Of the dozen "reputation management" news stories that caught my eye recently – including Royal Bank of Canada's plan to outsource jobs – came the story of a PR cockup that damaged a brand and the industry in which it operated.
It involved the legal profession, and the international law firm DLA Piper. The firm – a merger of three organizations from the United States and Britain – has more than 4,200 lawyers in more than 30 countries with annual revenues of almost $2.5-billion (U.S.), and average per partner income of approximately $1.3-million a year. It's the biggest law firm in the world.
But DLA Piper was in the doghouse – particularly the legal doghouse – because of litigation initiated by one of its former clients who alleged the firm had overcharged on legal fees. When the firm sued the client to recover $675,000 in unpaid accounts, the client counterclaimed for more than $22-million in punitive damages. In the process of pre-trial discovery – where parties are required to exchange relevant documents relating to the case – e-mails written by lawyers at DLA Piper were uncovered that seemed to substantiate the client's complaint, that made the firm look greedy, ravenous and rapacious, and in the process, did a minor hatchet job on the legal profession.
Said one lawyer in an internal e-mail to another: "I hear we are already 200k over our estimate – that's Team DLA Piper!" Said another, when discussing the fact that additional lawyers were brought into the file: "Now Vince has random people working full time on random research projects in standard 'churn that bill, baby!' mode." And finally, the pièce de résistance: "That bill shall know no limits."
The internal backslapping found its way into The New York Times, and it spread around the legal world like wildfire.
As a franchise and commercial lawyer in Vancouver who bills for his services, my first reaction was this: Why can't these brain surgeons in the United States get a basic grip on their accounts receivable? How on Earth could a law firm put itself in a position of having a client owe it almost $700,000? Why wouldn't it have stopped work at a predetermined amount until there was some further agreement on how and when the fees would be paid? How do you go $200,000 over an estimate and not have to answer to someone?
I suppose that's one lesson for all the lawyers reading this. When a client owes you that much money, he doesn't have a problem. You do.
My second reaction was that these internal emails seemed to tacitly substantiate a corporate culture where it was acceptable to overbill clients by "churning" superfluous and unnecessary legal work by other lawyers. And it appeared to be a badge of honour to featherbed a file with juniors who would be given needless tasks to drive up fees so the senior lawyers could meet or exceed billing, referral and cash-in targets assigned by the firm.
If the e-mails are accurate about this kind of culture at DLA Piper, it is reprehensible, and only adds to the misconceptions about lawyers and their billing practices. Needless to say, the firm settled with the client, and the lawyers in question aren't working there any more. I would imagine the settlement was encouraged by crisis managers and damage-control specialists who wanted the matter to end as soon as possible to get off the business pages of The New York Times.
I'd also imagine that in addition to any social-media polices the firm had in place for partners, associates and staff, there's now a clause that more or less says, "if you send jocular e-mails to other lawyers in the firm about billing matters that make us look greedy and rapacious, we will fire you."
So if your business doesn't have these sorts of policies governing internal and external communications, it should. Internal communications of this nature may be discoverable in litigation.
My advice to clients is to challenge in court the bills they believe are too high – a right they are entitled to pursue in each province. There are very capable lawyers who specialize in the review of legal accounts. But clients can also help themselves by securing a quote for the fees, a cap on them so that the law firm's bill won't exceed a pre-agreed limit, or a realistic estimate that the lawyer won't exceed without instructions. Admittedly, quotes and caps may be difficult in litigation, where delays and unexpected "surprises" may increase fees beyond what the law firm might reasonably expect to charge.
But for many matters, it may force law firms to find other ways of billing than the hourly rate – which, it's been said, can create perverse incentives. It might encourage greater efficiencies in law firms so that lawyers do a better job of seeing a legal task as an exercise in "project management," the way engineers and building contractors assess what it should cost to erect a bridge, a highway or a skyscraper. Call me crazy, but if engineers and contractors can bid on these very complicated projects and build in a profit for themselves, surely lawyers can too.
But the bigger point in the "churn that bill, baby" scandal is the damage a few internal e-mails can do to a well-respected legal "brand." I referred work to the Piper Rudnick firm some years ago – one of the merger partners – and I was impressed with it. But how comfortable will my clients be if I suggest they go to DLA Piper for future work in the United States or Britain? "Hey, aren't they that firm that encouraged overbilling their clients and featherbedded the work? Find me someone else."
DLA Piper's management went into overdrive after the scandal hit The New York Times. "The actions described in this story did not happen," the firm stated. "These e-mails reflect an unfortunate attempt at humour by three former lawyers of the firm, but did not result in overbilling to the client. DLA Piper as a firm has always adhered to the highest level of ethics and integrity in all of its work, including billing practices."
Well, what do you expect them to say? In fairness, the fees might have been justified in the circumstances and this could well be a situation where a few stupid e-mails written between lawyers boasting about their billings cost DLA Piper a lot of money, a disparaged brand, and unnecessary publicity.
But what it also says is how fragile brands can be when the organization somehow screws up and the matter finds its way into the court of public opinion – something the president of RBC and the partners at DLA Piper have had to struggle with.
Tony Wilson is a franchising, licensing and intellectual property lawyer at Boughton Law Corp. in Vancouver, he is an adjunct professor at Simon Fraser University (SFU), and he is the author of two books: Manage Your Online Reputation, and Buying a Franchise in Canada. His opinions do not reflect those of the Law Society of British Columbia, SFU or any other organization.
Tony Wilson