Virtual Law Firms on the Rise as Clients Increasingly Embrace the

Perhaps no subject gets as much attention in the legal trade press these days as this: Clients’ increasing desire—“demand” might be a more accurate term—for more effi-cient, lower-cost service from their lawyers. “Enhance efficiency and cut costs … enhance efficiency and cut costs ….” It’s practically become a mantra in the business and legal communities.

And to that end, we’ve seen law firms over the last five years dig deeper to find

technological solutions, create more and more client-pleasing alternative fee structures, pare down perks for their attorneys and staff, outsource administrative tasks to companies that know how perform such functions more

Vol. 32 • No. 3 • March 2013

In This Issue

Growing Trends …

Virtual Law Firms on the Rise as Clients Increasingly Embrace the Model and Appreciate the Efficiency

In-House Trends. Among other findings, an ACC survey shows that law departments don’t frequently pursue pro bono projects. It may be good news in disguise if law firms can now partner with clients on worthy initiatives ............................................................................................................................................. Page 3

Fair Measures. Compensation no more assures competent firm leadership than origination credits guarantee new business. But as James D. Cotterman discusses, there are three indices by which to recognize sound management ........................................................................................................................................ Page 6

ADR Disputed. An explosive increase in the use of arbitrations has fed ongoing controversies over ADR. Eric P. Tuchmann responds, citing supportive SCOTUS decisions and refuting charges that fact-finders typi-cally ‘split the baby’ ............................................................................................................................Page 11

New Bottles. The marketing race is to the swift and sure. Merrilyn Astin Tarlton offers a review of cutting-edge strategies, with a useful reminder that nice guys don’t necessarily finish last ........................................Page 14

Convenient Slots. Some firms cut costs by assigning partners to administrative positions. Ed Wesemann says the approach requires fresh thinking on compensation—assuming it’s a smart idea in the first place…..Page 18

Elite Force. Last year New York’s Murphy & McGonigle was the only small firm to achieve top recognition for securities regulation practice. Chairman James Murphy discusses the unique blue chip culture that led to this singular honorific ............................................................................................................................Back Page

Continued on page 2

Of Counsel, March 20132

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economically and explore other ways to—yep, you guessed it—“enhance efficiency and cut costs.”

Of course we’ve also seen the rise, expan-sion, and transformation of virtual law firms (VLFs), which don’t have to make monthly payments for all that brick and mortar, not to mention the decked-out lobbies with the cheerful receptionists, the shiny oak confer-ence tables, sophisticated and modern (but not too-cutting-edge) artwork, and other law office adornments. Consequently, lawyers at

successful virtual firms can slice their rates, deliver top-shelf service, and please their clients.

“It’s all about cutting the overhead, and our clients like that,” says George Tamblyn, who in 2010 co-founded the virtual firm of Advocates Law Group, which now has 15 lawyers—all of whom are partners—and operates primarily in the Seattle area but the partners may soon tap the Portland and Honolulu markets. The partnership only recruits lawyers with 10 or more years of experience, several of them coming from large firms.

Clearly, if done correctly and with the right people, this model can work well for both clients and lawyers. “The low cost is an advantage that’s appreciated by the client but also by the lawyers who may be hold-ing onto more of the fee dollar than is the case with lawyers at traditional brick-and-mortar firms,” says Ward Bower, consultant at Newton Square, PA-based Altman Weil. “I definitely see this as a trend that’s going to keep growing.”

From Across the Pond

While the genesis of VLFs can be traced to the creation of Woolley & Co. in England in 1996, the model really took hold after the firm Axiom, founded in 2000 in the United States, demonstrated that a group of BigLaw refugees could attract and maintain a solid client base and grow to what is now a firm of some 550 attorneys and 1,000-plus total people that operates internationally.

[Today Axiom officially shuns the “virtual firm” label, although many still refer to it as a VLF. Consider how the Financial Times referred to the partnership when it recently ranked the “most innovative European law firms” (although born in the U.S., Axiom oper-ates extensively in Europe). “For the first time, virtual law firm Axiom enters the top 10,” the Times wrote. When Of Counsel asked to inter-view Mark Harris, Axiom’s CEO, for this article

Continued on page 20

From the Editors

3Of Counsel, Vol. 32, No. 3

Taylor’s Perspective …

ACC Survey Explores the Concerns of CLOs and Reveals … Opportunities

for Law Firms

Chief legal officers may not be sleeping very soundly these days, but the worries that are keeping them up at night might actually offer outside lawyers some opportunities. While some readers might think that this statement encourages exploitation, we prefer to think that it invites assistance.

In late January, the Association of Corporate Counsel released the largest global survey of the challenges facing CLOs in in-house legal departments, getting responses from more than 1,100 legal department lead-ers from 36 countries. Read the findings in the ACC Chief Legal Officers 2013 Survey and you’ll more fully understand the chal-lenges in-house counsel confront and why they’ve demanded better service at lower rates from the law firms they retain.

Now, it seems you can’t turn around with-out bumping into yet another survey about the legal profession, whether it’s about inside legal departments or outside law firms. And many of them tell you what you already know or they’re so inconclusive as to be of little value. Not this one. First of all, the ACC is a well-regarded and tightly organized group with 30,000 members, excellent leadership, and a 30-year track record of serving its constituents very well. Its surveys are conducted with the very best methodology and usually get out-standing participation rates. Clearly, ACC’s extensive CLO survey provides insight into the

collective concerns of law firms’ clients—and there’s a lot of information to digest.

But, in a nutshell, here are three find-ings that may be the most useful to private practitioners. Pro bono programs are not “prevalent” among inside legal departments, according to the ACC. Ethics and compli-ance issues are keeping CLOs the busiest or are at least causing them the most stress. And, 30 percent of CLOs plan to increase their legal budgets.

Partner Up on Pro Bono

Let’s look at the pro bono picture. Most corporate legal departments don’t have for-mal pro bono programs. “The absence of these programs in law departments is becom-ing a trend, with one of the contributing factors being restrictions on in-house coun-sel’s right to practice,” Veta T. Richardson, ACC president and CEO, tells us.

But that doesn’t mean legal departments don’t have informal pro bono programs, nor that they don’t want to donate some of their time and resources to help those in legal need; they often do. Savvy leaders in Corporate America understand the importance of giv-ing back to their communities. Furthermore, talk to most lawyers, inside or outside, and they’ll tell you about the satisfaction they


get from performing pro bono work. Most attorneys aren’t cynical about this and take their pro bono assignments very seriously; in the case of private practitioners, some are just as committed to their pro bono clients as they are to their biggest revenue-generating clients.

And here’s where the opportunity for law firms presents itself. Law firms would be smart to approach clients and prospective clients and offer to partner with them on pro bono proj-ects that each team finds mutually attractive. Of course, right-to-practice restrictions would have to be dealt with to get the in-house team in on a project. But that’s more of a hurdle than a barricade. And remember that’s only “one of the contributing factors” for “the absence of these programs in legal departments.”

Time and money are certainly other fac-tors. If outside and in-house attorneys pool resources, even with law firms carrying the larger load, both teams can reap the benefits pro bono work offers: You help others, create good-will, generate positive PR, train your younger lawyers, and cultivate the sense of pride and satisfaction inherent in most pro bono projects. What’s more, private practitioners can build or strengthen relationships with clients through their group efforts on a worthy cause.

And what about the survey’s findings about CLOs’ concerns regarding resources spent on ethics and compliance matters? “Overall, chief legal officers prefer to be strategic advisors, participating in corporate issues,” Richardson says. “However, the ACC CLO Survey shows that for 87 percent of CLOs, dealing with increasing scrutiny related to compliance and ethics issues is how the majority of their time is spent.”

That sounds like a cry for help, or at least an open invitation. If you’re a practice group leader of your firm’s compliance team you might want to offer to tighten the efficiency of delivering counsel on matters ranging from Sarbanes-Oxley to Dodd-Frank and elevate your marketing to corporations to let them know: “We’re here to help.”

