Cell phones removed from listed property category

Cell phones have become so ubiquitous that the Small Business Jobs Act of 2010 has  eliminated the need to create special record-keeping by taxpayers for employer-provided cell phones.

IRS makes mid-year 2011 adjustment to business standard mileage rate

For the third time in six years, the IRS announced a mid-year adjustment to the business standard mileage rate because of rising gasoline prices. The business standard mileage rate increased from 51 cents-per-mile to 55.5 cents-per-mile for the second half of 2011 and into 2012.

Wisconsin, the historical bastion of progressive legislation and politicians, has certainly served up a strange mixture of bedfellows in the last couple of years. It makes for interesting reading ... unless it's your ax that is being gored. The real question is whether this is limited to the state of Wisconsin or a harbinger of things to come on the national level.

This was my response: 

I don’t worry about surveys or what percentages others manage.  Every business/law firm is different … and there are too many variables to look at others’ operations and then get depressed because you didn’t meet them or elated because you bettered them … each feeling may not be justified. Do the best you can under your particular circumstances.

When I coach and consult with lawyers, that is one of the areas of my inquiry … how we can do what we do better.  If your profit is 20%, for example, who’s to say that it couldn’t be 25%?  And if another firm manages 30%, does that make your percentage a poor performance?  Not necessarily. Remember that percentages of this nature are based off the beginning figure of revenue. How is your revenue?  If you can get it higher, then your expense percentages will be lower/better.

There are too many variables to give a definitive answer. Thus, I distrust the surveys that are floating around.

• Big Law vs. Small Law
• Sole practitioner vs. Large firm lawyer
• Specialist vs. Generalist
• Boutique vs. Full product line
• Domestic vs. Outsource (overseas as in India and Philippines)

And I’m sure there are other distinctions that I've overlooked. But, now there is another phenomenon appearing. ....

The phenomenon even translated to the small firm and sole practitioner. One of my clients, a sole personal injury practitioner in Texas found that he could expedite his needs because of the time differential. He could send his needs as he left work and find responses and completed drafts on his desk the following morning.

A major national firm separated all of its "backroom" functions such as accounting, HR, etc. and opened a central facility in West Virginia, thousands of miles from its headquarters; the firm then added lower paid lawyers to the mix. These lawyers received less compensation because their work was limited in scope to mundane, repetitive work such as document review and because of the lower cost of living in the area.

A new twist is with us, however. The very same "outsourced law firms" have grown so large that they are now opening offices in the U.S. and hiring lawyers in the U.S. The compensation of these lawyers is lower. But, as someone appropriately suggested, "If you are not getting the bills paid, you need to work even if the per hour rate is lower."

The nature of the outsourcing industry was already changing when ThomsonReuters acquired a 400 lawyer outsourcing firm in India. This company is now opening an office in Texas. So perhaps we've come full circle ... and the compensation (at least on average) of lawyers is flattening, if not lowering.

This raises suddenly another issue for me. If the expense side of law is "flattening" because of globalization, how long will it take for the revenue side to change? For this to happen, rules of professional conduct will need to be, first, federalized and, second, globalized. In other words, we all must be playing on the same field for this to occur. Recently, I said this wouldn't happen for many years ... but perhaps it can happen in as few as 5 to 10 years. But, this is a discussion for another time. Stay tuned.

AdAge says: "...Return on advertising investment has always been a priority for marketers, but in the recession it flew to the top of the list. As chief marketing officers fought to justify spending within their organizations -- often via spirited discussions with procurement departments about where the dollars are going... " The Days, the subject matter of this article, I'm pleased to say are friends ... and outstanding marketers who focus on providing a profit on marketing dollars spent.

Do you look at this issue? Can you determine whether the money you spend is producing a profit, is enabling you to expand in your practice area, is improving your skill as a lawyer, or otherwise contributing to the improvement of your law practice?  You should. If not, you're in the gardening, playing with the dirt rather than growing gorgeous roses for sale to others who can appreciate your skills.

