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         FORDHAM UNIVERSITY SCHOOL OF LAW
       LOUIS STEIN CENTER FOR LAW AND ETHICS
  PROFESSIONAL CHALLENGES IN LARGE-FIRM PRACTICES
           FRIDAY MORNING, APRIL 15, 2005



Panel II: Balancing Quality of Life and Delivery of Legal Services with
                  the Demands of the Billable Hour

                                   Moderator
                              Kenneth G. Standard
                          Epstein Becker & Green P.C.

                                 Panelists
                            Susan Saab Fortney
                   Texas Tech University School of Law

                                 Steven C. Krane
                               Proskauer Rose LLP

                                  Bruce MacEwen
                                AdamSmithEsq.com

                            Jim O. Stuckey II
                Nelson Mullins Riley & Scarborough LLP

                              James E. Towery
                    Hoge, Fenton, Jones & Appel, Inc.



                MR. STANDARD:     I want to welcome you to the second

session.        My name is Ken Standard.     I am here, perhaps,

because I am the President of the New York State Bar

Association.

                One of the initiatives that I have had as


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President of the Bar Association has been to appoint a

committee, which is chaired by a former president of our

organization, to look into the issue of the changes that

have occurred in the way we practice law.        The change that

we want to focus on is the loss of balance in our lives that

we all now experience.

                I started practicing law when I graduated from

Harvard Law School in 1962.        I have had the advantage of

practicing within the government sector, corporate sector,

and the law-firm sector.        In my experience, the difficulties

that each of us faces as a lawyer have grown in all three

spheres.        It is not simply a matter of the billable hours

that, in my view, is responsible for this change; it is the

cultural and technological changes that have overcome all of

us.

                I have hopes that our committee will at least help

to illuminate the area, but I must say I am not terribly

optimistic that we are going to be able to find solutions.

                I hope that our discussions this morning, perhaps,

will surface some ideas that we can pursue in a little more

depth with our committee, and that each of us, as

individuals, can pursue.

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                I think the answer – if we are seeking answers –

lies within each of us as an individual.               We can bring about

cultural change.               The only way we can change the

environment, if it is uncomfortable for us now, is for us to

vote with our feet, as well as with our minds and hearts and

mouths, to bring about change.               But we have to decide that

this is a situation that is uncomfortable for us in terms of

the limitations it places on our personal lives, and is

uncomfortable for us in terms of the limitations it places

upon our ability to do good.

                Most of went to law school, I believe, with the

feeling that we wanted to improve the world.               We didn’t go

to law school because we wanted to make a lot of money.                 We

wanted to changes things.               We wanted to serve mankind.   I

think we have moved away from that, except in the sense that

we serve our individual clients.               But the ability to do pro

bono publico in the traditional sense – doing things for the

public good – I think has escaped a lot of us, because of

the pressures we face each and every day, simply to serve

our clients’ needs.               We have to decide if we are going to

continue to live this way or we are going to try to bring

about change.

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                The five panelists that you see here to my left

are going to present different perspectives on the practice

of law as it has now developed.           They will each speak for

between five and eight minutes, and then we will have

interaction among ourselves up here and then we will have

interaction between them and you.

                I have been told by Bruce that we can go on for a

full hour-and-a-half.           Is that correct, Bruce?   Thank you

very much.

                I am not going to give you the entire biographies

of each of the speakers who will be coming up here.              I will

introduce each of them briefly for you.           For the full

biographies you can consult the written materials.

                Our first speaker will be Bruce MacEwen, who is a

strategic consultant focusing on the economics of law

practice.        He is a blogger of some note.     I happen to know

the Public Broadcasting figure, Adam Smith, whose name is

George J.W. Goodman, otherwise known as Jerry Goodman.               I

was asking Bruce last night when we were having dinner if he

has heard from Mr. Goodman’s lawyers because of his use of

―Adam Smith.‖           But maybe it is in the public domain.     I am

not sure.

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                Without further ado, Bruce MacEwen.

                MR. MAC EWEN:   Thank you, Ken.   I want to thank

you all for coming.

                Just a little bit more about my background, to

flesh it out, so that you understand the context.          I am a

lawyer.       I practiced in two big New York firms, Breed,

Abbott & Morgan and Shea & Gould.         I am not responsible for

the demise of either one.         Great firms.

                I was in-house as a securities lawyer with Morgan

Stanley/Dean Witter for nearly ten years on Wall Street.

Then I was CEO of a dot-com that I founded, which was a

great ride until about the summer of 2000.          Since then, my

professional focus has migrated thoroughly to the economics

of law firms, and in particular, the increasing

professionalization of their management, which I celebrate

as a very happy and long-overdue trend.

                If you consider that today to make the cut of

number 100 on the Am Law 100 you have to have annual revenue

of nearly $200 million, to my mind, that is a large

enterprise.         It requires professional management.   Not to

offend anyone in the room who may have done this in a prior

life, I don’t think that kind of enterprise can be managed

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by the executive committee in their spare time.           So I

applaud that trend.

                My blog, which is a little over a year old, talks

about issues surrounding that.           Its subtitle is ―The

Economics of Law Firms.‖            Of course, I have to give you the

URL, which is AdamSmithEsq.com, which is sort of a play on

the intersection of law and economics.

                I want to give you my bias – turn my cards face-

up, as it were.            I was an economics major in college, and I

have never gotten it out of my system.           So I approach this

from the economic angle.           When I look at the phenomenon of

the billable hour, it strikes me that it ties price to cost

of production as opposed to value to client.           Fundamentally,

that offends logical economics.

                There are a couple of other things I want to say

about it.        I think that there is a sense that the value of

legal services is ineffable, so we are going to put a

falsely precise measure in place.           I think everybody would

admit that it is a false precision.           I think we would admit

that in a heartbeat.           It is almost a transparent absurdity

to think that the tonnage of time that you throw at a matter

is more important than the inspiration you may have when you

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are running in Central Park that morning that cuts to the

heart of things, which is not even worth a tenth of an hour

in terms of billable time.

                One of the other aspects of it is that I think it

kind of institutionalizes a structural conflict between the

client’s desire for efficiency and high productivity and a

certain level of confidence around what this legal service

quantum here is going to cost – so that is the client’s

desire on one side:             efficiency, high productivity,

certainty about price.

                The law firm, on the other hand, their interest,

pretty self-evidently, is profitability.            That usually

starts with revenue.            That means a lot of billable hours.

It also discourages, of course, firms from being more

productive.         To some extent, it goes back to the first

panel, in that maybe you don’t want to get your associates

up to speed too fast; they won’t be able to bill all the

hours.

                Now, there is another thing which I think is going

to be shot through all of our conversations and dialogue

today, which is the level of trust, or lack thereof, between

lawyer and client.             I think that thirty years ago or forty

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years ago, when the typical end of an engagement was ―for

services rendered‖ and a number, that bespoke a degree of

trust between the law firm and the client.        The fact that

lawyers get defensive today about billing and say, ―Well, we

put in the time,‖ and clients push back by saying, ―How much

of the first-year associate’s time are you going to eat?‖ –

this is a corrosive kind of discussion to have.        I think it

is to the detriment of the profession.

                What I witness, basically, is, with the exception

of the bet-the-company case, where money is no object, there

is pressure on the profession to move to a Wal-Mart model,

where commodity legal services are commodity legal services.

