Bar Associations: Protecting Consumers or the Status Quo?

Status Quo

Some Bar Associations are behind the times. And some are challenged by the dual and potentially conflicting roles they play: one, to self-regulate the practice of law in order to protect consumers; and two, to protect the guild of lawyers from competition. A recent Texas State Bar ethics ruling demands a reaction because not only does it fail to protect consumers, it creates additional barriers for advancing the profession.

The ruling states that a Texas law firm may not use "officer" or "principal" in job titles for non-lawyer employees in the firm, as doing so may suggest that these employees exert control or influence over the work of the lawyers, which is a violation of the rules of professional conduct. Additionally, the ruling states that bonus compensation for such non-lawyers can't be formulaically based on the firm's financial performance, as this would constitute unauthorized fee-sharing with non-lawyers. The ruling purports to protect the consumers of legal services, presumably under the premise that non-lawyers are simply not qualified to influence the delivery of legal services and any such interference constitutes a prima facie case of wrongdoing. (See what I did there, pretending to speak like a lawyer?!)

In my role as President of the Legal Marketing Association, and on behalf of our 4,000+ members, I collaborated with the leaders of other legal associations to draft a response urging the Texas Bar to reconsider its stance. These association leaders are well-credentialed professionals who are dedicated to improving the operations of law firms, big and small, and yes, improving the delivery of legal services. And one could argue that by specifically excluding such voices, the legal profession is holding itself back. You should read our letter. It's reasonable and articulate and provides good food for thought.

But speaking individually as a former CEO, I'll be a bit bolder. The Texas ethics commission ruling is ridiculous and unsound. It reflects the worst of the closed-minded lawyer mindset: a belief that lawyers alone can define "quality" in the delivery of legal services. I can assure you, most CEOs spend very little time ruminating about the state of their suppliers' industries or professions, unless some impending disruption in these fields will impair our business performance. And lawyers are doing just that. So, wearing my CEO hat, here's my reaction:

Business clients are unhappy. Lawyers in the mid-size and big firms that serve us often do a terrible job of communicating. They fail to properly manage expectations by limiting the client's surprise. They tend to treat each matter as if it's unique and infinitely variable, yet at the same time expect us to believe their experience in a given field is meaningful. They believe in charging higher fees based on the length of time they've practiced, even when they are unable or unwilling to demonstrate this experience by using matter budgets or project plans. And their fees are typically established irrespective of the value I place on the services rendered, and what alternatives exist for me obtain these same services elsewhere, assuming that the seniority of the lawyer and the time necessary to deliver the work are the primary drivers of value.  They claim that non-lawyers in a law firm, or worse, non-lawyers providing legal services outside the structure of a law firm, e.g., an LPO, must be incapable of providing quality legal services, even when these alternative providers can unassailably demonstrate higher quality at a lower cost.

Does the Texas ruling really protect the consumer? There are different consumers of legal services. As a seasoned corporate executive, mindful of my corporation's risk tolerance and business objectives, and well-trained as a steward of my corporation's hard-earned capital, I don't need as much hand holding. I have long experience managing complex M&A transactions, launching new products requiring IP protection, managing layoffs and plant closures, negotiating labor contracts, and being deposed in contracts disputes. I want the Bar to protect me by ensuring my lawyers are competent in business issues. I can find a thousand lawyers who can conduct legal research, identify precedents, and draft a memo telling why taking some action carries risk. I find far fewer lawyers who think like me and understand the business impact of my legal issues.

And if these so-called protections are not, in fact, in the interests of consumers, might they instead serve to protect the interests of lawyers? It's a curious industry that establishes its own operating rules, self-regulates its members' conduct, decides for itself what competition it will allow, and purposely addresses these issues without the input (or interference?) of anyone outside the profession.  I'm not suggesting that there's a vast conspiracy with nefarious purposes, but I am suggesting that human nature operating within such a closed system is bound to create confusion between "what's right" and "what's right for us." From my perspective, the Texas Bar ruling has a lot to do with protecting lawyers from adopting modern, sound business practices, as if somehow doing so is inconsistent with practicing law.

If a senior business person in a law firm can help the lawyer-leaders understand how to budget, how to profit from efficiency, how to embrace continuous improvement, how to lower fees while improving quality, how to better communicate with unhappy clients, and more, then not only should that businessperson be given a title befitting that knowledge, he or she should be given a compensation package commensurate with that experience, experience that is highly prized in the business arena. And if growing the firm's profits is a consequence of improving client satisfaction, then reward that businessperson in some way commensurate with his or her impact on business performance. If you're unable to distinguish between a non-lawyer who improves firm operations and client-focus, and one who is engaged in the unauthorized practice of law, I question your competence as a lawyer.