Market Regulatory Expertise

On a related subject, the survey indicated that “regulatory or government changes” represented another primary concern. “Successfully managing the role of legal advisor, business executive, and team leader is a skill that CLOs have had for years,” Richardson says. “The volatile regulatory environment of today is more aggressive and overzealously targets chief legal officers. It’s not surprising that for nearly half of the ACC CLO Survey participants, awareness of activities that have legal implications is a top priority.”

It’s worth noting that regulations like Dodd-Frank were put in place because of corporate malfeasance, which contributed significantly to the Great Recession, and many people feel even tighter regulation is needed—but that’s another topic. What’s most relevant to Of Counsel readership is the message these sentiments are sending. Corporate lawyers’ heads are spinning trying to keep up with regulations governing their industries and the recently stepped-up enforcement efforts by government on all levels.

Law firm leaders already know this, of course, which is why in the last couple of years many partnerships have bolstered their ranks with attorneys with broad regulatory experience. This finding from the ACC sur-vey should reinforce the need to recruit regulatory attorneys and, perhaps, retrain associates so they can help in this arena.

And again, marketing departments at law firms should jump all over this clear and present need in the regulatory realm with the best tried-and-tested outreach campaigns: Regulatory law? That’s what we do and here’s how we do it better and more efficiently than other firms.

Finally, the survey demonstrated that in-house law departments are going to increase their budgets. Now it’s possible that these extra dollars will go to hire more in-house counsel. That is, until you consider another


of the survey’s results. Some 11 percent of CLOs cut staff, which isn’t a lot but of those staff cuts 32 percent were in-house attorneys.

Intuitively then, it seems this should bode well for law firms. Of course, firms shouldn’t expect that an increase in clients’ legal bud-gets will mean they’ll start spending “like it’s 1999,” to paraphrase the singer Prince. In fact, we can expect CLOs to continue to con-solidate their outside firms, ask for discounts, demand efficiencies, and all the other related things that have been occurring for the past several years. But still, increased budgets are better than the opposite.

The take-aways from the ACC survey are important and provide partnerships inroads, which are, to summarize, these: Approach cli-ents with offers to partner and pool resources on pro bono projects; build your compliance legal teams and market the heck out of them to fill the obvious, almost desperate, legal needs of in-house counsel; ditto with regula-tory practice groups; and tap the uptick in legal spending.

The opportunities are out there waiting for you. Carpe diem. ■

—Steven T. Taylor

Editor-in-Chief Wolters KluwerLARRY SMITH

Phone 201-854-3288Fax 201-861-6728

PAMELA MALONEYExecutive Editorial Director

KATHLEEN BIANCOSenior Developmental Editor

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Thus far in 2013, many law firm partners are continuing to take on new leadership roles in their firms. These individuals may be running practices, offices, regions, special firm committees, or the entire firm. The role could be limited to a specific issue undertaken in addition to everyday responsibilities for a short duration, or could require the entirety of their time and energy for many years.

When a law firm asks an individual to step forward on behalf of the group, it is incumbent on the group to define the scope, authority, and expectations for the leader-ship position. In addition, there should be mechanisms in place to evaluate leadership performance, provide feedback, and appro-priately adjust compensation. It is common to hear partners talk about leader pay as a kind of “tax” on their own compensation. However, this so-called tax provides the firm with centralized management functions and hopefully the benefits of practicing in a more competitive law firm.

How a law firm approaches leader pay depends very

much on the scope and scale of the post.

Firms seeking good leaders will not create them using compensation incentives. That approach will be no more successful than efforts to use origination credits to turn service partners into rainmakers. It takes talent, time, and training to become an effec-tive leader. The role of compensation is to appropriately recognize and reward a leader’s contributions. Moreover, while compensa-tion committees are getting much better at using pay schemes to recognize hard work and client generation, there remains great

difficulty with appropriately recognizing, evaluating, and paying for indirect contribu-tions such as leadership.

How a law firm approaches leader pay depends very much on the scope and scale of the post. The full-time worldwide managing partner role is vastly different from the part-time office head. Some roles are effectively handled within the existing partner compen-sation scheme; others may require a specially conceived program. The more limited the scope and time requirements, the easier it is to reasonably handle the role within most remuneration schemes.

However, once the job has become signifi-cant in its time requirements—as it does with global managing partners—the firm must design a pay program that identifies the criti-cal success factors for the position, and then builds feedback and pay around those fac-tors. These programs are specifically geared to leaders, yet remain aligned with the firm’s values and culture.

There are three principles that firms will often employ as their leader pay programs evolve. They are an evaluation of inputs, the establishment of a fixed payment, and an evaluation of results. The method used is largely a product of the firm’s size, man-agement sophistication, and the partners’ collective sense of the appropriate role of a law firm leader.

Evaluation of Inputs

Historically, the compensation focus was on effort, largely in order to be consistent with how partners are measured generally or because the firm could not agree on how to incorporate leadership performance into the

Effectiveness Scales:

Paying and Transitioning Leaders


decisions. The most readily available input metric is billable hour equivalents.

Under this methodology, firms will discuss and arrive at an appropriate hours’ budget with the incumbents for each position. Hours in excess of budget would be considered only upon approval and if the incumbent can jus-tify why the additional time was required. This appraisal may occur in a year when the firm undertakes an office relocation, significant technology migration, merger exploration, or other episodic and important events.

Many firms convert management hours into fee equivalents using a lawyer’s average effective rate. While this technique is useful to compare partners on a basic productiv-ity measure, one must be careful to realize that we are not talking about real economic dollars. It is therefore advisable to “tax” all partners proportionally with the cost of the management fee credits.

While fair to incumbents at least in terms of effort and time away from their law prac-tice, this approach often makes the firm’s partners wonder what they are getting for that time and money. The next two principles grow out of those concerns.

Establishment of a Fixed Payment

Paying a stipend based on the demands of the job, as agreed to by the partners and the leader, lets everyone know in advance what this job is worth to the firm. Besides its simplicity, this approach also prevents man-agement time run amok, a common concern when inputs drive the pay decision.

An enhancement of the fixed payment approach adds periodic adjustments based on the job’s actual and evolving require-ments. Finally, a bonus provision based on results helps differentiate good leader pay from underperforming leader pay. Such dif-ferentiation is an important characteristic of well-functioning pay programs.

Evaluation of Results

Not satisfied with the first two principles, many firms eventually move on to an assess-ment of the leader’s performance. To provide context for evaluation, results are compared to a plan, budget, or forecast.

Sometimes firms also will compare actual results to market conditions, which is a rec-ognition that a bad year’s performance may reflect good leadership if the firm withstood an economic storm better than its competi-tors (think about the recent recession) and a good year’s performance may not reflect well on leadership if the market easily out-performed the firm.

Some firms will tie some portion of pay to actual performance metrics such as a per-cent of firm fees or a percent of the partner income pool. Such an approach is simple and clearly aligned with important metrics. However, it may also focus thinking on a very short time horizon.

Ideally, leader pay schemes should recog-nize efforts, results, and risk. Many initiatives undertaken by law firms require efforts long before results are known. Likewise, many initiatives have timeframes that far exceed the annual compensation cycle.

Finally, good leaders must accept risk as an inherent part of their job. Smart, strategic risk should be evident in the firm’s competi-tive strategy. The best businesses take risks. Innovation, growth, responses to rapid market

If a law firm wants to implement strategic objectives in a competitive and changing

market, it will want to encourage smart, strategic risk-taking, and consider

including informed risk-taking in the remuneration scheme.


changes, and the ability to discern longer-term shifts all involve risks. As Procter & Gamble’s chief executive, A.G. Lafley stated (Business Week, “How Procter & Gamble Plans to Clean Up,” April 2, 2009), “you learn more from failure than you do from success, but the key is fail early, fail cheaply, and don’t make the same mistake twice.” If a law firm wants to implement strategic objectives in a competitive and changing market, it will want to encourage smart, strategic risk-taking, and consider including informed risk-taking in the remuneration scheme.

