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American Bar Association

ABA Section of Business Law

Business Law Today

Snap Judgments
By Molly Thomas
Legal Outsourcing Has Legs
Law firms are looking for ways to trim costs these days, as clients demand firms with lower fees, reports the Wall Street Journal, and one trend that continues to expand is outsourcing. Certain tasks can be delegated abroad, to India, for example, where an experienced lawyer charges from $75 to $100 an hour to do routine tasks such as document review, legal research, and due diligence. While legal outsourcing to India generates only about $250 million per year in revenue, that number continues to grow. An estimated 35,000 legal jobs could move from the United States to India by next year, and up to 79,000 by 2015, estimates Forrester Research Inc.

Legal outsourcing "has built up now with cheap Indian lawyers who are pretty smart doing the sort of work done here by paralegals," says Sanjay Kamlani, co-chief executive of Pangea3, a New York-based outsourcer. Legal outsourcing firm QuisLex Inc. says it is gearing up for more work at its office in Hyderabad, India, stemming from the U.S. government bailout of Wall Street. The firm is involved in helping U.S. companies facing regulatory investigations about subprime mortgages. Says Sirisha Gummaregula, QuisLex's chief operating officer, "Any time there is economic fallout, one thing that always comes out is new regulation . . . That's where we can help the companies out."
More and More Malpractice
As deals go deeper and deeper south, extra attention is being paid to every detail, and the outcome of some of that scrutinizing is a rise in malpractice suits against lawyers, in particular, real estate lawyers, as reported by the Daily Business Review, a South Florida legal and business publication. Bill Loucks, president of Florida Lawyers Mutual Insurance based in Orlando, has seen a 13 percent increase in claims related to real estate, saying "the economy has had an indirect impact on claims, primarily on the real estate practice area. Attorneys whose primary practice is centered around real estate went through a real estate boom . . . When the real estate market fell apart, then there was a lot of very close inspection of lawyer-prepared documents." Typical claims involve allegations of conflicts of interest, poorly constructed contracts, and zoning issues. Andrew Hall, partner of Hall Lamb & Hall in Miami, insists that legal malpractice claims are not simply born out of the declining economy, but an issue coming to a head for years. He targets the current approach of law as a business, and in particular the pressure to hit certain billable hour goals. "You're creating your own doom," says Hall, "because you're setting higher standards for yourselves by what you're charging." Higher bills ultimately can strain the relationship between attorneys and their clients, Hall said. Since unpaid legal bills also usually accompany malpractice suits, Hall advocates regular communication of needs and bills as a deterrent to the possible monetary tension between lawyer and client.
Large Losses Lead to Lawsuits
USA Today reports that federal securities class action lawsuits involving Wall Street are up 19 percent from 2007. Says Tom Dubbs at Labaton Sucharow, "We're seeing a raft of cases flowing from the credit crunch, mainly against financial institutions." Plaintiffs' deep anger is clear, with almost 50 percent of the year's litigation involving investor losses related to the collapse of the securities and debt markets, and plaintiff claims totaling up to $856 billion. A record percentage of financial companies are facing litigation, with nearly one third of financial companies listed on Standard and Poor's 500 index listed in new lawsuits. Observed Stephanie Planchich of NERA Economic Consulting, "People are looking at their securities and perhaps bringing suits if they think there was fraud going on," so expect the startling number of lawsuits targeting financial services to continue to rise throughout the year.
Legal Self-Serve
Do-it-yourself isn't just for crafts anymore. A rising number of Americans are serving as their own counsel lately, and not just for the typical small claims and uncontested divorce cases, but even in more complicated situations, such as bankruptcy, complex lawsuits, and child custody, reports the Associated Press. Most pro se litigants are choosing to represent themselves because of the cost involved in hiring a lawyer. There are no national figures on how many people are choosing to represent themselves, but Tim Eckley of the American Judicature Society in Des Moines, Iowa, says, "I don't think anybody who's involved with the courts would deny that this is a trend in the last 10 to 15 years." Sue Talia, a judge from Danville, California, has traveled all over the country to talk to legal professionals about the growing trend, and reports that "courts are absolutely inundated with people who do not understand the procedures. It is a disaster for high-volume courts, because an inordinate amount of their clerks' time is spent trying to make sure that the procedures are correctly followed." It's clear that the phenomenon is not about to die down, so many states have set up Web sites and help desks to guide pro se litigants through the various processes.
Channeling Charitable Work
New York lawyer Steven Reiss certainly sets a good example for his co-workers. As litigation partner and co-chairman of the pro bono practice at firm Weil Gotshal & Manges, Reiss helped integrate pro bono work as part of the reputation and culture of the firm, but his dedication to a charitable lifestyle extends beyond the office . . . all the way to the English Channel. New York Lawyer reports that Reiss and a group of self-professed "really old guys" swam the English Channel last August to raise money for a rare genetic lung disease, Alpha-1 antitrypsin deficiency. Reiss calls this "public service," which he and his firm differentiate from pro bono work, and which he believes in both personally and professionally, saying, "You can't tell people they have to do public service, but it is the right thing to do and we expect people to do it. We've embedded this into the character of the firm, and now it has a life of its own." From a business standpoint, he believes that his firm's reputation attracts clients and employees alike, who identify with the well-rounded spirit of the firm. "It is hard to quantify," says Reiss, "but to the extent the firm has a reputation for public service, charitable work, ambitious pro bono goals, involvement in the community, it helps." Good for the business and the body!
Bankruptcy Boom
As business slows in other areas, bankruptcy filings are expected to proportionally continue to rise through 2010, reports the National Law Journal. After Lehman Brothers filed the biggest bankruptcy of all time in 2008, the expected rash of smaller bankruptcies could seem like small potatoes, but the projected number of filings and range of industries involved means big business for firms with bankruptcy teams. In 2008, 37 public companies with assets of $250 million dollars or more filed for bankruptcy, more than three times the number in 2007. Before the credit crunch, capital from private equity funds and hedge funds and liberal loan terms helped companies settle financial difficulties outside of the courtroom with help from their law firms, but the present reality is that some companies just aren't going to be able to negotiate around bankruptcy the way they might have in the past. An upside? Some BigLaw firms are looking to hire, hoping to bolster their bankruptcy teams as they brace for more restructuring work.

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