It is not just the general counsels of DuPont and Sysco and

G.E. saying, ―Take 20 percent off your rate card and you can

be on our preferred provider list.‖        It is getting to the

point where I think our profession needs to come up with

fundamentally different ways of billing.

                I have a little thought experiment for you.

Rather than nitpicking over the first-year associate’s

write-offs, wouldn’t you rather have a truly high level,

thoughtful, economically grounded conversation with some of

your important clients about how your firm can deliver

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compelling value to them in the area of legal services?

That conversation, to me, seems like the most interesting

conversation you could have as a lawyer and as a

businessman.

                MR. STANDARD:   Thank you, Bruce.   Bruce will be

back later with his fellow panel members.

                We are now going to have Steve Krane come up and

talk about some of the issues he is going to discuss with us

today.      Steve is one of my predecessors as President of the

New York State Bar Association.           He is a partner at the firm

of Proskauer Rose here in New York.          He is an active

litigator.         He is doing, actually, pro bono litigation on

behalf of the New York State Bar Association.

                Mike Greco is back now.    Mike, as you know, is the

President of the American Bar Association.          The New York

State Bar Association filed suit against the Federal Trade

Commission several years ago because the Federal Trade

Commission sought to apply the Gramm-Leach-Bliley laws

against the legal profession, which, throughout our history,

has been state-regulated.         The New York State Bar

Association filed suit.         The American Bar Association filed

suit some months later independently, and some other bar

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associations have since joined in.

                We won at the trial level.       The FTC was enjoined

from pursuing its efforts to apply Gramm-Leach-Bliley

against the legal profession.           The FTC, we think

misguidedly, has decided to appeal that trial court

decision.        The case will be argued by Steve and others on

May 5th in the District of Columbia Circuit.

                So Steve, despite the fact that he has a very,

very busy litigation practice, does somehow manage to find

time to engage in significant pro bono, as a lawyer and also

as a Bar Association activist.           I don’t want to say

―junkie,‖ but that is what some people have used to describe

his affliction.

                MR. KRANE:     Thank you, Ken.    It is great to be

with you here today to talk about the billable hour.

                 As I was sitting out in the audience listening to

the first panel, my epiphany was the title for my

presentation.           Since we are in an academic environment here,

with law reviews abounding, my title has to have a colon in

it.     Law review article titles do.        So it would be ―The

Billable Hour:           Scourge or Scapegoat?‖    Now I am going to be

asked to write on that, I am sure, right, Bruce?

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                I am going to talk about microeconomics, and the

microeconomics of the law firm, and why it is we have

billable-hour quotas, which are so maligned.             I think Bruce

would probably call my remarks to come ―corrosive.‖              So be

it.     I am here to be provocative.

                Let’s talk about why we are where we are.        The

simple answer is association salary escalation.              When I

returned from my clerkship in the court of appeals back in

1985, my take-home pay actually decreased from my clerking

days to coming back to private practice because of some

differentials in tax from being a state employee to a

private employee.              There was really no difference in terms

of what I was getting before and what I was getting after.

It was actually a little bit less.

                Associate salaries at the time were in a creeping

period.       Associate salaries have moved in leaps and creeps.

We were in a creeping period at the time.             We had the great

leap forward of 1968 from $10,000 to $15,000.              There were

some leaps in the early 1980s and the late 1980s, and then

the Silicon Valley-driven leap in 1999, I believe it was.

These leaps are usually led by one or more law firms, and

the rest of the large firms follow.

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                Conscious parallelism?      Yes, absolutely.    That is

the case.        You have to follow the lead of the other large

firms, because, otherwise, you are second-rate.              If you are

not first, you are last.            If you are not in the top tier,

you are second-rate.             You don’t want to be perceived as

second-rate.          Why not?    Because you want to attract the best

and the brightest law students.            What objective criteria do

law students have to differentiate one firm from another?

Not much.        What criteria to law firms have in the hiring

practice when they are looking at the so-called best and the

brightest?         Not much.

                All these decisions are made on the basis of

imperfect information.            You do the best you can.     As an

employer, you try to get the top students from the top

schools.        You want to be able to tell your clients, ―We have

top students from top schools.            That is who is doing your

work for you.‖

                So you go to look for them, and you make your

decisions based on, essentially, first-year grades, a

résumé, maybe the results of a writing competition where

they got on a journal – maybe not – and half-hour

interviews.         You have no idea whether they are going to be

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good lawyers, but when they come out and they start working

for you, you are going to pay them $125,000 a year or more.

That is the reality of law firm economics.

                Law firms are not eleemosynary institutions.         They

are in it for making profit.           That is part of the business

of the practice of law.           The profession sort of gets shifted

to the side when you start talking about the business.               I

sit in partnership meetings, and I would have no idea if I

walked in off the street what kind of business was being

discussed in my firm’s partnership meetings.            It could be

the widget manufacturing company up the block.           (There

actually is one in Times Square that manufactures widgets.)

                That is where we have devolved to.     We have

devolved to a business where we have profit centers and

profit margins, and we all have to worry about that.

                So how does this all work out?     Let’s take an

associate who is getting $150,000 a year.           Overhead,

benefits, support staff cost another $150,000.           So you are

up to $300,000.            You would like to make a little profit off

them, so triple the associate’s salary to $450,000 a year.

That is what you want to get out of that associate, on

average.

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                How much can you bill for that associate, though?

You can’t bill $400 or $500 an hour for some junior-level

associate.         The clients won’t stand for it.      The market

won’t bear it.           It would also skew your billing-rate

structure so much that you end up with your senior partners

at too high a level also, out of the marketplace.

                So maybe you bill $300 an hour.      But you do the

division, and that would mean about 1,500 hours a year.

Okay, so you bill $300 an hour; you can actually bill and

collect for 1,500 hours ― you get your $450,000, and

everybody is happy.            But no.   You have to actually collect.

The billing is easy; the collecting is hard.            You can’t

expect to recoup 100 percent of associate time.            And you

have to make up for the associates who you hired in this

blind of information who have turned out to be just no good

and you can’t bill for any of their time.            There is also

training time.           So you have to make up for that somehow.

                The way that law firms arrived at in order to

provide incentives for associates to be productive is a very

simplistic one.            They say, ―You must bill X hours‖ – X being

a number greater than or equal to 2,100, usually – ―in order

to be eligible for higher levels of compensation.‖            That is

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the simplistic way we have dealt with the issue in large law

firms of getting sufficient value out of our associate pool

of talent.

                What would eliminating the billable hour do to

this scenario?           Not much.   You still have to find a way, if

you are a law firm interested in generating a profit and a

law firm that, like most law firms, will never say no to a

client whenever they ask them to do something – they never

say, ―I’m sorry, we can’t do this quite this quickly,‖

because there are ten law firms down the street who will.

You have to find a way to fund associate salaries and

generate a profit for your firm.

                All the talk about alternative billing

arrangements is great from the attorney-client relationship,

but internally you still have to set your alternative

billing arrangements with an eye toward making money.             That

is not going to change.           Some profitability target still has

to be in the mix internally as you go forward and make these

decisions.         You still have to allocate and manage your

resources within the organization effectively.

                Now I sound like I am talking about a widget

company, but this is the reality of the modern business of

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large-firm practice.