Valuing leadership is the next hurdle. The profession has largely accepted that lead-ership has value, yet there remains some level of discomfort in according it equivalent status to a partner’s thriving law practice. A better approach is to ensure that leaders are not disadvantaged with respect to pay oppor-tunity relative to their front-line practitioner colleagues. At the same time, that assurance should not protect the leader from account-ability for performance, or sharing in the overall fortunes (good or bad) of the firm.

This balance is best achieved by calibrat-ing a leader’s pay to yield a decision that compensates at about what the individual currently makes as a full-time practitioner if the firm performs at the same level; more if they advance the firm’s performance; or less if they dilute performance. You can substi-tute for “firm” any other term that describes what the individual has responsibility for, such as practice group or office.

“What do you do with a managing partner, when

he stops being a managing partner?”

Return to Practice

The final component of the leader pay decision comes at the end of the leader’s

term. Law firm leaders used to be older when they entered these positions and could eas-ily retire afterwards. Today we see more and more fifty-something leaders who are ready to step down from their posts after five or 10 years. Still in their 50s, most do not seek to leave their firm or their law practice. Yet for many, particularly those who have left the practice entirely for 10 years to serve the firm’s interests, the return presents some challenges and questions.

One of those questions is, “What happens to my compensation?” While the issue is gen-erally limited to managing partners, we are beginning to see some of it at the office and practice leadership levels, at least at the very largest firms where the duties of their posi-tions are quite extensive.

If there is a “general rule” to apply to this situation, it has been to hold the former managing partner’s compensation at its cur-rent level for one year for every two years served, with a cap of three years protection. Perhaps a modern equivalent, with a slightly more nuanced approach, might be as follows: Upon leaving, there will be one year of no adverse adjustment from the average of the last three-year’s compensation position for each two years in the post, up to a maximum of three years protection.

“Compensation position” is different from compensation amount. Position considers the individual’s actual compensation rela-tive to average, top, median, and entry-level partners. The protection seeks to maintain the “sustained position” (hence the average of the prior three years) as a floor for com-pensation of the leader during the protection period. This provision allows for the compen-sation to go down if the overall profitability of the firm declines.

However, when a specific program is being developed, the typical or nuanced approach becomes a bit tricky unless the firm simply desires to provide an unencumbered entitle-ment to the departing leader (which may be fine as well, if it is deliberate).


Beyond post-leadership compensation, a more fundamental question is particularly important to managing partners. In a nod to a holiday movie favorite, White Christmas, “What do you do with a managing partner, when he stops being a managing partner?”

A number of variables drive the answer: firm size, incumbent age, firm governance charter, practice area, clientele, and the like. What might make sense for the 70-year-old managing partner of a 10-partner firm who is retiring at the end of term almost certainly will not make sense for the 50-year old man-aging partner who, after 10 years leading a 200 partner firm, is very much interested in returning to his or her law practice.

Ongoing Dialogue

It is important for the firm to engage in a dialogue with its exiting managing partner. There are many factors to consider depend-ing on the unique circumstances involved.

• Is this discussion for an imminent transi-tion or preparation for some time off in the future?

• How long has the person been in the position?

• Was the position full-time (involving a turnover of client relationships and ces-sation of practicing law)? If not, how much did the leadership post intrude on practicing law, business generation, and market presence?

• What kind of practice and client follow-ing did this person have? Transactional

practices are different from advisory practices. How permanent was the client relationship transfer?

• How visible was the post in the market (i.e., was there a high public profile or was it more of an internal orientation)?

• What is the expected role of an incum-bent upon leaving the post (is there any transition, formal or otherwise, expected of this person)?

• What kind of compensation program does the general population of partners work under?

• Does this leadership post have any particular variation or customized pay scheme?

• What does this person really want to do? We know individuals often say that they want to return to their law practice, but there are varying degrees to which that is actually the case. It helps to understand what each side is thinking.

The best leadership transition program is one that works to meet both individual and firm interests while considering the chal-lenges and timeframes to transition from the formal leadership role into the next role—whatever that may be. ■

—James D. Cotterman

James D. Cotterman is a principal of Altman Weil, Inc., a legal management consultancy headquartered in suburban Philadelphia. He advises law firm clients on compensation, capital structure, and other economic issues. Contact Mr. Cotterman at 407-381-2426 or email: [email protected].

Dodd-Frank Wall Street Reform and Consumer Protection Act: Law, Explanation and Analysis provides comprehensive analysis of the sweeping new banking and securi-ties legislation.

The Act’s historic reforms are transforming the way banks, hedge funds, credit rating agencies, broker-dealers, investment advisers, accountants, public companies and other fi nancial institutions—and the attorneys who advise these entities—operate. Therefore a comprehensive understanding of these changes is vital to all participants in the U.S. fi nancial system. This defi nitive publication provides immediate insight into the impact of the new law.

Written by the CCH attorney-editor staff of banking and securities attorneys, this 1,600+ page book explains every provision of the sweeping new banking and securities legisla-tion. With 600 pages of analysis, it will give you an understanding of the impact of this historic legislation.

Commentary includes discussion of the relevant legislative history, including committee reports and fl oor remarks, detailed citations to new and amended law sections, and editorial comments and caution notes.

This publication also features the full text of the legislation and committee reports, tables of effective dates and stat-utes amended, and a topical index.

Dodd-Frank Wall Street Reform and Consumer Protection Act: Law, Explanation & Analysis

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Systemic Risk Oversight Federal Depository Institutions Securitization Dissolution Authority Executive Compensation and Governance Derivatives Markets Consumer Financial Protection Hedge Funds Credit Rating Agencies Financial Intermediaries Enforcement and Litigation SEC Funding, Organization and Reforms Other Securities Reforms Federal Insurance Offi ce Mortgage Reform & Anti-Predatory

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deemed risky Limits proprietary trading at the largest fi nancial fi rms (the

Volcker Rule) Regulates derivatives on exchanges or through clearing organizations Requires SEC registration of hedge funds and private equity funds Imposes retention requirements on securitized loans Promotes use of stricter state-level consumer protection laws Requires independent compensation committees Gives shareholders a non-binding “say-on-pay” Investor protection for seniors and underserved investors

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Businesses, individuals, and governments have forever been looking for more effec-tive ways to resolve disputes other than through litigation. “Discourage litigation,” Abraham Lincoln advised. “Persuade your neighbors to compromise whenever you can. Point out to them how the nominal win-ner is often a real loser, in fees, expenses, and waste of time” (Lincoln’s Lessons for Lawyers, Thomas Stipanowich, http://ssrn.com/abstract=1759598).

The use of arbitration as an alternative to litigation has also been around for centuries. It is well known in the Alternative Dispute Resolution (“ADR”) community that George Washington included an arbitration clause in his will, which stated that disputes aris-ing out of his will were to be resolved by an arbitration process, and that the arbitrators’ decision was to be “binding on the parties as if it had been given in the Supreme Court of the United States” (The Papers of George Washington: http://gwpapers.virginia.edu/documents/will/text.html).

This historically entrenched view that indi-viduals and organizations continuously will seek more effective and efficient means of resolving disputes continues today, and argu-ably more so at the present time when the legal field has been repeatedly described as in transition. Some commentators have described a “new reality” for law firms, both because of a softening demand for legal services and also because corporate clients are insisting that firms find ways to lower the fees that they charge or at least provide more value.

Certainly, the economy had a role to play with the current legal environment. As the economy slowed, so did corporate transac-tions, and as transactions decreased, the

amount of litigation taking place appears to have slowed. In the Federal District Courts, civil case filings in 2012 decreased by 4 percent over the prior year (2012 Year-End Report on the Judiciary, http://www.supremecourt.gov/publicinfo/year-end/2012year-endreport.pdf).

In the current environment, it may also be that when disputes arise, parties are less will-ing to fund litigation or arbitration, simply placing a greater value on the business rela-tionships that they have and working harder to resolve disputes that arise in the course of those relationships. In addition, in-house counsel increasingly insists on fee arrange-ments other than traditional billable hour arrangement.

