction and continuous improvement: reduce the complexity and focus on gathering actionable information.

There's a time and a place for complexity and nuance, but it always follows the acceptance of core concepts. If you don't know explicitly what your clients value about your service and if you don't know explicitly what they wish you would do better, then all the charts and graphs and analysis are just so much statistical noise. Sustainable profitability comes from client satisfaction. Client satisfaction comes from continuous improvement. Continuous improvement happens when we regularly ask our clients what we do well and what we can improve.  It's that simple.

When I present these two simple questions, there is always someone who will suggest alternative wording or suggest two or three or ten additional questions to add color or depth to the findings. Sometimes this works. Often it just complicates things. It seems as if we create complexity where simplicity is needed, because complexity pays better, or provides job security. But there is no better job security than channeling the voice of the customer, and this isn't hard to do.

What are we doing well?  Let's not assume that everything -- heck, anything -- we're doing is worth continuing. It's critical to know explicitly and specifically what clients value, why they value it, and that they want us to continue doing it. Here are actual excerpts from client feedback sessions I've conducted, or feedback my clients have compiled. The consistent theme of each is that no one knew the high value the clients placed on the specific action or service, and in some cases we had been debating whether to stop the practice.

"We appreciate the monthly one-page project summary reflecting progress against the original budget and timetable. We may have never mentioned it, but we distribute that report to key executives and they love how we demonstrate that the law department operates like other business functions."  (Deputy GC responsible for Litigation to outside counsel retained for a single high stakes matter)

"I like the detailed time entries on the invoice. I have to carve out time every month to make phone calls to my outside counsel to ask for clarification on the invoices, but with your firm I rarely need to."  (Chief Legal Officer for a small manufacturing company)

"No other vendor salesperson stays involved during the configuration and implementation phase, but [our salesperson] stayed in touch all the way through rollout to ensure we got everything we needed."  (Law firm CIO to a legal technology vendor)

What can we improve?  This is specifically worded to acknowledge that there is always something we can do better. Many of the law firm partners I work with are hesitant to hold annual client satisfaction reviews, let alone end-of-matter reviews, because they cringe at the thought of inviting criticism, or worse the thought of that criticism being shared with a colleague such as a Managing Partner instead of them. Or perhaps worst of all, they loathe even the idea of sharing a client's criticism with their implicated colleagues. The question worded in this way reduces that emotional baggage, because it's clear our intent isn't placing blame or avoiding responsibility. Our goal is simply to identify specific actions that we can improve. More examples:

"I don't enjoy having to wait an indefinite period for a call back. Sometimes I get the sense that you won't call until you have an answer. It's okay if you need time, if it's urgent I'll say so in my voice mail or email. But it would be better for me if you acknowledged receipt of my call or email and let me know when you can get back to me. I'd much rather know that you're in court and can get back to me next Monday than wonder all weekend if you even got my call. In fairness, if it's urgent and you can't get to it right away, I may need to call in someone else. But I will always find another opportunity for those who are good at managing my expectations.  (Associate GC for a clothing manufacturer to a law firm that has received very little work even after a lengthy process to reach the preferred panel list)

"I enjoy attending your dinners at [a major conference] because you invite others that I want to see. But I am uncomfortable with the invitations to ball games and other events. It's not that I dislike one on one time, I'm happy to meet over lunch, but we have a policy against accepting gifts and attending a sporting event in your suite doesn't feel right to me."  (Executive Director for a mid-size law firm to major legal services vendor)

It may come as a surprise to learn that many clients, possibly most clients, don't relish the thought of giving criticism any more than those on the receiving end like hearing it. The questions posed above help avoid the emotional baggage and put the focus where it belongs.  Let's discuss those things we do right and that you believe we should continue, and let's discuss those things that from your perspective we can do better.  Once you master this approach, there's a lot more to help you home in on specific industries or market segments or to help synthesize and prioritize a high volume of disparate feedback.  But let's not get ahead of ourselves. Start simply and grow from there.