                So internal tracking of productivity – how are we

going to measure the productivity of 2,000 associates in the

large firm?         How do you do that?    You can’t do that

subjectively.           You can’t effectively make that kind of

evaluation.         You still need some objective benchmarks.

                So my point is that, even if clients pressure law

firms to eliminate the billable hour, the lifestyle of

lawyers is not going to change.           We are still going to have

to provide incentives for lawyers to engage in more work, to

be more productive, to provide more services to clients, so

that the clients will continue to pay more and more money to

law firms.         It is all a question of measurement.

                I have some thoughts about what we might do as

alternatives to this, but my time is up, so you will just

have to wait for the secret solution at a later time.

                Thanks.

                MR. STANDARD:    Thank you, Steve.

                Next we will be hearing from Susan Saab Fortney,

who is a Law Professor at Texas Tech University School of

Law.     Prior to joining the faculty, she, like me, worked for

the Securities and Exchange Commission in her career.              She

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is going to give us her insights on this issue.

                As we go along, if anybody says anything that you

find provocative, interesting, stimulating – even boring –

please make a note of it.             If it is boring, you can confront

them with that when you get a chance.             If it is interesting,

ask them a question and compliment them.

                PROF. FORTNEY:       Good morning.   It is good to be

with you, to share this microphone with many distinguished

professors and practitioners.

                I am going to follow Steve’s lead in terms of a

title for a piece.             I just thought of it this morning:

―Billable-Hour Derby:             Blaming the Greedy Associates or

Blaming the Greedy Partners?‖             Let’s keep that in mind.

                One thing that came out of our panel-planning

group was that there was a great deal of consensus on the

economics of practice and the economics of the promotion-to-

partnership model that is used by most firms.             I think, to a

large extent, the panelists agreed in our work sessions that

the billable hour is not the root of all evil.             I remember

Larry Fox wrote a piece, I think, with that reference once.



                I think, rather, that the problems that we see

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with billable-hour practice – at least that I see – largely

relate to the steady increase in billable-hour practice and

the movement to quantify contributions in firms.           It is

quantifying contributions of partners, as well as

associates.

                A generally held view that Steve expressed this

morning is that these recent increases have resulted from

the salary wars and this desire to attract topnotch

associates, while still meeting partner income expectations.

Basically, this billable hour derby has been accelerated

with changes in associate and partner compensation systems

that emphasize objective measures, including hours

collected, as well as business generated.           Insiders and

outsiders alike have bemoaned the consequences of these

increases, the long- and short-term effects.

                I am one of the people who have bemoaned the

consequences of these increasing billable hour expectations.

I did so based on data obtained from an empirical study I

did of 1,000 associates in Texas firms.          What that study

revealed was all the problems that Bruce mentioned in the

program today.           All the problems were revealed in those

study findings.

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                But from the standpoint of ethics and

professionalism, to me, the very disturbing results related

to attrition and the departure of, in particular, ethical

associates.         In the study, 39 percent of the respondents

indicated that they wanted to change jobs.           Not

surprisingly, when they were asked the reason why, they

indicated it was because of billable hour pressure.            In

particular, ethical associates may feel as if these

increasing billable hour expectations are effectively

pushing them out the door.

                In the survey, approximately half of the

respondents agreed that billable hour pressure causes

ethical and competent associates to leave private practice.

Only half that number disagreed with that statement.

                If you think about attorneys who pride themselves

on doing quality work, they may find themselves at what we

view as a kind of competitive disadvantage when firms put

more and more weight on hours produced, such as the bigger

bonuses only kicking in at a certain income level.           If we

view it from the standpoint of the firm, the profession, the

public, we all, I think, are hurt when we have this kind of

quantification.            Lawyers may feel the pressure to cut

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corners, to overwork files, possibly pad, rationalize

questionable practices.        That is the problem that I think

many of us have heard about.        There are findings to support

those problems, those concerns.

                The question is:   What do you do about it?     One

thing that we talked about is the possibility of changing

compensation systems to counter that trend to quantify law

practice.

                That brings me to my two- or three-minute overview

of steps that firms can take to address the negative

consequences of billable hour practice.

                As I mentioned, examining firms’ compensation

systems that emphasize production in objective measures –

firms could eliminate these high billable hour expectations

and bonuses that are based on numerical benchmarks.            We have

heard, again, Steve say that we need it because the topnotch

associates want the big bucks.        Well, those of us in law

schools that are reading study results know that more and

more associates are willing to make less to work less.             I

think that some firms have paid attention to those study

results and have considered different compensation systems

and different partnership models.

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                One firm who has gotten a good deal of attention

is the Dickstein Shapiro firm out of D.C.         They have

successfully used quality-of-life initiatives and

alternative compensation systems in recruiting and retaining

associates.         I think these kinds of alternative compensation

systems will go a long way to not only improving the quality

of life for the attorneys but the quality of work for

clients.

                One thing we haven’t talked much about is the way

that these outrageous billable hour expectations really

impact the quality of work.        Clients pay lawyers to think

critically, to be creative.        The question becomes: Is that

something that a lawyer is able to do when he or she is

consistently billing over 2,400 hours a year?

                So firms can take steps.   Firms can take

additional steps by discouraging unethical practices, rather

than rewarding the heavy-handed biller.         The firm may audit

billings over a certain level.        Some firms are attempting

that.

                We have heard today that firms have moved towards

having an in-house ethics counsel.         That can also help

address some of the consequences of high billable hour

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expectations and possible abuses.

                But coming back to the economics, most

fundamentally, firms should rethink this all-or-nothing

model of promotion to partnership and consider having

multiple tiers and opportunities within the organization.

The concern now that we find among associates is that they

are afraid of reduced-hour arrangements because it will

affect their long-term treatment and advancement.        Some of

these attorneys want to do quality work, but at the same

time, they understand that if they ask for a reduction, it

will mean them being treated as second-class attorneys and

would be kind of professional suicide.

                Just to wrap up my remarks, I think the bottom

line is that firm leaders should not be resigned to the

current economic approach to law-firm governance.        Rather,

we should look long and hard at the models that we are

using, rethink the models that we are using.        If we are not

willing to do it, my suggestion at dinner was that maybe our

consumers of legal services will put pressure on us to do

so – specifically, those sophisticated consumers, in-house

counsel.        In-house counsel are now convening these beauty

contests.        They are getting information from various firms.

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My suggestion is that in-house counsel think about

efficiency and attrition and how attrition hurts efficiency,

and that in-house counsel should walk on by in that beauty

contest if they learn that a firm has high billable hour

expectations.           We talked about being provocative.   I thought

I would throw that out to be a little provocative.

                As a final note, many of the issues that we are

discussing in the program today are being evaluated, studied

in the NALP Foundation survey and study on work-life issues.

I am the research partner on that.           In the first phase, we

sent out 7,000 questionnaires to lawyers around the country.

Now we are convening focus groups in select cities,

including New York and Chicago, this next week.           If any of

you are interested in participating in the focus group,

please consider this a plug and see me sometime during the

break.

                Thank you.

                MR. STANDARD:    Thank you, Susan.

                As I said in my introductory remarks, the issue of

the workday is not limited to the practice of law.           It

includes investment bankers, for example; it includes

physicians, most notably.           I was interested, as Susan was

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talking about the quality of our work, in how that may be

affected by the work pressures that we all face.