How ADR fits into the legal landscape regarding business-to-business disputes is also at a crossroads. Accordingly, it is fair to ask, how will ADR now adapt? To answer that, it is important to understand that the real explosion in the use of ADR has taken place within the past twenty years.

Rising Demand

The advantages of mediation and arbitration have taken hold largely because organizations have recognized their benefits. Mediation, a process where an impartial neutral facilitates a settlement discussion among the disputing parties, offers significant advantages because it empowers parties to resolve disputes accord-ing to mutually acceptable terms.

Arbitration’s main benefits—including time and cost savings as compared to litiga-tion, the ability to select a decision maker with relevant expertise, and confidentiality—likewise drew large numbers of users.

ADR’S Continuing Development:

A Thriving Component of the Civil Justice System


Along with greater use of these processes, the American Arbitration Association (AAA) has found that extremely large disputes were being submitted to arbitration. Within a given year, a number of demands for arbitration with claims of hundreds of millions, and sometimes billions of dollars, have been filed with the AAA.

The filing of increasingly large arbitrations has been accompanied by other trends, how-ever. Along with these large bet-the- company arbitrations come increased complexity, demands for more extensive discovery, lengthier hearing schedules, and the selec-tion of arbitrators who are more likely to be expensive because of their experience.

In turn, some have asserted that arbitration has incorporated some of the characteristics of litigation, obviating long-held attractive characteristics of arbitration, namely that it is a less expensive and faster method of resolving disputes. It is fair to question whether these criticisms are justified. In doing so, however, we must consider how parties’ demands and expectations have increased.

Quality Control

In fact, for AAA-administered cases, the time and cost to complete an arbitration from filing to award has not increased dra-matically since 2005. The AAA has increased efforts to ensure that the arbitration process remains streamlined.

First, experienced arbitrators are working very hard at asserting themselves as man-agers of the arbitration process. Although arbitration is a party-driven process, the most experienced arbitrators are increasingly persuading parties to shorten their timetables and limit discovery.

In addition, arbitrators are advising that in-house counsel get personally involved. The AAA will provide additional training and monitoring of arbitrations and arbitra-tors, develop streamlined rules, and introduce new and more flexible and affordable fee

structures, as important touchstones in cur-tailing time-and-cost issues.

In-house and outside counsel also are taking control of the arbitration process with more careful drafting of dispute resolution clauses in order to address issues such as discovery and time frames for the completion of an arbitra-tion. Those issues include considerations that can also expedite the arbitration process, such as the choice of law, the locale of the arbitration, applicable law, and the number of arbitrators and their experience and background.

Solomonic Wisdom?

One perception that developed, which the AAA has long worked to correct, is that arbi-trators “split the baby.” The AAA has looked at the issue of outcomes in arbitrations through a number of studies over the years, with a particular eye on various caseload types. Each of these studies confirms that arbitrators render awards decidedly in favor of one party or the other.

The most recent such study, conducted by the AAA in 2011, looked at over 2,500 busi-ness-to-business arbitrations where monetary claims were asserted. The results of that study showed that 27 percent of the awards granted either nothing or less than 20 percent of the amount claimed, while 49 percent of the awards were for between 80-100 percent of the amounts claimed. In other words, in 77 percent of the arbitration awards, the arbitrator rendered an award that was almost completely for or against the claimant.

These outcomes are consistent with other studies of AAA awards in the past, which also looked at commercial and international arbitrations. The results of those studies were largely the same, squarely refuting the charge that arbitrators customarily split the baby. Instead, it is the AAA’s experience that our arbitrators are intensely committed to decid-ing cases according to the law, and the facts and evidence presented to them, and to render awards that are justified based on the record.


SCOTUS Support

At the same time that users are thinking about how to use the arbitration process most effectively, the United States Supreme Court’s support of the arbitration process has reached what might be considered a historical high. The Supreme Court takes up a number of arbitration-related cases each year and con-sistently decides those cases in a manner that supports the arbitration process, the enforce-ability of arbitration agreements, and minimal court involvement in the arbitration process.

Further, the Supreme Court has been par-ticularly aggressive in reversing state courts that have expressed any type of hostility to the arbitration process. Within the past two years, SCOTUS has summarily reversed three state court decisions, without merits briefing or oral argument, that the High Court viewed as demonstrating an unwarranted hostility toward arbitration.

The most recent such case was Nitro-Lift Technologies v. Eddie Lee Howard, 133 S. Ct. 500 (2012) where the Oklahoma Supreme Court had held the existence of an arbitra-tion agreement did not preclude judicial review of the non-compete provisions con-tained in the underlying agreement. The High Court reversed, making it clear that it was for the arbitrator, and not the court, to make that determination, and holding that “[t]he Oklahoma Supreme Court’s decision disre-gards this Court’s precedents on the FAA.…Our cases hold that the FAA forecloses pre-cisely this type of ‘judicial hostility toward arbitration.’”

The Supreme Court had similarly pointed language for the Supreme Court of West Virginia in Marmet Health Care Center v. Brown, 132 S. Ct. 1201 (2012), which involved the enforceability of arbitration agreements in the context of wrongful death claims against nursing homes. The West Virginia Supreme Court held that, as a matter of public pol-icy under state law, pre-dispute arbitration

agreements in nursing home admission agree-ments would not be enforced.

The Supreme Court stated, however, that the “West Virginia court’s interpretation of the FAA was both incorrect and inconsis-tent with clear instruction in the precedents of this Court.…[W]hen state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.’” Id. at 1203 (quoting AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1747 (2011)).

From these cases, among many others that have been decided by the Supreme Court, the message is clear that arbitration agreements are to be enforced according to their terms, as mandated by the provisions of the Federal Arbitration Act. As a result, organizations should be comfortable with the understand-ing that the currently existing federal body of arbitration case law is emphatically support-ive of the arbitration process.

In some respects, the trend taking place whereby parties submit their business dis-putes to arbitration for a broader range of dispute types and sizes, is countered by a demand that the arbitration process remain true to its roots as a fast and cost-effective way of resolving disputes. The AAA has, and will continue to respond with dispute resolution options that enable businesses to streamline their cases, and to empower arbitrators to more effectively manage the arbitrations that they preside over.

In doing so, ADR continues its longstanding and historical partnership with the courts as a thriving component of the justice system, both domestically and internationally. ■

—Eric P. Tuchmann

Eric P. Tuchmann is General Counsel and Corporate Secretary of the American Arbitration Association, based in New York City. Contact him at 212-716-3937 or [email protected].


Are you ready to ratchet up your market-ing activity? Maybe things have slowed down around the office. Or perhaps you just don’t like the direction your work is taking—too much repetition and not enough of a chal-lenge? Is it time to refocus your practice? Or do you just need to stop waiting for others to “do something,” and start bringing in your own clients?

Regardless, there are some serious misper-ceptions about marketing legal services that need to be cleared up right away.

Refresh Your Thinking

Size doesn’t matter. No one really cares about the size of your firm. Well, okay, there are those international corporations approach-ing merger that need a brand-name firm to bolster the board’s confidence and protect someone’s tender neck if things go sideways.

Beyond those few odd twists, though, any ingenious and determined lawyer can provide what’s needed and wanted, regardless of how many workstations are on site, or who buys the paper clips. (Think: Contract lawyers, outsourcing, virtual lawyering, etc.) And there’s every reason to expect any lawyer to offer the kind of personal service previously associated with small and solo practices. Let’s repeat: No one cares about size. So it’s no way to compete, right?

It’s value, not price. If you’re still trying to compete based on price ...well, that’s another thing we need to talk about. There are so many wrong ways to think about your fees. Here a few popular ones I hear all the time:

“Big, Bad & Ugly just raised their rates! Now we can, too!”

“She’s a fifth-year associate, so her hourly rate has to be the same as all the others in her class.”