This group of law firms, the largest of which is Baker & McKenzie at 3,700+ lawyers, makes up less than 5% of the attorney population. Their growth, like all corporate growth, has its expansion and contraction phases. There are at least two questions that come to mind:

1.  Is this contraction permanent? Is this contraction a reflection of the entire industry?

2.  Does this contraction reflect a major shift in the way legal services will be delivered in the future?

My crystal ball does not give me the answers. But, I believe that

i) even sole and small firm practitioners felt the change;

ii) though the numbers in the survey reflect 2008 as the base year, there does seem to be a cautiously upbeat attitude among lawyers today. More lawyers are contacting me with the serious questions of how do we make our practice better, how do we grow our practice ... in other words, lawyers are starting to come out from their caves, a bit shell shocked, but ready to understand the needs of clients and focus on providing solutions to their clients;

iii) it's not the contraction that will cause the shift in the way services are delivered, it's the continuing evolution of technology that will impact the delivery of services. And this conclusion would have been the same with or without the contraction. It's just that, because of the contraction, we're more sensitive to the changes. But, these changes began before 2007-2008, and they will continue after 2011.

Lawyers have to be more sensitive to technological changes and how these changes can improve their efficiency and mode of delivery. Clients certainly are and they are looking for those lawyers who can reduce their legal costs (not necessarily hourly rate). Thus, even the decades-old billing and pricing models will be subject to pressures that mere conversation failed to impact until now.

As Oprah said yesterday while interviewing the President and First Lady, "... keep your eyes on the prize."  Know what you want in your practice. Know what your clients want from you ... what is the ultimate solution they are seeking by engaging your services? Stay focused and you will have happy clients ... happy clients pay their bills ... happy clients refer their colleagues and friends ... While doing good, you will be able to do well.

The banking industry has moved on. They are into the electronic age and we have not kept up.  For example, few banking institutions, if any, still return canceled checks. They send photocopies and, after a short time, destroy the canceled checks. See the federal Check Clearing for the 21st Century Act.

In August, 2010, the American Bar Association's House of Delegates adopted the new Model Rules for Client Trust Account Records to replace the Model Rules on Financial Recordkeeping, in effect since 1993. The ABA rules now enable lawyers to use electronic tools to comply with Model Rule 1.15 concerning holding clients funds and property.

Check your State rules -- not all states have updated their regulations.

And, now!  Where a taxpayer is delinquent on taxes due and owing, financial institutions subject to a new California law must provide to the Franchise Tax Board (the State equivalent of the Internal Revenue Service) on a quarterly basis the name, record address, and other information for those people who maintain an account at the financial instiution.

The cost of this new initiative will be paid by banking consumers on opening new accounts. And/or banks may decline to open accounts for depositors who are on the delinquent tax debtor list.

How do you get on this list? Fail to pay a demand for payment for 30 days. Nothing is said about the right of the taxpayer to protest the validity of the State's demand.

Technology is becoming a bill/tax collector ... First, for deadbeat dads who have a job or who receive money from the government. Now for those who have money in a financial institution but don't pay their taxes to the State. And, as we know from recent exposes, we are being tracked by the use of our Smartphones. And tracking us by the use of our credit cards at gas stations, ATM machines, seems to be commonplace.

There seems to be no plalce to hide.  What's next?

The Pineda decision held that merchants who request a consumer’s zip code to complete a retail credit card transaction have violated California’s Song-Beverly Credit Card Act (“SBCCA”). The SBCCA contains a provision that prohibits merchants from requesting and recording “personal identification information” about the cardholder. Penalties for violating the SBCCA range from a maximum of $250 for the first violation to $1,000 for each subsequent violation. Needless to say, the potential damages for a retailer who routinely processes hundreds or thousands of credit card transactions per day could be astronomical.

What's the big deal? Well, the zip code, plus the name of the person, can be reverse "mined" in order to get the address of the person along with other important personal information, the precise thing the law was designed to prevent.

Of course, if you have this information as part of your file, I would guess the law doesn't apply because you're not asking for the zip code specifically in relation to accepting the credit card for payment.  But, be careful.