                There have been studies showing that physicians

make far more errors – particularly those who are in their

residency programs – because of fatigue.               As you probably

recall, there has been a reduction that has occurred in the

hours that interns have to work.               The hours are reduced to

eighty per week.               But even eighty is stretching anyone

beyond his limits.               When you hear the concern expressed

among medical practitioners about malpractice lawsuits, you

think about how many of those malpractice lawsuits might

have been avoided if the physicians had been less tired.                 I

think that could relate to us in the legal profession also,

though I don’t think we work, generally, the same sorts of

hours.

                Our next speaker is Jim Towery, who is from

California.         He is a former state bar president.        He shares

something in common with two other people here today, Bruce

MacEwen and Mike Greco.               Like them, Jim is also a graduate

of Princeton University.               I am not sure what that says for

our selection, but I guess we were looking for talent.

                MR. TOWERY:        Thank you very much, Ken.

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                Last January, I had the pleasure of being on a

panel on multijurisdictional practice with Bruce Green,

another Princeton alum, in the far more picturesque setting

of Kitzbuhel, Austria.           Bruce was telling me about this

conference.         We started chatting about it, and he was

gracious enough to extend an invitation.           I never pass up an

opportunity to come to New York City, so I accepted.

                After getting here and hearing the panelists, one

can make an argument that I am ill-suited for this group,

because this is a program about large firms, and I know

virtually nothing about large firms.           I have never worked in

a large firm.

                But let me tell you a little story.    On the prior

panel, we had Don Bradley, the General Counsel or Wilson

Sonsini.        When I came to Silicon Valley from graduating from

law school in Atlanta in the mid-1970s, the two largest

firms in Silicon Valley were Wilson Sonsini and Hoge,

Fenton, where I now am.           Both had about thirty lawyers.    I

didn’t go to either one.           Instead, I went to a small law

firm.      In 1989, I transferred laterally to Hoge, Fenton,

where I have been ever since.           Hoge, Fenton now has about

fifty lawyers.           Wilson Sonsini now has 600, down from its

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peak of 800 at the height of the tech boom.

                Why do I tell you this story?      It is not to make a

Robert Frost protest about the road not taken.             Certainly,

my life might have been very, very different had I elected

to go to a large law firm.             But I consciously have stayed

away from large law firms.             I have had opportunities to go

laterally to large law firms.

                On the one hand, of course, I regret the

compensation that I have passed up by passing by those

opportunities.           But I have a fundamental belief, from my

observation throughout my career, but particularly within

the last decade or so, that the large law firm model is

broken, and it just fundamentally does not work.             While

there are superb people inside large law firms – the ones I

am familiar with in California – and they have great clients

and fascinating cutting-edge legal problems, the challenges

to being happy in a large law firm are significantly higher

than the challenges I have.

                I would rate my job satisfaction level as a nine

on a scale of ten.             It has pretty constantly been that

throughout all of my career.             I think it is very difficult

for partners in large law firms to say that.

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                Why is that the case?       I would point to a couple

of things.

                • One, the development of the computer and its

ability to analyze time records for law firms had a profound

effect.

                • Number two, Steven Brill, and Steven Brill

journalism, the publication of profits per partner.              Firms

were certainly focused about their profitability and their

competitive profitability before Steven Brill came along,

but he made the whole exercise far more public.              We now have

managing partners setting forth often explicit goals about

what they want profits per partner to be, to help them in

that great race.

                • A third factor is the associate salary race.          I

would particularly point to the Gunderson Dettmer salary

increase in 2000.              Let me give you just a little bit of

background about that, because that happened in my backyard.

                Starting salaries had always basically been set in

New York and gone West.              Then we got to the tech boom.

Gunderson Dettmer was a small firm in Menlo Park.              They were

paying what everybody else was paying at that time, which I

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think was $105,000 per year.               They were very concerned that

they were not going to be able to get the best and

brightest, so Gunderson Dettmer made a decision that they

were going to jump to a level that they were confident would

not be followed by the major law firms.               It was effectively

$150,000.        It was $125,000 and a guaranteed bonus on top of

that, but it was effectively paying new graduates $150,000.

Excuse me for being old-fashioned, but it is hard for me to

believe that any person fresh out of law school is worth

$150,000 a year.

                But lo and behold, first of all, the Palo Alto law

firms joined it, then the San Francisco firms, and then it

gradually spread the other way, east, to New York, and then

across the ocean to London.               Even when the tech bubble burst

and many tech firms downsized by 20-to-25 percent – so it

was no longer a question of hiring the best and brightest,

but rather it was who you were going to lay off – salaries

did not go down.               They have stayed at that level.

                What has happened with respect to associate

salaries is that the hourly requirements for bonuses have

ratcheted up.

                If you read Susan’s really superb article that she

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did on her survey of Texas associates, she was using a

timeframe of 2000, right at the height of the tech bubble,

even in Texas.           Susan and I were chatting about what has

happened to those billable hour expectations in the large

firms since she published her article in 2000.          I haven’t

seen data on it, but my impressionistic sense is that the

firms have only increased their billable hour expectations

on associates.

                So my view is that large law firms, regrettably,

as a result of market forces – the ones I have mentioned and

others – have become so solo-focused on profits and paying

the associates the new level and keeping partner

compensation at the levels that partners want, that the

billable hour pressure is great.

                I don’t say this because I am not willing to work

hard.      Last year I had an extraordinary year.      I billed

2,400 hours, just because I had two jury trials that lasted

a month and another near-trial.           It was not a happy year for

me.     I don’t like working that hard.       I don’t think one can

function at 2,200-to-2,400 hours on a constant basis and

maintain any kind of balance in one’s life.

                My firm partners typically bill about 1,700 or

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1,800 hours.          It is a critical difference.   It may seem like

a small increment in terms of the numbers of hours, but it

is a huge increment in terms of having the ability to have a

family life, having the ability to serve on nonprofit

boards, having the ability to do bar activities.             I fall

into that ―bar junky‖ activity.          I think if I had been at a

law firm, I probably would not have had the opportunity to

essentially take a year off of practice and be President of

the California Bar a few years ago.

                This is not to say that there are not happy people

in large law firms ― there certainly are ― but I think the

challenges are much greater to being happy.          I think,

fundamentally, the economics of large law firms – and it is

absolutely an economic perspective – are putting so much

pressure on things now that the message that we are sending

to partners and associates alike is that it is not the

quality of the work that you do, but rather it is the

quantity, and that is what you are going to be measured by.

I think that is fundamentally wrong for the profession.

                Thank you.

                MR. STANDARD:    Thank you very much, Jim.

                We now come to our final speaker, who is a Partner

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in a firm in Columbia, South Carolina.            He is going to give

us the Southern perspective on this issue of billable hours

and quality of life.           Jim?

                MR. STUCKEY:    Thank you, Ken.

                When I told one of my colleagues that I was coming

up to New York City to talk about this subject, I told her

that I have come to bury the billable hour, not to praise

it.     I also mentioned it to my dad and told him what the

topic was, and he gave this sort of resigned sigh and said,

―Well, you won’t have to do any research for that.‖

                A little bit about my personal background, which I

think will provide the context for my remaining comments.               I

am married.         I have three handsome boys.    They are aged

four, seven, and ten.