“I’ll tell him my rate is $500 an hour and if he chokes, I’ll just discount it. Then he’ll think he’s special!”

“Their RFP asked for some kind of value billing, so I figure we give them 20 per-cent off and hope no one else matches that.”

“Well, we’re a small firm, so our rates have to be lower.”

“We’re bigger, we can charge more.”

And then there are some good ways to think about fees:

“We’ve done every one of these deals that’s ever been done in the pharmaceuti-cal industry. We’ll be fast, effective, and connected in a way no one else could be. And that’s what this client needs. We can deliver maximum value to them. Let’s set the fee accordingly.”

“Let’s just develop a simple Word tem-plate for this assignment. Then it will only take 10 minutes to do each task. It’ll be cheap for the client and we can maximize our profit by doing six tasks per hour with little partner involvement.”

Start focusing on the actual value of your work to the client. Clients will love it. In the end, you’ll love it too.

Look at me when I talk to you. Speaking of love…it’s not just the loves of your life that need to know you’re thinking of them. Everyone is naturally drawn to the person who sees things from the other’s point of view. Try this experiment: Pull up your last

Marketing Legal Services:

Let’s Get Real


RFP response or your firm website, and read a bit of text. Start counting personal pronouns.

Does it go something like this: “I, we, us, us, we, we, our, me?” As a potential client, that tells me all you want to talk about is you. I’m looking for someone to help solve my legal problem. Once I know you’re quali-fied (and that only takes 30 seconds), I want evidence that you know how to talk—and care—about me.

Next time you speak to potential clients, try asking about them instead of telling them about you. It works!

Do marketing and business development. What’s the difference between marketing and business development? At the risk of oversimplifying, marketing includes all the ways you communicate to your target clien-tele about your value and capabilities: media relations, advertising, branding, brochures, blogging, websites, email marketing, semi-nars, and so on.

Business development is personal selling. If you’ve developed an effective market-ing plan and have been implementing it conscientiously, your potential clients will already know who you are by the time you personally look them in the eye and shake hands.

Marketing builds a platform from which you can more easily sell your services. It lets you start a personal relationship after having already earned credibility. You can’t just do marketing or just do business development. It takes both to build credibility and bring in new clients.

Use the Internet. Welcome to the 21st century, where at least half of our communi-cations occur via the Internet. No longer do we argue for half an hour over dinner about the name of “Oh…that guy…in the Italian movie who…you know…he’s blond and dated Penelope Cruz?” Smartphones slide out of purses and pockets and the controversy is

quickly laid to rest. Every day begins and ends with email. We learn what’s up with fam-ily members by reading Facebook. Personal style is expressed via Tumblr, Pinterest, and what we tweet at night.

We “go to school” at home in our pajamas. Professionals demonstrate competence by being the first to share or retweet hot news. And clients do find lawyers via online legal networks.

Accept that this world is the one you live in. If you’ve avoided LinkedIn because “I just don’t want people to know that much about me,” or Facebook because “I don’t trust those security settings!” or Twitter because you don’t want to make a fool of yourself, then rethink your assumptions. If you need to “fish where the fish are” (and, of course, you do), you’d better learn to find joy on the Internet.

Think content. The Internet is not a passive sport. You, or someone you really trust, will have to work it if it’s going to get you closer to your goals. And that doesn’t just mean making sure you tweet, share, and blog with some regularity. It means that anything and everything on the Internet that represents you or your firm must be managed. Just about constantly.

For example, some months (or years?) ago, you created a new website. And it was incredible. Beautiful to look at. Friendly to use. You sent out a message to all of your contacts announcing the new site. They vis-ited and you received lots of nice comments. Then what happened?

Unless you are really on top of things, your site just sat there gathering digital dust. Everyone had seen it. The only new page views you got recently were when people needed to copy and paste their resumes into a letter, or your mom needed to brag to a neighbor. Why did this hap-pen? Simply enough, there is no reason for anyone to visit unless you’ve added new content.


And that is the issue of the age. Where does the new content come from? How do you keep people coming back for more? How do you “leverage your online presence” to build credibility and relationships? Oh, it can be done. Law firms are doing it right now. Figure out how to do that for all the digital things that represent you and you’ve really got something.

Something that will build new and old client relationships.

Be nice! Okay, you can be forgiven. You’re probably not to blame, anyway. It’s SOP. Law school taught you to fly like an arrow to the heart of anything wrong, incorrect, misguided, or inappropriate. Forget the good stuff…that’s not important. If you view the world negatively long enough—especially in the company of others with a similar outlook—it won’t be long before a negative, cynical, and competitive way of being feels like home. It’s all those glass-half-full, irritat-ingly positive people who really make your eye twitch, right?

But here’s the thing…people hire lawyers with whom they feel comfortable, the ones they can trust. Sure, some clients may share your cynical world view but most want to know that, while you can be a bad-ass when they need you to be, the rest of the time you are a good and kind person, interested in solving their problems.

One More Time

So, to review, here are some assump-tions about marketing that just don’t fly any longer.

1. We can’t do that; we’re too small (or too big).

2. The only way to compete is by lowering our rates.

3. To get them to hire you, you have to tell them all about all the things that make you the best lawyer.

4. Other firms advertise and don’t have to bother with all this embarrassing “sell-ing” stuff.

5. Marketing doesn’t work. It’s just a matter of who you know.

6. Real lawyers don’t tweet…or Facebook, or Pin, or Quora.

7. We’ve got a website. We don’t need to spend any more time or money there.

8. If someone wants to learn something from us, they’re going to have to pay us.

9. When people hire a lawyer, they want a bulldog, not a nice guy.

Don’t spend any more time arguing about these assumptions. If you want to stay alive in this dicey marketplace, it’s time to wise up and treat your practice like a business. Because that’s what it is. !

—By Merrilyn Astin Tarlton

Merrilyn Astin Tarlton is Partner/Catalyst at Attorney at Work with nearly thirty years’ ex-perience in law firm management, marketing, and development. She is a Fellow of the College of Law Practice Management and in the Legal Marketing Association Hall of Fame. You can follow her on Twitter at @astintarlton.com.

Attorney at Work is a multi-author blog that delivers “one really good idea every day,” straight from the minds of nearly 150 dif-ferent law practice management experts and entrepreneurs to the desktops of thousands of subscribers around the world. Subject matter ranges from marketing and technology, to pro-ductivity and ethics, and everything in between. The goal is to help individual lawyers—whether in small firms or large, private or in-house, vir-tual or actual—build practices and lives that work successfully, profitably, and happily. You can subscribe at www.attorneyatwork.com.


As one result of the cost-cutting that law firms pursued in response to the recession, many firms have filled a number of their managerial and administrative functions with partners discharging those functions on either a part- or full-time basis. If nothing else, it raises some interesting compensation issues for the equity partners who now serve in those non-practice-related capacities.

There are basically three ways that firms tend to look at compensation in such situations.

Lockstep Model

The first is to take a lockstep approach in which the partner’s prior compensation (either as a practicing lawyer with the firm or in a previous corporate position) serves as a baseline and is tied to other lawyers of similar age and experience compensated at a similar level. The compensation of the lawyer involved in management then increases at a level equal to those partners.

In our experience, complaints about overly generous compensation for partners in purely administrative roles most often come from their closest peers, particularly if the administrative partner is paid at a higher level than his or her practicing colleagues. The biggest advantage of the lockstep is that it provides an image of fairness to both the lawyer involved in management and to the practicing lawyers who are similarly compensated.

Over time, of course, the peer comparisons fail as the performance of some practicing partners exceeds others. Periodic reconsid-erations of compensation based on those comparisons must then be made.

Tier-Ranking Model

The second is a defined tier-ranking for those (many) firms that operate based on a series of tiered compensation levels. In such situations, a management position can be fixed to a tier (e.g., the fourth tier from the top, two tiers from entry level, etc.), and the basic compensation levels don’t change from there.