Timothy B. Corcoran is principal of Corcoran Consulting Group, with offices in New York, Charlottesville, and Sydney, and a global client base. He’s a Trustee and Fellow of the College of Law Practice Management, an American Lawyer Research Fellow, a Teaching Fellow at the Australia College of Law, and past president and a member of the Hall of Fame of the Legal Marketing Association. A former CEO, Tim guides law firm and law department leaders through the profitable disruption of outdated business models. Tim can be reached at Tim@BringInTim.com and +1.609.557.7311.

Why Big Law Firms Implode

Anyone following the large law firm marketplace knows of the impending demise of another big law firm.  This time it's Dewey LeBoeuf, the several-year old combination of Dewey Ballantine and LeBoeuf Lamb Green & MacRae.  At the time of this writing the firm is not, technically, dissolved.  But by the end of this week some action or combination of actions by the firm's bankers, creditors, partners or departed partners will put the final nail in the coffin.

Yes, large law firm lawyers earn a lot of money, and yes we have an oversupply of large law firm lawyers, but it's nonetheless extraordinarily sad when law firms implode.  Presumably, the remaining partners, even those who haven't yet found a new home, have saved enough money over their careers to tide them over until they join a new firm.  But it's a terrible and swift blow to the many staffers and associates who almost overnight will be left without a paycheck, probably without health insurance, and perhaps even stripped of some portion of retirement funds.

I've had multiple conversations with large law firm lawyers in recent weeks about this episode, and without exception all feel their firm is uniquely situated, collegial and immune from the sorts of shenanigans that led to Dewey's demise.  Sadly, this isn't true. I don't have specific insights into this collapse, as the firm is not and has never been a consulting client of mine and I'm not privy to its banking or financial records. 

As a vendor, some years ago I did engage in a protracted and messy negotiation with the Executive Director when he was in a senior role in a prior firm, and my primary takeaway is that his extraordinary arrogance masked his limited intellect. Still, one blithering idiot who has bullied his way to a position of influence isn't typically enough to take down an entire large law firm.  So what are the likely and repeatable root causes of such a debacle that other law firms should monitor?

When it comes to law firms, bigger is not necessarily better. Sometimes it's just bigger.  Dewey's now embattled chair offered a revealing insight when justifying the Dewey and LeBoeuf merger, insisting that the firm needed to get bigger to compete in a global economy.  I spend a lot of time educating law firm partners about the fundamental financial drivers of their law practice, and I've learned that many are unaware of the hard cap on revenue that the hourly method of billing imposes. 

At any point in time, I can calculate the firm's maximum potential revenue by multiplying the number of timekeepers by their established hourly rate and then multiply this result by the available billable hours.  From this max total, we start deducting unbilled time, unrealized billings, overhead and expenses, interest lost through slow collections, and so on, until we derive a final profit, which we divide over the number of equity partners to find the much heralded PPeP (profits per equity partner).

Given these constraints, most law firm leaders believe the primary way to increase revenue is to increase the number of timekeepers.  But savvier leaders know that revenue is not the same as profit, and there are more lucrative approaches to generating profit than by taking on the huge overhead associated with adding timekeepers through a merger.  (For example, embracing alternative fee arrangements that ensure a project fee while reducing the cost of legal service delivery through better project management.)

If the goal is to generate profits -- which is a lesson every MBA student learns on day one -- then firm size is just one of the many factors to explore.  An examination of numerous law firm combinations that were predictably dilutive suggests that the real catalyst for growth was ego and a poor grasp of what drives profits.

Owners should own, workers should work.  In my consulting practice I spend a lot of time reviewing practice group strategy and finances, and quite often I'm advised not to share these confidential data with partners (partners!) in these practices.  It's startling how many law firms still embrace a closed system in which many if not most of the partners are excluded from the financial operations of the firm.

In today's modern large law firm there is a distinct prestige associated with the title "partner" but in many cases the underlying fiduciary responsibilities of the partnership business form have been lost.  In fact, as Dewey's situation has revealed, many partners are quite content to not get involved in administration and prefer to merely pocket a rich paycheck, which is a shocking abdication of their fiduciary responsibility and poses a significant risk -- if not to the firm, then to their personal net worth!