                I have been employed with Nelson Mullins Riley &

Scarborough, which is 325-lawyer firm.            I am based in

Columbia, but we are based in three states and the District

of Columbia.          I do mostly employment litigation and served a

three-year sojourn with Governor Jim Hodges in South

Carolina back in 1999 through 2001.

                One other thing – and this is important in this

context; I don’t normally talk about this ― I am asthmatic.

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I have had sort of a running battle with that condition

over, especially, recent years, which requires me to get

treatment every two weeks through some injections.

Genentech’s stock is going through the roof.             I invest in it

because I am certainly one of their consumers.

                Although I have come to bury the billable hour,

let me say in its defense, to be fair, it does encourage

attorneys to spend as much time as necessary on a matter to

serve the client; it certainly provides that incentive.                It

also results in some side benefits for the legal profession,

in that we, as a whole, from the defense side, don’t have to

take on much risk.             As long as we have a relatively stable

client base and volume of work, it will just be a matter of

math ― we put in the hours and we will get the return.

                Finally, time is easy to measure.      There are only

twenty-four hours in a day, only sixty minutes in an hour.

                That is about all I can say in defense of the

billable hour.           It sort of reminds me of an old courtroom

joke.      I won’t bore you with it, but the punch line is,

―Your Honor, don’t charge me with arson.             That bed was on

fire when I got in it.‖             That is certainly true of my work

in a large law firm.             I knew what I was getting into,

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although sometimes experience is the best teacher.

                The cons of billable hours are certainly well

addressed in the materials and have been alluded to by our

panelists here.            I think the thing that bothers me the most

is that a lawyer’s brilliance and creativity are not

compensated, in relative terms, at the same rate as

inefficiency in this area.            One speaker earlier mentioned

that jogging in Central Park and coming up with a brilliant

idea is not even a tenth of an hour.            I think that is a

problem for our profession, and one that we will either deal

with internally or others will suggest solutions for us that

we might not like.

                Finally, I have at least one solution that I would

like to see used more often, and maybe even one day become

the norm, and that is for lawyers to engage in some of the

same risk-taking with the client that plaintiff’s lawyers

do.     Under my model, if I were czar and could impose a

solution, I think I would try to get lawyers and clients to

agree, especially in the litigation context, on a potential

exposure – that is, the risk to the client of a really bad

result – and then have the lawyer’s time be compensated as a

percentage of that exposure; and then, at the end, if the

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lawyer is able to deliver quality legal services and bring

the client a result that is less than the exposure, the

lawyer would be compensated for some percentage of the

difference.         That is, the lawyer provided some value to the

client, and the lawyer should be rewarded.

                I am fully aware that our industry will not change

as long as it perceives it to be in its economic interest

that this current state continue.        I think, unfortunately,

there are external developments that might change it for us.

                I would close with two things.

                One is that a lawyer in my firm once told me that

I was the most efficient lawyer he had ever seen.        I said,

―Thanks,‖ and then I walked away and realized, ―I don’t

think he meant it as a compliment.‖

                To add some levity for the rest of our discussion,

it occurred to me that sometimes I have been sort of

fatalistic about the whole thing.        In light of the Michael

Jackson trial that is going on, I remembered that Michael

Jackson appeared in a movie that some of you might remember,

called The Wiz, which was kind of a takeoff of The Wizard of

Oz.     In that movie, he plays the Scarecrow.      The crows are

teasing him, and he starts singing this song.        It has in

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some ways become my theme song.          The words go sort of like

this:

                ―You can’t win,

                You’re way over your head,

                And you’ve only got yourself to blame.

                People keep saying things are going to change,

                But they look just like they’re staying the same.

                You can’t win,

                You can’t break even,

                And you can’t stay ahead of the game.

                So you’d better lay back,

                Smoke that smoke, and drink your glass of wine,

                Because you can’t win, child,

                You can’t break even,

                And you can’t get out of the game.‖

                Thank you.

                MR. STANDARD:    Thank you, Jim.   The question is:

Can we win?         Perhaps even more basically:    Do we want to

win?

                Jim, you raised a question about when you went

into big-firm practice, you knew what you were getting into.

I am wondering if that has been the experience of all of our

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panelists.         Did we all know what we were getting into when

we entered the practice of law?

                Jim, do you want to comment, or Steve?

                MR. TOWERY:     I go back to the comments on the

prior panel about how much the practice has changed, due

primarily to technology.           When I came into the practice

thirty years ago, it just wasn’t the same billable hour

pressure, nor the same time famine that it is now.            That is

what we have to cope with.          So I think it is a fundamentally

different circumstance.

                MR. STANDARD:     Steve, do you want to add anything?

                MR. KRANE:     My experience was different.   I had no

idea what I was getting into at all when I came to Proskauer

in 1981.        I don’t think that the pressures are appreciably

different.         I think, in some ways, there is more

communication between the partnership and the associates as

to what is expected of them.           Back then, it was just work,

work, work, work, work, constantly, 24/7.           That was what was

expected.        You had no life.     You had been bought and paid

for with your salary.           At least these days, there are some

benchmarks so that associates can plan a little bit.            So, at

least in my experience, I had no idea what I was getting

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into.      I think it is actually better today than it was then.

                MR. STANDARD:        Are you happier today than you were

then?

                MR. KRANE:        That is a relative term.   Am I happier

today than I was then?               I have made some personal choices in

my own career that have given me greater satisfaction than I

had then, when I felt like I had been purchased wholesale in

the meat market competition.

                MR. STANDARD:        Were you purchased for fair value?

                MR. KRANE:        More than fair value, at the time.

                MR. STANDARD:        Bruce, do you want to add anything?

                MR. MAC EWEN:        My experience was like Steve’s.

Both the large firms I was at, which were each terrific in

their own way, didn’t talk to associates about what was

really expected.               So the sense that I had all the time I was

practicing was, ―We’re expecting a lot of you, and if you

meet our expectations, that’s great, but you won’t know that

we have that view until you’re eight years out and it’s time

for the big decision.‖

                Personally, I looked down that road and I realized

something else, which I think is even more true today than

it was then:          If you win the tournament in year eight, you

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get more of the same, not less.           That was a prospect that I

was unwilling to commit forty years of my life to.

                MR. KRANE:     One of the problems is that that

prospect isn’t there anymore.           There is no year eight

anymore.        We used to say that there was a carrot at the end

of a stick for associates, and that carrot was partnership.

At the end of year eight, you finally caught up to it.

                Now what we have is a stick with a rope attached,

and nothing at the end of it.           Promotion from within has

become so rare as to be no longer a realistic incentive for

associates.         The mantra is that true growth occurs only by

acquisition, that you do not grow the pie by promoting

associates from within; it is only from bringing in outside

partners with portable business that you increase overall

profitability.           Every now and then, you have to make an

associate into a partner, just to maintain the illusion that

there is some prospect of elevation at some point.

                MR. STANDARD:     Susan, what about your students?

What do they think about their prospects for becoming

partners?

                PROF. FORTNEY:     In terms of their partnership

aspirations, a large percentage of them don’t have them, as

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was suggested before and came out in the NALP study, Keeping

the Keepers.          The way they put it was it’s the pie-eating

contest where you get more pie.          They go for what they

believe are the big bucks, and then they will move on to

something else.

                MR. STANDARD:    Why do they want to be lawyers?

