June 5, 2014

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Industry Outlook
Industry Outlook: Legal


Industry Outlook: Legal

June 5, 2014

CLYDE: You ask what young lawyers seem to fear, and our observation is they fear the sustainability of the firm, that it’s the older lawyers that are the rainmakers that are bringing the work in, and they’re worried. Some firms keep them isolated. They can research, write briefs, but they don’t have client involvement. We involve our associates very early on in client contact and make sure the client is aware that they are there. We bring them into every meeting.

It’s a hard transition from law school. You have a 24-hour lifestyle as a lawyer. Clients do demand the attention of you as a service industry, and that’s a hard transition for some kids to make. If they can accept that, they can still have the lifestyle they want, but they do have to have flexibility to adjust or work a weekend when it’s necessary. Most of them will do that when it needs to be done. Some of them, though, you never see on a Saturday in the office. It’s just the old guys that are hanging around.

PINEGAR: We’ve made an effort to increase the transparency of what’s happening in the firm, decisions that are made, and to involve them in the process or at least inform them along the way so that they’re aware of how things are going, because of this idea of what’s going to happen after the old guys are gone. And one of the bad pieces of news for them is the old guys don’t leave as soon as they used to. We’re working longer, and that increases the uncertainty a little bit.

LORIMER: Their biggest worry is that the clients won’t be there tomorrow. When I was an associate, it was just go to your office, work hard, put your head down and the work will keep coming if you do what you’re supposed to do. Nowadays that’s not true anymore.

So we try to involve them in every pitch. We’re fortunate to have very bright young lawyers, some of them Ph.D.s, who know a lot more about technology than the old guys do. It gives them confidence to go in front of a client and shine where they can shine, and it also gives them a sense of being integrated into the team so that they feel that they’ve got skin in the game, and that breeds loyalty.   

Some have said that the next bubble to burst is the traditional model of billable hours and big retainers. Are you seeing that evolving in your firms?

McNEILL: For our firm, the billable hour is still the mainstay. It’s still the biggest part of how we make money. But clients demand a much higher level of communication about where that litigation money is being spent, a lot more interaction upfront and throughout the case in terms of what kind of money are we going to put into this brief, what kind of money are we going to put toward this effort.

SCOTT: The difficulty with construction litigation is you don’t have a snapshot of a single event where you might be able to reasonably estimate the cost of legal services to give the client a flat-fee type of arrangement. You don’t know how many documents will be generated at first. You don’t know how much time is at issue in terms of the event that led to the litigation. You might be dealing with a span of several months or years.

Yes, clients want to see a breakdown of what work we’re going to do, but it’s difficult to give them an estimate of where it’s going to be because we, quite frankly, don’t know what discovery is going to have to be performed until we get to that discovery. And it’s difficult to foresee what discovery opposing counsel is going to perform as well.

So the billable hour, at least in the construction industry, is here to stay. But clients do want a little bit more direction at least on what they’re facing, to the extent you can give that to them.

ROWE: In the transactional area, this hasn’t changed a lot over the years. Sophisticated clients view legal fees as one of the expenses of doing a transaction. So if it’s a large transaction, then they’re comfortable spending whatever money they need to on legal fees to make sure that they’re protected, and it’s largely governed by the size of the transaction, the repetitive nature of the transaction.

If it’s a smaller, more commodity-based transactional practice, then clients are very aware of legal fees. And frankly, they’re dealing with third parties looking at your legal fees as part of the cost of doing business. If you’re a good partner, you try and work with your clients to make sure that you’re an integral part of their transaction and that you fit in with what they view as the budget of doing a particular transaction.

BERGER: We’ve been having this discussion about alternative fee arrangements, and particularly billable hours, for at least 10 to 15 years, and enough time has passed where we can look back and really start to answer that question.

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