If I can't trust you to understand simple business mechanics -- the issues I deal with all day, every day -- and if I can't trust you to recognize your own deficiencies and fill these gaps with competent professionals -- and instead you harangue those who speak truth to power and sit smugly in an alternate reality where partners cannot be wrong -- and if I can't trust your pals in the Bar to protect me from your deficiencies -- and instead they issue rulings designed to forbid competent professionals from meeting my needs -- then I can't possibly trust you to give me sound legal advice. THIS is why law firms are suffering, not because demand for legal services is down, or because bean counters value price over quality.

By the way, let's banish the "non-lawyer" label as unnecessarily non-descriptive and non-productive, prone to nonsense. Defining something by what it's not isn't all that helpful, is it? Or keep it, if it makes lawyers feel better. No one really cares. But understand that corporate executives don't spend much time drawing such distinctions of pedigree and titles within their vendor organizations, so partners should feel free to proudly carry the label of "vendor" or "supplier." We care mostly about rising legal costs and declining value, not labels. The adjacent graphic represents an excerpt from an actual corporate budget representing exactly how even the most prestigious senior partner with sterling credentials is categorized. And yet you rarely hear corporate executives insist on calling partners “non-strategic suppliers.”

If the Bar wants to focus on truth-in-labeling, can we look into :

• Law firm leaders who haven't received a single day of formal management training yet carry the label of practice group leader, or managing partner?

• Non-equity or income “partners” who are merely highly-compensated employees, not equity shareholders in a partnership?

• Can we look into Marketing Partners who have never taken a marketing course, Technology Partners who have no technology training, Finance Partners with no finance or accounting degree?

• Can we look into pitches and proposals that compile disparate experience in creative ways, purporting to reflect deep subject matter experience but instead reflect the common but misguided notion that "We're smart lawyers. If we win the work we can figure out how to do it later?"

• Can we look into lawyers' over-reliance on hourly billing rate cards to purportedly convey the price of legal services, when in fact rates are but one element of the formula for the overall cost and the lack of other data is purposely misleading?

• Can we look into published billing rates that reflect an inflated “sticker” price as compared to actual receivables that perpetually reflect a much lower realized price?

• Can we look at inconsistent discounting and write-down policies in use in firms that bear no relation to "key client" programs?

There's a lot wrong with the modern law firm business. It takes smart people with relevant experience to solve these problems. Forbidding competent professionals to lend their experience isn't productive. Insisting that a law degree is the only distinction necessary to decide what is and what is not "good" for clients is myopic. I call on the Texas Bar to review and revise its ruling to reflect the cold truth that protecting the status quo is not what clients want. Progress waits for no one, and the Bar Associations and incumbent leaders of the profession can wring their hands and lament the intrusion of economic forces, or they can collectively step up to reshape the profession. Relevance is recoverable. Roles as trusted strategic advisors are there for the taking. Your move, lawyers.

View my interview here with Lee Pacchia on the Business of Law webcast at Mimesis Law TV. 

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 a 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.

On Bullying

It's a relatively simple mathematical calculation to quantify the negative impact of bullies in the workplace, yet managers in organizations everywhere allow toxic behavior to persist. This week's object lesson comes from the NFL Miami Dolphins, where a professional athlete left the team due to persistent harassment and bullying.

While the full story is not yet known, there are certain unassailable facts: at least one protagonist with a long record of impulsive behavior has acknowledged coercing a teammate into contributing funds to a Vegas vacation, directing ethnic and homophobic slurs at this teammate, and engaging in physical and mental abuse, all in the spirit of hazing -- a long and misguided tradition of veteran players "riding" younger players. The protagonist is not merely a veteran teammate, he's also on the team's leadership council.

There has been a large public outcry leading to the suspension of the protagonist, the victim hiring a lawyer, and the team owner demanding a full investigation. Sadly, but perhaps predictably, the segment of sports punditry comprised of retired athletes has defended the protagonist thusly:  One can't possibly understand what goes on in a locker room unless you're part of the team; the victim walked out on his team during a competitive season, thereby revealing his true character; and the protagonist's actions were merely "boys being boys."