What do they tell you is the reason that they came to law

school?

                PROF. FORTNEY:    Often they will talk about public

service.        When you do anonymous surveys, many of them will

admit that the financial benefits have attracted them to the

practice.

                MR. STANDARD:    Do you think that is a change from

prior years?

                PROF. FORTNEY:    I don’t know.   From the standpoint

of when I was in school, I think there was more interest in

terms of public service.

                One thing, though, to come back to the question of

how things have changed.          When I left practice, there still

were many firms that used lock-step compensation for

partners.        So I would be interested to know from the other

panelists, if I could throw this out, how that change has

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made a difference within the firms.

                MR. STANDARD:     Why don’t we go to Steve first and

then the two Jims on that issue?

                MR. KRANE:     I think that has made a tremendous

change.       It puts a great deal of pressure on everyone, from

the most senior partner down to the most junior associate,

to produce.         Productivity, at least in the partner ranks, is

measured essentially by hours billed and dollars collected

from clients.           Then there are some intangibles that they

throw in, or at least they say they do – ―they‖ being the

people who set the compensation.          That goes for whether you

are compensated by allocations from profits or percentage

points that get determined from year to year.

                The lock-step compensation – I never lived in that

environment, but from those who have, they say it provides

greater stability; but it has its disadvantages as well, in

the frustrations of people who feel they are generating more

benefit to the firm and are not being adequately

compensated, and it leads to defections.           So either way, you

have problems.           You have elements of stability and

instability in both systems.

                MR. STANDARD:     Jim Stuckey and then Jim Towery.

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                MR. STUCKEY:    My firm has adopted several

different models for partners and associates, who might not

necessarily want to build the maximum number of hours.

                Also in reference to pro bono, one thing that our

firm has done is, for certain pro bono projects that are

deemed very important to the firm, collections credit has

been awarded – although I am still worried that there is a

stigma associated with that.          Perhaps that is inevitable.

                I do remember in one instance, when a particular

lawyer who had spent a lot of the year working on a pro bono

project and got what we call approved pro bono credit for

it, one of the other lawyers who was evaluating that lawyer

and having influence in compensation described it as ―funny

money.‖

                So I think we still have a problem when it comes

to the stigma associated with different models that are not

the traditional model.

                MR. STANDARD:    Before I turn to Jim Towery, I want

to ask you a question about geography.          One thinks of places

like South Carolina or North Carolina, perhaps, as having a

slower pace, being more laid back, relaxed, more cordiality.

Do you think that actually continues to exist, or is that a

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myth?      What effect, if any, does that have on this billable

hour pressure and the quality-of-life issue?

                MR. STUCKEY:      I think I would reverse in part and

affirm in part.            Certainly, there is the perception where I

am from that we do have more civility, more cordiality when

it comes to the practice of law.             I don’t know whether that

is the case.

                I did hear earlier – and I don’t believe the

gentleman is here – he dropped 600 or so requests for

admissions on another lawyer at the time a summary judgment

motion was due.            Where I am from, that might get you

sanctioned, even if it could be justified under the rules.

                But in terms of the pace, we still like to be

compensated for our work.             We still like to increase profits

every year.         And there are only twenty-four hours in a day.

That is universal.             So I think that is the problem that we

will face.         Certainly, the problem might be accelerated in

the Northeast and other urban areas, but we will have that

problem to face as well.

                MR. STANDARD:      Jim Towery?

                MR. TOWERY:       I think the move away from lock-step

has been dictated by the marketplace.             It is necessary.      One

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has to reward the rainmakers.         One has to reward the people

who bring disproportionate amounts of income into the law

firm.      There is something irrational and not very systematic

about the old lock-step version, that just because of

advancing years, one got the greatest salary, irrespective

of productivity.

                But at the same time, I just see this as part of

the overall fabric of a movement of our profession away from

professional values towards business values.         Steve is

absolutely correct about portable practices.         That is what

is going on right now.         That is what headhunters compete

for, partners with portable practices.

                I heard a statistic recently – I won’t vouch for

the accuracy of it, other than to repeat it as hearsay –

that the average person coming out of law school today is

going to have, on average, seven different positions during

their legal career, which is probably twice as many as it

was when I got out of law school.

                You couple this with the fact that, at least in

the Bay Area, for the large firms, median associate tenure

is south of three years.         Less than three years would be the

median amount of time that an associate will spend at a

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large law firm.            So you have mobile associates, you have

mobile partners, and it is all part of the movement towards

this being nothing but a business.

                MR. STANDARD:      Before I turn to the audience,

Bruce, I just want to ask you, what are you picking up on

your Web site about these issues?

                MR. MAC EWEN:      What I am picking up is something

that Jim obliquely alluded to, which –

                MR. STANDARD:      Jim Towery or Jim Stuckey?

                MR. MAC EWEN:      Jim Towery.

                ― the invention, if you will, in the last twenty

years, and the maturation and increasing sophistication of

the market for lateral partner mobility has changed

everything.         If that market ceased to exist, half these

pressures would go away.            What, in my analysis, absolutely

drives the perceived need for ever-increasing profits per

partner is the fear of losing good people and the desire to

attract good people.

                Brobeck was a special case of too much debt, in my

opinion.        But we have seen firms that have, for example,

been more or less forced into mergers and things like that

because their profits per partner began to decline; the

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rainmakers left.               The phenomenon of a vicious cycle is a

real one.

                But it is sort of like BlackBerries.        We are not

turning the clock back on lateral partner mobility, nor

should we.         I think it is a fundamental precept that you

ought to be able to work where you want to work –

bilaterally, at will.               That should not change, but it is a

key driver of a lot of the trends we are talking about.

                MR. KRANE:        Just to interject, maybe we should

change that.          We are not all that different from

professional sports.               Free agency is destroying the game.

It is causing a lot of competitive pressures on the way

firms structure themselves.               The risk of partner defections

causes changes in compensation and changes in the

fundamental economics of the practice.

                So maybe one of the things we have to start

thinking about is whether to allow restricted covenants in

partnership agreements – to throw out a provocative thought

to the panel – because that would certainly provide a

disincentive to partners just threatening to pick up their

business and take it elsewhere, and might cause a de-

escalation of this problem.

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                MR. STANDARD:     And create more work for the

employment lawyers.

                But you raise an interesting analogy, Steve.          I

was an economics major for all of one year in college, and I

discovered I preferred English literature and switched, and

never regretted it.            But the analogy I would make is

socialism.         The practice of law was almost socialism, in

that each was given according to his needs – and it was

―his‖ needs, typically – and not according to his

productivity.           Now we are in a very ruthless capitalist mode

in the profession.

                With that question, I will turn to the audience.

All the way in the back.            I always like to reward the people

all the way in the back.            Please stand up and state your

question.

                QUESTION [Prof. Amy Uelmen]:     I am Amy Uelmen.         I

am here at the Institute on Religion and Lawyer’s Work.

                I just want to see maybe something a little more

explicit in this conversation, perhaps picking up on your

―his.‖      I worked at a large firm for five years, a small

office of a large firm in D.C., and watched all of the

senior women associates leave.            I became the senior woman in

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the office.

                I think there is an undercurrent to this

conversation, that a lot of these trends – we can’t go back.