In such systems, growth in compensation would be based on increases in total firm profitability, although there will often be bonus eligibility based on specific perfor-mance criteria. This system makes sense at firms that have a relatively low number of tiers as it can get awkward if there are more than six or eight tier levels.

The advantage in this approach is that the compensation is defined according to the responsibilities of the position and its con-tributive value to the firm rather than any perceived characteristics of the incumbent. A welcome sense of objectivity is created simply because the compensation level is established before the individual is offered or accepts the position.

The difficulty is that there is no career path for someone in an administrative role and a limited ability to reward exceptional performance.

Value Slots

The third system is based on comparable worth. Here, the compensation committee looks at the management position in com-parison to the compensation of various practicing partners and decides where the person’s value specifically fits in.

Square Pegs in Round Holes:

Compensating Administrative Partners


I know one firm that uses a forced rank-ing system they call the “lifeboat drill.” The firm imagines itself as a ship in peril and then anticipates which partners would go in the first life boat, which in the second, and so forth based on their overall value in contrib-uting to the survival of the partnership.

Each lifeboat is then assigned a level or range of compensation. Obviously, this system is extremely subjective and probably works best in a closed compensation environment. Some administrative partners whose compen-sation is based on comparable worth complain that they are can be too easily scapegoated. In bad years, they’re penalized disproportion-ately to the rewards they enjoy in good years.

Fundamental Question

All that said, the most interesting question may be whether placing partners in adminis-trative positions makes sense in the first place. For one basic criterion, does the fact that the individual in the position is actually a partner bring additional benefit to the firm?

For example, at one firm, an equity partner serves in a full-time position as the Director of Development; in other words, the partner is essentially responsible for lateral part-ner recruitment. Because the lateral prospect can more collegially interact with an equity partner than with a non-partner, the firm’s managing partner and practice group heads save a lot of time on consuming detail.

Not surprisingly, the firm has found that it’s also a signal to the lateral of the importance the firm places on his or her recruitment—even as it allows for more consistency in the negotiation of performance standards and compensation.

On the other hand, several firms have named equity partners to essentially serve as marketing directors. In such situations, it is often questionable whether the equity partner status really brings any particular advantage to the function other than empathy. It can also result in a substantial overpayment for the capability and performance levels provided.

Yet the biggest difficulty about putting an equity partner in an administrative position is that it can create the appearance that an under-performing lawyer has been “parked” somewhere where he or she can find some-thing productive to do.

When that’s the case, it doesn’t make a lot of sense no matter how shrewdly the firm determines compensation. !

—Ed Wesemann

Ed Wesemann is a member of the consulting firm of Edge International. He is also a co-owner of Legal Resource Group, a recruiting firm special-izing in senior administrative staff members. For further information visit the Legal Resource Group website at www.LRGLLC.com or at the Edge International website at www.Edge-International.com. He can be reached at 1-912-598-2040 or by email at [email protected].


he declined in part because the partnership is “not a virtual law firm.” One of the firm’s PR people sent this definition of what it is: “Axiom is a 1000+ person new model firm that serves nearly half of the Fortune 100 across 11 offices and four delivery centers globally.” The firm’s headquarters are in New York.]

Although the rise and acceptance of VLFs occurred at a steady, rather than an astonishing rate, they’re clearly here to stay, chiefly because clients and lawyers see the advantages—not all of which are financial in nature.

Virtual Law Partners, founded in the Bay Area in 2008, launched its practice with a focus on work-life balance as one of its guid-ing principles. “I work from home because my house is set up for that and so I get to see my kid every day at breakfast and dinner,” says David Goldenberg, a VLP co-founder. “It’s such a better quality of life.”

The VLP partnership is modest in size with 35 attorneys but not, it seems, in the quality of clients, legal talent, service, and reputation. Goldenberg says that some of his clients represent global oil corporations and other big companies, but he mostly represents start-up and mid-market technol-ogy firms. “My clients love this model; they get it,” he says. “And they’re all for cutting a third out of their bottom line. Once I explain that’s how the law firm model works, that when you pay your attorney $600 an hour, $200 is paying for the office you often will never see, they say, ‘Great. Sign me up.’”

The Coffee Shop “Office”

VLP lawyers are all responsible for pro-viding their own offices. Several work from home and others rent office space outside

the home, and they meet their clients at various locations. “I meet my clients at the coffee shop around the corner,” Goldenberg says. “I joke with them that that’s my office. Many of my clients also have alternative-workspace arrangements. They’re people who feel more comfortable meeting at a coffee shop than getting dressed up to go downtown to a high-rise office building, wait in the lobby for someone to come down and take them up to the 36th floor and sit in a conference room.”

Like Advocates Law Group, VLP recruits experienced partners and doesn’t hire any associates. It employs legal “specialists,” who are essentially paralegals or legal assistants, and other staff, convenes all partners for face-to-face meetings or social events four times a year, and the partners invest signifi-cantly in information technology, including a client portal and round-the-clock IT support.

Although the rise and acceptance of VLFs occurred

at a steady, rather than an astonishing rate, they’re

clearly here to stay.

“We have a way for clients to virtually see copies of their documents in a secure location, 24/7,” Goldenberg says. “So they don’t have to call their attorney and ask, ‘Hey where’s that document I signed last week.’ And our IT people can get on our computers and fix them at 2:00 in the morning if we need it.”

VLP attorneys charge rates that are con-siderably lower than lawyers with comparable experience and expertise at traditional firms. But their fees aren’t bargain-basement spe-cials as they usually range from $300 to $375; for some practices areas, however, the rates can reach $500 an hour.

“We’re not the cheapest firm around and we’re not trying to be the cheapest around,” Goldenberg says. “What we say is, ‘We’re

Continued from page 2

Virtual Law Firms


the best value. You’re getting a great attor-ney with great experience, delivering what you need for half price.’ That’s what we tell people.”

While Goldenberg says he and his colleagues appreciate the benefits the firm offers—the collegiality, albeit mostly long-distance col-legiality, the complementary practices for cross-referrals and the infrastructure—the partnership does face some challenges. The most difficult aspect of their operations and growth strategy is recruitment.

“The biggest challenge for a virtual law firm is the centralized billing,”

Tamblyn says.

“We’re looking for partners with $500,000 to $1.5 million books of business,” Goldenberg says, “who have great credentials, went to a very good law school, and will fit with our culture. That’s a constant challenge. We get tons of resumes that come in and 90 percent don’t get past our initial screen. We screen very hard because we’ll admit you straight in as a partner.”

Kitchen Table Deposition

George Tamblyn of Advocates Law Group operates out of his Seattle-area home. “My partners and I meet clients in their offices or at a conference room that one of the partners has,” he says. “I can also meet them at my house. And really after you meet with them initially it’s rare that you need to have face-to-face with them as most of our interaction is done by phone and email. Another partner and I—she’s doing most of the work—are preparing a client for a deposition and we’re doing that right here at my kitchen table on Mercer Island.”

While ALG is doing quite well and has many sophisticated clients who say they like the low rates that a reduced-overhead firm

can offer, the partnership does confront complications. “The biggest challenge for a virtual law firm is the centralized billing,” Tamblyn says. “We haven’t centralized that much. We have a bookkeeper out of Olympia and we have an online timekeeping system that works wonderfully. We were lucky to get that solved right from the start. We’re keep-ing track of all the money of all the partners very well. That’s a problem if you don’t do it well.”

The next biggest challenge, Tamblyn says, has to do with collegiality. After all, the partners don’t see each other every day like at most firms so it takes time and effort to build strong relationships. “We have to work to create emotional cohesion among the partners so that we know and trust each other and want to share with each other,” he says. “So we do that by frequently get-ting together both socially and for business meetings.”

At VLP, the firm addresses this issue through its Virtual Culture Committee, which helps coordinate the four yearly gath-erings and a video conference every two weeks, among other things. “The commit-tee’s a group of attorneys and staff who are focused on keeping people who don’t see each other every day together,” Goldenberg says. “It’s been working because this is clearly a group of people bonded together, a firm. That’s what gets you through the tough times. I have confidence that when I wake up in the morning I know my partners aren’t going to leave and do something else next week. I trust them.” !