One retired coach called the victim a "baby" and waxed philosophic about "Back in my day when men were men..."  Others accused the victim of gamesmanship, suggesting his failure to report these allegations earlier and his supposed camaraderie with the protagonist demonstrates disingenuousness. In response, the victim acknowledged a fear of retaliation and the loss of his livelihood as reasons for not stepping forward earlier. We'll learn more as this story unfolds, but we know enough to recognize a hostile work environment. Why? Because nearly all of us have witnessed such bullying in our own workplaces.

In the corporate sector, the toxic personality often takes the form of a top-producing salesperson who breaks the rules, fails to properly document activity, over-commits the organization to meeting a client demand, and then bullies colleagues into delivering the impossible because, as the old saying goes, "nothing else matters until we make a sale."

It can also take the form of a long-entrenched manager who has watched leaders come and go, who has watched strategies come and go, who has watched competitors come and go, and all the while she's tending to the company's day to day needs. She truly believes her steady hand on the rudder is the primary driver of organizational success in an ever-changing marketplace, and so when presented with new and uncomfortable ideas her knee-jerk reaction is "We've tried that before and it didn't work. Next!"

In law firm land, the corollary is the toxic partner, that rainmaker bringing in millions in billable hours, or the long-established patron of the corner office whose reputation is unassailable and who can do no wrong. Whether the partner cycles through secretaries like others change their socks, or metes out punitive assignments to associates who fall out of favor, throwing tantrums in the office when the staff fails to read his mind or demanding that others adhere to stringent work requirements out of some vague allegiance to client service, these actions constitute a hostile work environment.

Worse, if the toxic partner is acting under the delusion that such actions will improve team performance, she or he is assuredly provoking the exact opposite outcome. We've all seen the feel-good movies where a tough-as-nails but kind-hearted leader drives his team to victory by forcing everyone to reach deep inside, to unlock that extra courage, to go that extra mile. And there's some truth to that, of course. Any coach knows that even high performers often need external motivation to break through barriers. But how much is too much?

The underlying math in any organization is simple, requiring us to balance the revenue generated with the costs incurred. But too often we fail to complete the equation, focusing solely on the revenue side. So the rainmaker generating millions of billables earns a free pass, or perhaps only an occasional private "talking to" when his conduct falls too out of line. But when we factor in the victims' lost productivity due to distraction or emotional detachment, the cost to continually recruit and train replacements, the sub-optimal work product that results from star performers avoiding collaboration with the toxic partner, the client defections, and more, this "total cost of ownership" will invariably tip the scales in the other direction.

There is NO financial reason to perpetuate a hostile work environment. There is ALWAYS a long-term loss in revenue and profit when such a situation is allowed to persist.  If you've done the math and somehow produce a result that says otherwise, I challenge your approach.

There are protections in place for whistleblowers for a good reason: people often won't speak up for fear of retaliation, because they fear the loss of their income and job security, because they feel they'll be shunned by colleagues for impairing the team's performance. Rather than discourage open talk, we should encourage it. If there's a toxic personality creating a hostile work environment in our workplaces, as managers and leaders we need to step up and address the situation directly and immediately. If you can't summon the courage to do so because it's the right thing to do, then take action because such an environment is unquestionably impairing the team's performance.

Why in the world would you take money out of your own pocket to reward some immature buffoon's temper tantrums or locker room behavior, when the alternative is to excise the annoyance and improve both morale and financial performance? Not every workplace has a toxic personality. But if you have one, or more, take action today.

Epilogue: The Miami Dolphins had a .500 record when the above incidents came to light, meaning their next game would literally put them on the path to a winning record or a losing record. The team lost its next game to a previously winless opponent.

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.

Solving for Profitability

At a recent collaborative workshop between two camps -- in-house counsel and corporate procurement professionals on one side and law firm partners, finance and marketing professionals on the other -- we had a lively discussion about law firm profits. Most agreed generally with the view that a law firm has a right to profits, but the challenge arises when a law firm is extraordinarily profitable at the same time the client is extraordinarily unhappy with the value delivered. This scenario, one which resonates with many in-house counsel in recent years, leads to increased price pressure from buyers and over time this will depress law firm profits.

Predictably, in an effort to boost sagging profits some short-sighted law firm partners will make up for price pressure from one set of clients by raising prices for others, eroding the price-value connection for even more buyers, and accelerating this decline of profits. One in-house participant declared that he requires all outside counsel to submit profitability data and he'll decide what profit margin is acceptable! We can all empathize with buyers who are dissatisfied with the value received at the prices they pay for goods and services. But it's a stretch for the buyer to explicitly decide what profit the supplier should earn, in any marketplace.