We are slaves to technology, we are slaves to client

expectations, and we are slaves to associate salaries.            I

don’t want to make a gross generalization, but I think women

might be a little more hesitant to say that that is all we

can do – or they leave; they vote with their feet, as you

mentioned.

                I just wanted to see if there was any concern for

the fact that all of the senior women leave and we end up

without the resources within the law-firm culture to make

those kinds of changes.         Are there any concerns or comments

about that?

                MR. STANDARD:   Before we turn to the panel, I

would like to say that I don’t think all the senior women do

leave.      Some stay and can manage to have families.      I think

others make the terrible choice of deciding to stay single

and not have children or anything else, because they marry

their careers.

                QUESTIONER [Prof. Uelmen]:   I see that.   I am

saying, just in my experience, during the time I was in this

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office for five years, that is what happened.               There was no

one left to even look up to as a mentor for how to manage

and work all of the different aspects of your life.

                MR. STANDARD:         Who would like to respond to that?

Anyone on the panel – or anyone else in the audience, for

that matter?          Yes, in the back.

                VOICE:         I think, at least at a couple of firms,

there is some cultural change.               I think Arnold & Porter is

up to around 9 or 10 percent what we are calling part-time.

The language doesn’t really do very well here, because

―part-time‖ is now forty or fifty hours a week.               It is sort

of crazy to use that term like that.                In any case, Dorsey &

Whitney is at 8.6 percent part-time.                So there are at least

a couple of examples of cultural change going on in some of

the larger firms.

                QUESTIONER [Ms. Uelmen]:         This was the New York

office of Arnold & Porter, just to clarify that.

                MR. STANDARD:         Yes, ma’am?

                QUESTION:        I come at this from a slightly

different perspective, which adds to what others were

saying.       I am a firm counsel, so I am seeing a lot of

people – Susan has talked about them wanting to leave the

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firms, that they are not happy.

                But when you really boil it down for these folks,

this is not about that they don’t want to bill the 2,100

hours.      I think what they resent is the way in which they

are expected to bill the 2,200 or however many hours you

want.      Most of us in this room are older than the Gen X’s

and Gen Y’s coming through, who view the world a little bit

differently.          They don’t see their BlackBerries and the

technology as something that has tethered them; they see it

as something that gives them freedom.

                So part of the disconnect I see when you are

talking about managing partners is that they still want the

people to be there on the weekend and at 9:00, and that is

how they measure someone’s commitment.         The junior

associates are saying, ―I’m still prepared to work the hours

that you want, but I don’t want to be here at 5:00, if I can

do something else, and it’s up to me.‖         Now, we can debate

whether that is a good thing or not, if they are home at

2:00 in the morning working on briefs.

                I guess I am curious to hear from the panel.      Is

there a way that people can start looking at this level of

commitment differently, so that women can stay home and have

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their children and be home at dinnertime, but get on the

computer if they want?           I don’t think it is just a woman’s

issue.      I think it is for all of our junior associates, and

that doesn’t seem to be happening.

                MR. KRANE:     I think there is a great deal of

flexibility, on an individual basis.           I don’t think you can

brand law firms with a culture like this.

                Just as an example, I just tried a case within the

last two weeks before this one in Miami, with a lawyer from

our Florida office, who was the mother of a four-month-old

baby.      I never felt at all disadvantaged by the fact that

she had certain things that she needed to do during the day

that related to her newborn and the fact that she worked at

home in the evenings and we communicated electronically or

on the phone.           She worked very hard and did a fantastic job.

As the partner on the matter, I only felt a little guilty

that I was forcing her – I thought – requiring her to do all

this work.         But it didn’t bother me where she was, when she

was doing things, as long as she was in the hearing with me

at 9:00 in the morning.

                I myself telecommunicate at least one day a week

from my own home, fifty miles north of the city.           So far

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that has not been a disadvantage to anyone.

                So the technology is liberating as much as it is

oppressive.         I see a world within the next ten years where

law firms are going to be – there is not going to be any

―there‖ there anymore, and we are going to have virtual

offices, and maybe a place with some conference rooms where

you have to get face to face.              But it is going to allow much

more flexibility as we go forward.

                So I hear what you are saying and agree with it.

                MR. STANDARD:       You used the term ―liberating.‖

That brings to mind the Women’s Liberation Movement.                I

wonder, to what extent, in fact, it has been a liberating

movement.        To what extent has it simply imposed more burdens

on women, by giving them the freedom to become professionals

in the most demanding fields – at the same time, not being

able to relinquish all of their childrearing

responsibilities?              Also, to the extent that they have

relinquished childrearing responsibilities, how big a

problem is this for families, that you now have nannies

raising families?

                Mike, do you want to respond?

                MR. GRECO:        I want to address a different subject,

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so if someone wants to –

                MR. STANDARD:    I will come back to you.

                Does anybody want to respond on that issue?

                PARTICIPANT:    Deborah Rhode, from Stanford, and

formerly Chair of the ABA’s Commission on Women in the

Profession.

                We are going to talk about that during my panel.

At least that is part of what I am going to talk about,

because I do think that the whole issue of balanced lives

and how you make it work is an issue not just for women.             If

you look at polling data, increasing numbers of men say they

want it, too.           Whether they are willing to do the next step

and vote with their feet – obviously, women are more likely

and willing to do that than men.

                But I think one of the central challenges that we

will talk about some in the afternoon is making the policy

that looks good in principle actually work in practice.

Part of the problem is in dealing with just the issue about

availability that was mentioned earlier.          Ninety percent of

firms now offer part-time policies.           Only three percent of

women actually take them.

                The reasons have to do not just with the second-

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class status that people feel, but also because the way that

they are implemented, it turns out that you have ―schedule

creep.‖       People feel a lot of pressure to demonstrate

commitment during those off-hours, and the liberating

aspects of the technology also tether them to the workplace

at times when they thought they were going to be off.                 The

schedules aren’t respected, and the more the woman tries to

maintain a professional persona of being totally committed,

just not putting in the face time, the more the situation

unravels.        So a lot of people end up feeling like they are

doing close to the functional work of a hundred percent

availability, only part-time paid, and it is not worth it.

                MR. STANDARD:         And feeling stressed all the time.

                PARTICIPANT [Prof. Rhode]:         Yes.   So figuring out

a way to solve it in practice is where I think the key

issues are.         We could learn some from the accounting

professions and other organizations that have done it

better.

                MR. STANDARD:         Did you want to comment on that

point, before I turn to Michael Greco?

                VOICE:         Part or the issue, too, I think, is men

need to start thinking a little differently.                Just a couple

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of comments that people on the panel made – you yourself,

when you said ―the very bad choice of being single and not

having children.‖              There shouldn’t be a value judgment

there.      The whole point of liberation for anybody is so that

they can make those choices, and there not be those values.

                I think sometimes, too, partners’ hearts are in

the right place, but they will see a new mom and they will

say, ―Well, we won’t send her on this assignment because she

has to deal with childcare needs.‖              If she is the best

associate for that assignment, she should be asked and be

put in the position where she can tell you, ―I can’t do it

because of childcare,‖ or, ―Yes, I’d love to do that, and

I’ll deal with my own childcare issues.‖

                I think that is where the problem comes in.

Sometimes the men in power are still looking at them as

women first and then lawyers, and we would sort of like it

to be the other way around.