—Steven T. Taylor

About Virtual Firms: In His Own Words

Advocacy Law Group’s George Tamblyn has written fairly extensively about virtual law firms—he researched them thoroughly before helping form his partnership—and he’s shared some of those writings with


Of Counsel. Below are excerpts of what he’s crafted, which offer further insight into this alternative law firm model:

“The virtual law firm is no longer the figment of a techie lawyer’s imagination. It exists today in many forms, large and small, throughout the country, indeed, throughout the world. Being virtual is definitely here to stay and is already influencing the way that law firms are structured and legal services delivered.

“A VLF could be defined as an organized business entity, which primarily or exclusively does not utilize a central office to house attorneys and permanent staff. Instead, it relies on technology to provide much client contact and the interaction between members of the firm. Without substantial office space and permanent staff, an impressive amount of overhead is eliminated. Contract person-nel can be available for support and large projects and their expense charged to the project or to the individual attorney utilizing the support to leverage his/her time. A VLF may or may not provide virtual legal services (VLS), which are services that are partly or entirely delivered to the client via technology.

“Many bankruptcy attorneys and fam-ily law attorneys are utilizing VLS to interface with their clients and provide

computer-generated documents directly from client-inputted data. A traditional bricks-and-mortar law firm might well provide VLS, but so could a VLF. A VLF is more about the structure of the law firm and its operating philosophy than about the way services are delivered….

“What should general counsel look for in a VLF?

• Is the VLF truly a VLF? If it maintains an expensive central headquarters or is a business enterprise supporting entrepre-neurs and/or investors, the costs associ-ated with such activities erodes the VLF’s ability to provide lower rates and to have competitively paid, quality attorneys.

• Is the VLF creative regarding fees and rates and willing to tailor them to your needs? Flat fees, low monthly retainers, low rates, contingent fees, contingent plus flat, performance bonus; are all these, and others, on the table?

• Does the VLF have the experience and expertise you need? A review of the VLF’s resumes should give a partial answer to this question.

• Will the VLF be able to be specifically responsive to your corporation’s needs? Are they flexible about additions to their firm that you might find useful? Will they be a team player with you?”


some of the biggest financial institutions in the United States? Talented attorneys cer-tainly help. In its short history, the firm’s recruited a critical core of top-notch securi-ties regulation practitioners. Nine of M&M’s partners formerly served in the SEC, some in senior management positions.

What’s more, the founding lawyers formed the firm with an innovative operational model that tightly controls overhead, among other things—a model that has become increas-ingly attractive to clients ever since the Great Recession melted the economy.

Recently Of Counsel talked to co-founder James Murphy about the U.S. News recogni-tion, his career, the strategic thinking behind creating M&M in 2010, its path to success, the firm’s core values, and other topics. The following is that excerpted interview.

Of Counsel: As you know, James, we like to start these interviews by asking this question: What made you want to become a lawyer?

Through the course of my law school years, I concluded that I didn’t want to return to Arkansas but rather I wanted to go where it looked like the

lawyers were having fun.

James Murphy: My father was a huge influence in my life and that of my sister’s life as well. He was part of the team that prosecuted war crimes right after World War II in Germany. He went on, after his tours of duty were over, to become a criminal defense attorney and later a law professor.

My sister, who’s the smart one, was on the law review at Yale and worked at the United States Supreme Court and worked at Ropes & Gray. She eventually became a law professor as well.

So I think it’s just in the DNA. We had lively debates around the dinner table back in the days when families actually got together and had dinner all at the same time. So, being a lawyer was something I wanted to do from a very early age.

Lovin’ “LA Law”

OC: You went to the University of Virginia for a degree in economics and then you went to Vanderbilt for law school. What pushed you into the financial services side of law?

JM: It was entirely by accident. I had gone to Vanderbilt with the idea that I would return to Arkansas, where I grew up, mainly, and where my parents live. My dad finished up his career as a law profes-sor at the University of Arkansas and was on the staff with Bill and Hillary Clinton. But through the course of my law school years, I concluded that I didn’t want to return to Arkansas but rather I wanted to go where it looked like the lawyers were having fun.

Now, you may recall a TV show called “LA Law.” So all of us law students used to marvel at “LA Law” and how much fun the lawyers on that show were having. For a period of time a lot of people who normally would try to get jobs with Wall Street law firms were going out to Los Angeles and I followed the crowd and wound up at a terrific law firm, Jones, Bell, Simpson & Abbott, which hap-pened to specialize in securities litigation. So I started to learn securities litigation from a group of people who were terrific mentors for me. I spent about four and a half years of my practice in Los Angeles.

OC: What brought you to McGuireWoods, in Richmond?

Continued from page 28

Of Counsel Profile


JM: My wife and I decided that Los Angeles was not the place that we wanted to raise a family, and we were getting to that point where we decided we wanted to start having children. And, I had fallen in love with Virginia during my years at the University of Virginia. I got some good advice from a friend who said, “What you ought to do is go to one of the larger firms and establish your credentials in that market and then should you ever choose to leave, you’ll have a lot of opportunities.” So that’s what got me to McGuireWoods.

OC: You then went to the smaller firm of LeClairRyan. Did you like the small-firm culture of that partnership?

JM: I was recruited there by a partner I’d known for awhile who was focused on SEC-related work. He was a former SEC lawyer and he knew that I was a securities litigator and he said, “You know, if the two of us get together we’ll have the largest securities litigation practice in Virginia. [chuckles] And maybe we could build something from here.”

That’s what I always wanted to do, given my training at Jones Bell. So we combined and we started to build. Eventually we recruited some lawyers to create the DC office for LeClairRyan and then eventually I led the firm’s effort to get into the New York market, which is a place that I felt we had to be in order to be a legitimate player in finan-cial services and represent the larger national and Wall Street firms.

Building an “All-Star Team”

OC: You stayed at LeclairRyan for 13-plus years—you obviously liked the firm and the growth it was experiencing that you were helping with—so the logical question is: Why did you leave to start up Murphy & McGonigle?

JM: I did enjoy my time at LeClairRyan very much and I still have very good friends there. I felt like there was a tremendous

market opportunity to create a boutique firm that focused on financial services and to put together what I refer to as an “all-star team” of top-notch talent. And I wanted to try to put it together in a firm where the lawyers practice law instead of engage in a lot of administrative activities that can distract from the thing that the lawyers are actually trained at and good at and, of course, that’s the practice of law.

My thought was we’d create a streamlined and bureaucracy-free law firm and outsource a lot of the administrative work that must be done to support any kind of business. We’d [hire] the kind of talent that would attract a premium clientele, where we could focus on high-stakes litigation and cutting-edge regulatory issues as well as the defense of sophisticated and sometimes high-profile SEC investigations.

The recognition of us as a national tier one firm is, to

me, an astonishing affirmation of the concept that we started

with in 2010 and a result of some of the good things

our clients and peers are saying about us.

OC: So you have 40 attorneys, which, of course, is considered a small firm by many standards, and yet you’re able to make that U.S. News best law firms list in November. There are probably a few reasons why you’re the only small firm in that ranking, which includes large, big-time firms with household names like Cravath and Cadwalader and Skadden and Sullivan & Cromwell. How have you been able to receive such an honor in such a short amount of time and with rela-tively few attorneys?

JM: I think it’s the clients. The methodol-ogy of U.S. News is to survey clients in the financial services business and to survey our


peers. The clients are going to be big banks and Wall Street investment banks, broker dealers and companies of that kind. And our peers, as you’ve indicated, are people at AmLaw100 firms who are also in the busi-ness so I have to assume that they had good things to say about us.