So how can a law firm both enjoy a healthy profit and satisfy clients? If we adjust our lens a bit, it's not all that difficult - as with many commercial ecosystems, the pursuit of profit can best be maximized by delighting customers, and not as many assume by having one party win while the other loses.

Long Term vs. Short Term Profitability

Most law firm financial systems are structured to measure short-term profits, that is if there is any measurement structure at all. A surprising number of law firms do not explicitly calculate profitability, and many who do refuse to share these calculations with the partnership out of a misguided concern that it's divisive and corrosive to a collaborative culture. What's more divisive is a culture of not knowing -- which naturally leads to most parties making flawed assumptions about their performance relative to their peers. But the root problem is that without a clear understanding of what generates profits and what dilutes profits, no enterprise can sustain itself indefinitely because there will be too many factions working at cross-purposes. When everything supposedly makes money, then nothing makes money. And vice versa.

A focus on short-term profits drives and rewards the wrong behavior. Imagine a partner who sees an opportunity to bill a client $100,000 for a litigation defense matter, when that partner's experience could quite easily lead him to counsel the client that he's better off settling rather than defending, and thereby reducing legal costs by $50,000. Or imagine the partner who pads his own time and allows others to pad their time against the client matter, knowing the client will absorb some or all of these costs without complaint because, after all, "They hired us because we're the best and because we're thorough and they should expect to pay a premium for this."  In reality, clients are rapidly becoming more sophisticated and can incorporate benchmarking data from other matters and other firms to help identify the "right" price for legal services, and increasingly they know when they're being overcharged. This isn't unlike purchasing an automobile before ubiquitous internet research, when price shopping was logistically challenging and buyers expected the dealers to take advantage... and they did. When a buyer discovers he's been overcharged, he doesn't return to that merchant.  And therein lies the mathematical basis for focusing on long-term profitability instead of merely short-term profitability.

A law firm that calculates profitability as a function of maximum hours per engagement will, over time, as sure as the sun rises in the East, eventually experience client defections. Client defections (measured by retention rate) caused by over-emphasizing billable hours lead to three serious financial consequences:

1. The cost to acquire a new client is far higher than the cost to maintain or expand an existing relationship

2. The firm will price itself out of competitive bids

3. The firm will eschew efficiency and alternative fee arrangements and forgo potentially higher profits associated with these models. Success can't hinge on finding an endless supply of clueless clients, a task that gets harder every day.

If a law firm embraces a model in which long-term profitability is more balanced with short-term profitability, we will see changes in behavior and reward systems:

• Matters will be priced more competitively, because the objective is not only to win the work, but to also win subsequent work

• Matters will be delivered efficiently to maintain price competitiveness, and profiting from the learning curve is always more sustainable than profiting from high prices

• Satisfied clients not only stay longer (leading to higher retention rates), they buy more services (a.k.a. cross-selling, leading to higher penetration rates at a lower cost of sales)

• Satisfied clients insulate the firm from consequences of lateral partner defections. Even when a key rainmaker or service partner leaves, satisfied clients remain

• Lateral hires and new offerings measured for their contribution to long-term profitability will insulate the firm from making hasty and dilutive decisions, such as recruiting a lateral partner with an alluring book of billable hours but with high service costs, non-competitive pricing, and clients evidently willing to change firms at will

• Contributions from those involved with delivering high-quality legal services and managing valued client relationships will be more readily recognized, and the emphasis will shift from substantially rewarding origination to rewarding all steps along the supply chain. (Yes, it's hard to win new business, and this is why "hunter" salespeople are often highly-paid individuals in a corporate setting too. But those who make, manage and service the product lines are also essential to the sales and retention process. Missing this point is one of several extraordinary gaps in law firm management science.)

Organizational vs. Matter Profitability

To be clear, if we focus on long-term profitability and ignore the many short-term actions we take day in and day out, it's likely that we'll make many wrong and dilutive decisions. So there's nothing wrong with measuring profitability on a shorter time horizon too. Organizational profitability is typically the derived sum of individual matter profitability, often clustered within practices whose profit contributions are measured and compared.

Matter profitability, as we've described above, can be influenced by over-pricing.  Is it acceptable if we achieve a 50% profit margin on a $100,000 matter, but in so doing upset and lose the client?  Or is it better to achieve a 35% profit margin on a $50,000 matter, followed by a 35% profit margin on four subsequent matters, each acquired at no cost to the firm because a happy client simply assigned the work?  Similarly, who should earn the higher reward -- the rainmaker who brings in a $100,000 matter at 50% margin that keeps 5 timekeepers at 60% utilization for 3 months, or the rainmaker and timekeepers who convert a $50,000 matter at a 35% margin that keeps 10 timekeepers at 40% utilization for 2 months into four more $50,000 matters, each at a 35% margin and that also keep 10 timekeepers at 40% utilization for 2 months?