Their headline ignores some of the very important considerations client think about when deciding who to represent them and how much to pay:

• The lawyers who receive the big bucks are thought to be folks who can get them out of very expensive matters more quickly than others could, thus saving them thousand and millions of dollars in litigation expenses or other business expenses ... or close deals faster that would enable the client to start making a lot of money sooner.
• The attorney might have a unique set of skills needed by the client at that moment.
• Lawyers who command high prices tend to be in limited practice areas such as bankruptcy, taxes and M & A, where the stakes are extremely high ... and the cost of the lawyer is really only a blip on the screen for the client.
• The cost per hour is irrelevant to the total cost of the legal services delivered.
• Fees to lawyers are more frequently now based on value to the client. The lawyers compensation becomes his/her equitable contribution to the benefit delivered to the client, making the "cost" per hour irrelebant.
• U.K. based lawyers, according to WSJ, charge more.

The writer also ignores the thousands of lawyers, more than 50% of the profession who earn less than $100,000 per year at hourly rates as low as $50 per hour, sometimes lower. Is there a cognitive dissonance here? I think so. One's reality, the high-flyers, is not the reality of all. And the WSJ should recognize that instead of flaming the flames of hatred against lawyers by throwing around large numbers of an infinitesimal group of people -- they are not representative of the profession. And, oh by the way, where is the companion piece that talks about how much money the CEO, CFO, et al of these very same companies that are hiring these lawyers? Let's look at a balance and fair perspective.

Dear Mr. President:

 I agree with you completely. There is a tremendous "justice gap." I'm glad the State Bar is seeking to do something about this. I wonder, however, why the State Bar doesn't expend the same energy on helping its own members, lawyers. One study reported by the State Bar several years ago indicated that 50% of lawyers in this state earn less than $100,000. Just think, if the State Bar would actually help its members be more effective with their clients, be more efficient in the delivery of their services and, yes, be more profitable, members of the Bar would then i) be less tempted to invade client trust accounts (a public service issue) and ii) have money to contribute to narrow the "justice gap."

Instead, however,  the Bar does things that are perceived by our members to be antithetical to the interests of lawyers … The list is rather long and I won't bore you here with issues on which I've spoken before. But, until you (the organized, mandatory Bar) works with its members … until you (the organized, mandatory Bar) has as at least one of its primary goals the interests of its members, you have a great deal of courage (some might say gall) to ask struggling lawyers to contribute more than they already do.

If our Bar were a voluntary Bar, I suspect less than 50% would join … Then we would not have governance issues imposed on us by the legislature. Of course, we would also be far more interested in the thoughts and concerns of our members than is currently the case.

Clearly, these are my own thoughts, not those of any Section or other body of the State Bar … but these thoughts were clearly expressed to me just this morning by another attorney. I thought you should know, considering you're asking us for money.

And let me take this opportunity to wish you and your family the best of the holiday season.  You've taken on a very tough job, some would say a thankless job, and I wish you great courage and strength. 

Dear Colleagues:

As you renew your State Bar membership, I am writing to make sure you are aware that one of the most vital roles of the State Bar is to distribute funds to support legal aid to low income people. Please join these efforts by supporting the Justice Gap Fund.  I am asking you to join me in two ways:

• When you pay your 2011 State Bar dues, please donate $100 or more to support legal aid for low income people. All gifts are tax deductible; and every dollar goes to help those in need. You can even make a gift online at http://calbar.org/justicegapfund. Donors of $1,000 or more will be recognized as “benefactors” of The Justice Gap Fund.
   
• Share this email with your colleagues and friends and urge them to contribute. Last year, only about 4% of California lawyers contributed. If every member of the Bar were to donate the recommended $100 amount, more than $20 million would be raised for the Justice Gap Fund. Even if every attorney were to donate only $25, there still would be over $5.4 million available to provide services to vulnerable Californians.

The “justice gap” is the gap between the number of people who need legal services and the resources available to provide those services. There simply aren’t enough resources to provide legal services to all of those in need. Every day legal aid intake workers have to turn away people who are struggling with heartbreaking legal issues. The Justice Gap Fund is one way that we, as lawyers, can help to close this “justice gap.”