As you look at the profile of our law firm, what’s unusual is the client base. We represent three of the top five largest com-mercial banks in the United States. We represent virtually all of the investment banks on Wall Street. We represent many other regional broker dealers, national bro-ker dealers, hedge funds, investor advisors, you name it. They have found their way to us. That’s due to the reputation and expertise of the individual lawyers who make up the law firm. The law firm itself is certainly no brand name. As a result, the recognition of us as a national tier one firm is, to me, an astonishing affirmation of the concept that we started with in 2010 and a result of some of the good things our clients and peers are saying about us.

OC: What sorts of compliance counsel are your clients asking for your firm’s help with the most? Is it Sarbanes-Oxley, Dodd-Frank, something else? And then why is that?

JM: It’s Dodd-Frank, in a big way. Dodd-Frank is perceived in our market as far more impactful on the way financial service compa-nies are going to be able to conduct business in the future than Sarbanes-Oxley was. So we have advised national banks on what we think proprietary trading might look like under the proposed Volker rule. The contours of that are not spelled out yet. We represent national securities exchanges, where stocks, bonds, and commodities are traded. One example—the New York Stock Exchange. We represent the New York Stock Exchange in rule filings. And these things are very compli-cated. We have people who know the ins and outs of the way exchanges operate.

I think you know that we have a bunch of SEC lawyers but what you may not know

is that we also have people who were in industry, either prior to going to law school or who took a detour during part of their careers. So, for instance, we have a partner who was formerly a managing director in the global equities division of Merrill Lynch. We have someone who was senior legal counsel at Goldman Sachs. We have someone who was a financial analyst at Merrill Lynch. We have a guy who graduated at the top of his class at Penn and then went to Harvard Law School and then became a proprietary trader and equity trading analyst at a hedge fund before coming into private practice.

So we have a bunch of partners who have been there and done that. When you get into these sophisticated issues around trading, the clients are really interested in finding lawyers who can actually speak the lan-guage to people who operationally have to deal with running a business in a way that’s within the rules, which are always changing. It’s unique in any law firm of any size to have as many lawyers who have that kind of expe-rience and expertise. We’ve attracted these people intentionally to position ourselves as a law firm in financial services that really does have people who have been there and faced the same kind of challenges that our clients face every day.

Dealing with Conflicts

OC: Because you have so many of the large financial institutions as clients and you have former SEC people and people who used to work for large financial institutions, how often does the issue of conflicts come up for you? And, how do you deal with that when it does arise?

JM: Those are good questions. We believe that running into conflicts from time to time is an indication that you have a healthy law firm that is in high demand. So we don’t think it’s a bad thing. Everyone knows that we are on the side of the financial services industry and we do not take plaintiffs cases against the industry.


To the extent that we, from time to time, run into conflicts, we deal with them on a case-by-case basis and our experience so far is that our clients are very understanding and accommo-dative because they know where our heart is and that’s on the side of the financial services industry. So we’re not one of those litigation firms that might pop up with a plaintiffs’ class-action suit against the industry.

OC: James, you talked earlier about how you want your attorneys to practice law so you outsource a lot of the administrative work. That certainly lays the foundation for a certain kind of culture. How would you characterize your culture and what do you do to maintain it?

JM: We have a set of 10 core values that are listed on one sheet of paper. And, every-body knows what our core values are and I discuss them in great detail with every person that has joined our law firm to determine whether they really believe in these core val-ues and can commit to them.

I like to spend time with all of the lawyers that we hire. As we grow I think the challenge becomes greater to do that. Right now, I think of our status as “so far, so good.” We really share a commitment to delivering world-class service to our clients. We’re really grateful to our clients because they entrust in us some of their highest-exposure litigation and some of their most sensitive matters, whether it’s an SEC investigation or a significant regu-latory challenge that affects their business in a major way. We are honored by those requests for help. There are no clients here that anyone considers a birthright because they’ve been with the firm for a generation. We’ve only been in existence for two and a half years.

We have a “we’re-all-in-this-together” culture. The partners have capitalized the business. We’ve never borrowed a dime from a bank. We’ve invested our own money in this enter-prise and therefore, as a leader of the business, I find it’s very easy to maintain a consensus about being smart about our overhead because we all

know we’re spending our own money. So we’re all on board and rowing in the same direction.

I recognize that the challenge gets greater as we grow and the one thing that we talk about in partners’ meetings is that we do not want to recreate the atmosphere that many of us left. Virtually every partner has worked at a megafirm and we don’t work there anymore because we want a different kind of culture—like the one we’ve built here and work hard to maintain.

No Prima Donnas

OC: You know, I’m going to take a hunch that one of the 10 core values, maybe the first one on the list, has something to do with a commitment to client service. Correct me if I’m wrong, and can you tell me what might be a core value that would surprise me and our readers? An unusual one that maybe other law firms don’t have.

JM: Let me first say, you’re absolutely right. Core value number one is … it’s all about the client. You’ll recall the first Clinton campaign slogan, “It’s the economy, stupid.” Well, for us, it’s the client.

We say “low overhead” that means we don’t have secretaries go pick up our dry cleaning. We get our

own coffee.

Now about one that distinguishes us from other firms—well number four is one we’ve talked about already: Minimal bureaucracy. We will be ever-vigilant to minimize the administrative burdens placed on our lawyers and avoid unnecessary meetings.

Another thing that a lot of law firms say is that they have a no-prima-donna rule. Although, they may use a different word for that [chuckles]. What we say is, “We are


a low-overhead shop. So in some cases our lawyers may have to do for themselves what other firms provide through administrative support.” We treat our staff with courtesy and respect. This is probably what I talk most about with laterals who are coming in. We say “low overhead” that means we don’t have secretaries go pick up our dry cleaning. We get our own coffee. But when it comes to the tools our lawyers need—like technology—we’re going to have what we need to provide world-class service. While we’re low overhead, we do invest in technology so that we’re right there with anybody and can deliver great service.

OC: Finally, James, how much more do you think your firm will grow? When will you all, collectively, feel that you’re just big enough?

JM: Well, as you might imagine, that’s a question that’s discussed around here

often, among the partners. We’ve tripled in size in two and a half years. That was not done pursuant to any plan to grow to any particular size but rather it has been done 100 percent in response to client demand. It’s difficult to turn away an existing cli-ent who says, “You guys have done a great job on this matter will you also handle this matter that’s even larger and requires more manpower?”

So we have grown by necessity. We’re very comfortable at this size but I think that it’s likely that we’ll continue to grow and prob-ably that growth will be focused in New York, given the demand by clients there. We’ll also continue to assess how we’re maintaining our culture. At some point we might say, this is enough. But we’re not there yet. We are, however, happy to be practicing together as a close-knit, successful partnership. ■

—Steven T. Taylor

Wolters KluwerOf CounselDistribution Center7201 McKinney CircleFrederick, MD 21704

March/9900614424

When It Comes to Securities Law, Size Matters

Major corporations want to retain large law firms that have broad expertise, deep resources, and stellar talent to help them nav-igate the labyrinth of complex and nuanced rules and regulations enforced by the U.S. Securities and Exchange Commission and other governmental agencies.

So the Cadwaladers, Cravaths, Davis Polks, Morrison & Foersters and Sidleys of the world tend to dominate this practice area. And, all of these firms are highly recognized for their work in this arena. These partner-ships, and others, recently achieved National Tier One recognition for their U.S. securi-ties regulation practices by U.S. News—Best Lawyers® “Best Law Firms.”

That probably doesn’t come as much of a surprise; those megafirms win awards all the time for securities legal work and in other areas. But among the partnerships to earn this honor one, a small boutique, stands out. Two-plus-year-old Murphy & McGonigle, with 40 total lawyers, is the only firm on the list with less than several hundred lawyers. Murphy & McGonigle is also the only recently formed firm to be included on this prestigious ranking of the best American securities regulation law firms.

Now that’s news.

And how has M&M—which has offices in New York, Washington, and Richmond—been able to do so well, attracting and serving

Of Counsel Interview

Murphy & McGonigle Boutique Is Recognized as Successfully Competing Against Megafirms

in Securities Law Arena

Continued on page 23

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