So why kid ourselves that every pre-eminent lawyer should also have a vote in the firm's operations.  There's a much simpler approach:  When a lawyer has achieved a certain level of success, give him or her the title of partner and provide a rich compensation package that includes profit sharing, but leave firm management to those qualified to do so, or at least those appointed or elected to the role.  There should be far more lawyer employees and far fewer law firm owners once a firm reaches a certain size. Why lawyers adhere to the inefficient partner business form when there are other options offering the same tax and liability benefits is baffling.  Some will argue that the non-equity partner approach has been tried and has failed, but in its prior incarnation it was merely a tool to recruit worthy service partners and not a shift in governance.

Building, leading and sustaining a successful business shouldn't be confused with falling first in an avalanche.  Law firm leadership is hard.  So is law firm management.  Nothing reveals management incompetence moreso than watching the flailing that occurs when a business enters a new and predictable phase of the business cycle.  Corporations are not immune: many founders have had to give way to experienced managers once a certain scale is reached, and others who have successfully led in boom times are incapable of making tough decisions in bust times.  It takes different skills to to manage a law firm when demand is no longer a constant, when unfettered pricing discretion gives way to increased buyer leverage, when critical raw materials become commodities, than the traditional political and consensus-building skill set of past law firm leaders.

I held an in-depth one-on-one conversation with a newly-elected law firm chairman several years ago in order to help him write his remarks for an upcoming all-partner meeting.  He had no platform, no strategic plan, no vision for change, no understanding of the firm's financial position beyond the annual report highlights and he was elected after a contentious and lengthy process in which multiple more qualified but polarizing candidates were unable to garner sufficient support.

So his greatest asset, apparently, was that he was disliked somewhat less than others.  And yet this chairman enjoyed a couple years of success, years that looked a lot like the years prior to his arrival, and probably similar to what would have happened had the firm's partners elected a potted plant to the role.  Until the economy collapsed and he floundered helplessly.  A ceremonial position riding the tide of a generation-long run of near-unlimited demand for legal services is distinctly not what is needed today, and this applies at both the firm and practice group level.

Rather, leaders must be "consciously competent" and know why the firm or practice is successful, what levers and options exist to sustain or generate growth, what pitfalls or costs are associated with each alternative and the risks posed by the competition -- traditional and non-traditional.

It's not "too big to fail," it's "too big to trust."  An unwritten but assumed aspect of the partnership business form is that partners, by and large, know each other and consciously choose to throw in their lot and do business together.  As law firms have skyrocketed in headcount, it is literally impossible to know every other partner, certainly not at a personal level that leads to mutual respect and trust.  If that were true, partner meetings would have 100% attendance, cross-selling would come naturally to those who want their colleagues to succeed, sharing client contact information and evolving single-engagement clients into firm institutional clients would be automatic.

But what every law firm implosion has shown us is that many partners have joined a firm in order to benefit from the brand strength, but have no interest or incentive in sharing clients or helping the firm as a whole succeed.  Too many partners "protect" their clients in order to retain maximum portability should a better offer materialize elsewhere.  And this lack of a common bond poses a challenge in a troubled business climate when the bankers come calling and ask partners to provide personal guarantees to secure lines of credit.

As one DC-based partner spat upon learning he lost an industry accolade to a NY-based colleague, "I'll be damned if I work with let alone congratulate that overpaid clown."  You don't have to like all of your partners, but if you don't trust them enough to effectively cross-sell and collaborate to your mutual benefit when times are good, the likelihood of standing shoulder to shoulder to face a common threat when times are bad is non-existent.

Timothy B. Corcoran delivers keynote presentations and conducts workshops to help lawyers, in-house counsel and legal service providers profit in a time of great change.  To inquire about his services, contact him at +1.609.557.7311 or at tim@corcoranconsultinggroup.com.