According to the California Budget Project, in 2009 more than 5.6 million Californians were living below the federal poverty line -- $21,756 for a family of four. (A full-time minimum wage worker makes about $5,000 less than that.) If working a full-time job is not enough to ensure that your family has enough to eat, how do you cope when your sick child is wrongfully refused insurance coverage, when your husband begins to show the strain of unemployment by abusing your children, or when your elderly mother is evicted because her landlord’s house was lost in a foreclosure? When low-income people cannot afford an attorney to help them claim what is right and fair, legal aid is there to help. But the system is so overburdened by the sheer number of people who need help, many of those people now have nowhere to turn.

Closing this gap is one of the most important things that the State Bar does, and we’ve never needed your help more to ensure that access to justice, the very underpinning of our society, is truly available to all.

Sincerely,

Bill Hebert

Most systems will work so long as the participants deem the system in place to be fair and reasonable. The system is better, in my opinion, when there are objective metrics in place. But, even subjective metrics work as long as the participants think there is fairness and justice working ... with an appellate process in place that is also fair and just.

Oh, by the way, I concluded, I do that! <g>

Apropos of this conversation, I read that another law firm is being sued for unfair compensation system that works against the women in this firm. See my earlier post on this subject.

In a recent matter, a female partner claims that Dewey & LeBoeuf, a law firm that has received diversity awards, discriminates against women. She asserts that women partners receive less compensation than men in the firm.

The firm's partner distribution system is apparently based on origination, not just billable work. This is the case in many firms. What do you do, however, when "the old boy network" was created years ago, when women were not major law firm players, and there is no "sunset" provision in the firm for compensation? Seemingly, this would entrench old relations as the basis for current compensation ... and allow little or no access to women, to younger lawyers, and to other diverse groups in the firm.

Firms unwilling to look anew at their compensation culture will continue to face challenges from within as well as pressures from clients from without.

There is no prohibition to charging a high hourly rate so long as at least 3 factors co-exist: 1.) The client receives value commensurate with the charge; 2.) The client perceives he/she has received value commensurate with the fee; and 3) There is sufficient communication between the lawyer and the client to confirm that the client understands what the charges will be ... and the client is sophisticated enough to accept or reject the engagement agreement and fee being proposed.

The difficulty with fee disputes is that they are always "Monday morning quarterbacking," usually being determined by people who are using outdated standards of evaluation. The only real issues are 1) Did the client understand the fee structure and 2) Did the client receive sufficient value (not time) to justify the fee.

But, then the firm announces that "... the downturn in patent litigation persists, with fewer cases being filed and more settling earlier.... (C)ases coming in are smaller with tighter budgets and leaner staffing expectations...."  And this results in firings/terminations/layoffs (say it anyway you want, the people are gone) of lawyers and staff.  In other words, the troubled economy is still having its impact on law firms.

So far, so good. But, then the firm also announces that it sees an increase in patent prosecution, counseling and reexamination work, particularly in the electronics and software practice and the firm will hire first-year associates. Again, from the outside, it looks like the firm is firing experienced lawyers who get paid 3X and will hire first year associates who will get paid 1X. You fill in the numbers. When industry does this, it's called "age discrimination." It may also be called "stupid" because it negatively impacts the morale of the organization ... and you don't build a loyal, cohesive and capable workforce by seeking the least expensive team members. Why couldn't the firm offer the presumably lower paying jobs to the experienced folks? In this economy, they might not like it, but they'd rather stay employed and working with colleagues they know and like and trust. And, the organization will look like a caring place to work, making needed economic changes but also sensitive to the needs of its current work force.

Just seems to me to be a better way to do things.  And, at the very least, the PR ineptness of these announcements coming on the heels of one another is just astounding.

There are finance companies, in addition to other resources, that lend money on such cases. That is what my client was seeking.  Tell us how you handle your cash flow and financing of large cases. Perhaps you can identify the names of lending companies. I look forward to hearing from you.

Join us at the Forum for further discussion on this and other topics that are challenging and stressing you.

The term for bogus charges in a phone bill is cramming! The current issue of AARP's magazine discusses the history of the activity and suggests that there is only way to prevent unauthorized third-party charges on your phone bill:

• Call the phone company (AT&T: 800-288-2747; Verizon: 800-837-4966; Comcast: 800-266-2278; Qwest: 800-491-0118)
• Or send an email to the writer of the article, Ron Burley.