I know, the math is getting hard to follow.  The point is, sometimes the math is hard to follow so reducing everything to a single, simple point statistic like billed hours, and then basing all rewards and pricing on this one factor, is foolish.  Running a business is a bit more complex.  The many variables we've identified already include retention rate, utilization, realization rate, leverage, productivity, penetration rate, cost of sales, cost of goods sold, and more, and this is only a small subset of the variables available to managers who need to make rational decisions about the allocation of resources.

While we're at it, a few quick notes on the mechanics of matter profitability:

• Matter profitability and even practice group profitability ignores cross-pollination. One of my clients recognized that the Trust & Estates practice generated a significantly lower profit margin per matter than other practices and considered shuttering the practice. However, deeper analysis revealed that T&E clients, many high-net worth individuals like CEOs, were feeders to the firm's other practices, like corporate, securities and litigation. On an isolated basis, the numbers suggest the firm's T&E practice should be closed, or at least starved of resources in order to focus on more lucrative practices. On an aggregate view, however, there may be more investment needed in this feeder practice if this can be done at a lower cost than alternative lead generation activities

• Matter profitability often provides a false read because of improper allocations. One of the liveliest discussions in any business setting is how to allocate various costs to the business and to the various product lines. In a law firm, we can argue endlessly over whether to allocate costs based on headcount, or on a square foot basis, or on a consumption of resources basis, or other models. In many cases, the final tally isn't all that sensitive to modest tweaks in allocations, but the overriding imperative is to select a model and then stick with it for all, so it provides a sound and sustainable comparative measure

• Matter profitability shouldn't be diluted by productivity. Matter profitability should balance the revenue generated against the hard costs to deliver the matter, including the compensation associated with the timekeepers billing against the matter. But the compensation should reflect target hours worked by associates, or associate bands. While associates are not truly fungible, in this case we should view their contribution as an interchangeable raw material, so if we replace Mary with Carlton, the underlying cost structure doesn't change. Why? Because if we price our services efficiently based both on our organizational learning curve ("We can complete this task in 5 hours") and the client's perceived value ("This task is worth $3,500 to me"), then an individual contributor's productivity shouldn't have a material impact on our costs of goods sold. Said another way, clients resist first- and second-year associates working on their matters because of the assumption that associates work inefficiently as they learn their craft. By basing the price on a standard cost, we remove the client's objection. Some will complain here that more productive associates are penalized because they're placed in a box along with less productive associates. But productivity is a management issue, not a pricing issue. We don't pay more or less for light bulbs or automobiles or haircuts or vaccinations based on the training level of the person making the product or delivering the service. And legal services shouldn't be priced that way either.

• Matter profitability shouldn't be diluted by equity and bonus compensation. Partner time can be billed at actual rates rather than a target, if we choose, under the assumption that their variable billing rates already reflect experience and an experienced partner will bill 3 hours at $650 for a task that an inexperienced associate might bill 10 hours at $275. So a pro rata portion of the partner's compensation based on hours billed is a sensible cost to accrue to the matter. But it would be foolish to add in partner equity compensation, or bonuses for either partners or associates, as these costs have nothing at all to do with the matter! In fact, these costs would force the matter profitability to plummet, requiring the firm to significantly increase prices to make it profitable, which as we've described above serves to provoke the opposite effect, namely that no clients will buy any of what the firm is selling. Consider lawyer bonuses and partner equity compensation as SG&A to be addressed elsewhere.

Managing a law firm or a practice group is challenging enough without adding a lot of financial math to the mix. But the reality is that no law firm manager should be operating without a clear sense, or hopefully a directional sense, or at bare minimum a vague idea, of how resource allocation and pricing can influence the financial health of the business. Long-term profitability vs. short-term profitability, matter profitability vs. organizational profitability, allocations and overhead and leverage, oh my. Yes, it's hard. But I'm willing to bet that you have a resource on staff, or a phone call away, who can help you sort through these issues. The key is to establish a consistent approach across the firm based on the ideals of firm management. And these ideals should be established based on a fully-informed view of the alternatives and consequences. Welcome to management. No one said it would be easy.

For more information about the evolving state of law firm pricing, see Toby Brown's excellent "The State of Legal Pricing 2013."

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.

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.