                MR. STANDARD:       When I say ―a bad choice,‖ let me

be like Tom DeLay and explain myself.              I was referring to

women who have expressed the feeling that they felt that

they had to make this choice, and they made it because of

work, not because it was, perhaps, what they would have done

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in other circumstances.

                Mike, do you still want to make your comment?

                MR. GRECO:        I do, Ken.   I will begin by saying

that I am sorry I can’t stay the whole day, because this has

been such a worthwhile discussion.              I will be here for

lunch, and then I have to get on a plane back to Washington,

where I have a meeting this afternoon and evening.

                But I wanted to say one or two things quickly, if

I may.      This discussion, in part, led me to choose my

overarching theme for my year as ABA President.               I referred

to it this morning as a renaissance of idealism in the

profession.         I want you to know why I chose that.

                There are easily twenty different challenges that

I could have selected.              Why this one?   The answer is that,

for the last year-and-a-half, I have been listening to

lawyers throughout America, especially the young lawyers –

we have a Young Lawyers Division of the ABA.               I met with the

forty-five leaders of that division last August.              We went

down a river someplace in Idaho for four hours, and I

listened to them.              We had this amazing discussion.   When I

saw these best and bright young lawyers, who have been in

firms three to five years, express such sadness about their

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career choice – they want to leave their firms.

                The American Bar Foundation validated what I heard

these young people say to me.          In the ABF survey, five years

ago – three to five years out of law school — 67 percent

said that they were thinking of changing their place of

employment; 37 percent of them said that they made a mistake

in becoming lawyers.

                Four months ago, in Massachusetts, the Lawyers

newspaper did a survey of all lawyers, not just young

lawyers three to five years out.         Fifty-seven percent of

2,500 lawyers surveyed said they would not choose law again

because of what it has become.

                So I decided that things are not right with our

profession.         All of us have allowed it to become what it has

become.       There is no one person to blame, no one size firm.

But it is what it is today.          We have disenchantment.     We

have young people who are not going to law school because

they have friends; they know what they are going to

encounter.

                The reason I chose this is:     What are we going to

do about it?          This is our profession.   What do we want it to

be five years, ten years from now?          If we don’t do something

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about it now, it is going to continue to drift in ways that

make people either sad to be in it or enter it and then

leave after three to five years.

                So this planning group that I have had helping me

with this issue in the last six months – on it are some very

smart people, experienced people.           One of them is the

managing partner of a major law firm.           When we met at

Princeton, in November, for a weekend-long retreat, we

talked about the effect of the billable hour, as you have

been talking about it here, pros and cons – mostly cons, as

it turns out.           We talked about the loan burden that causes

young people out of law school to take the $125,000-a-year

job so they can pay their loans off, but they really want to

do public service.

                I said to the managing partner, whom I won’t name,

―Tell me something.            I know that it’s not unusual for a firm

of 900 or 3,300 lawyers to lose anywhere from twenty,

thirty, forty associates a year in turnover.           Smaller firms

have smaller numbers, but there is that kind of turnover.

The reason they are leaving the firms has to do, in large

part, with lawyers feeling unfulfilled.           Why are they

unfulfilled?          Because either they are unhappy at having to

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bill 2,400 hours, which leaves little time for family and so

forth, or they are unfulfilled – I think there is a real

connection – because they are not doing much more than

churning out the hours.               Certainly, they are not having

client contact and helping people and serving nonprofits or

the communities.               That is absent from their lives.‖

                I said to the managing partner, ―Tell me

something.         If your firm loses thirty-to-forty associates a

year, what investment has your firm made in one associate?

Is it $300,000, $400,000?‖

                He stopped and said, ―Oh, my gosh.‖

                When you consider the time spent by partners and

associates going out to interview, hotels, airplanes, hours,

opportunity lost because they are not billing on client

matters; when you add the hiring – you train that young

lawyer, CLE programs, in-house, when you pay the associates

$150,000, $125,000 for three or four years, and that

associate walks out the door after three or four years, what

is the lost investment?               The answer is, probably $1 million

per associate.

                Why, with all the intelligence we have – and I

have been on my firm’s management committee – why would a

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firm consciously choose to lose $30 million a year, $40

million a year, at the bottom line, by having to go through

this revolving door, vicious cycle, of hiring, spending, and

losing?       Why don’t we look at what we need to do to make

lawyers feel fulfilled with their career choice?

                A large part of it, I think, is that lawyers

aren’t allowed the time to devote to other endeavors,

whether it is family or whether it is doing pro bono work,

doing public service.

                Whether we keep the billable hour model or not,

law firm decision makers have to understand that we have to

free up time in the law offices for lawyers who want to do

public service, who want to do other things, so that they

can do it.         And they will stay at the firm – not all of

them, but most of them will stay.             They will be happy.      The

morale will be great for the rest of the firm.

                But the billable hour is a key issue, a key

problem with this.             With all of that as preface, I would

ask, since, Steven, you are the one who defended the

billable hour on this panel –

                MR. KRANE:      I wouldn’t say that, but okay.

                MR. GRECO:       What is the answer?   Help me.    How can

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I go to a managing partner and say to that person, ―Why

don’t you convert that $30 million or $40 million loss

annually into a plus?           Commit that money to freeing up an

equal amount of time so that that time is not a loss down

the drain, but it is being devoted to making lawyers feel

fulfilled and serving the public.‖

                Among other things, when you have 1.2 million

lawyers in this country and 80 percent of them aren’t doing

public service, but they could be, and the public isn’t

seeing that – if we had 1 million lawyers doing more in

their communities, those who keep saying to me, ―Mike, do

something about the public image of lawyers‖ – it will

follow.       People will see that lawyers are doing these

things.

                So, Steve, a tough question:     How am I going to

persuade law firms to convert that $30-to-$40 million loss

into a plus?

                MR. KRANE:     What you need to focus on is

persuading them to make a fundamental change in their

business model and how it is they go about doing business,

from compensation on down.

                The glib answer to what you have just proposed

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will be, ―Well, that means we just hire fewer people,

because we plan on attrition.        We will bring in 100 new

associates every year, knowing full well that by the end of

year three, we will have twenty left and that the rest will

have fallen by the wayside.        That is an acceptable cost for

us.     If we do a better job of hiring the people who we think

we want and who want us at the outset, then we’re going to

hire fewer people.‖

                Whether that is a good thing or a bad thing,

overall, you could make arguments both ways.        But I think

most firms would say, ―If we continued our current hiring

levels and brought in these large first-year classes‖ –

actually, it is the summer program that is the hiring pool,

because almost no firm hires third-year law students

anymore; they just hire out of the summer program.        So you

are basing it, again, on first-year grades – ―if we hired

100 people and they all stayed, it would be an economic

disaster for the firm.         We can’t possibly provide enough

work for all these people.‖

                The change needs to come at a more fundamental

level.      I am starting to sound like Jerry Maguire.    We need

to look at our business model and the way we go about

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organizing ourselves as a profession, get back to our roots

as a learned profession, as a great and honorable

profession, and start rethinking when enough is enough.

When have we maximized our profits?          Do we really need to

squeeze the next $100,000 in the profits-per-partner margin?

                I think there are a lot of partners out there in

large firms who, if you ask them that question, will say,

―We’ve reached the point where enough is enough.          We’d love

to roll it back, but we don’t want to get left in the dust.‖

Competitive pressures are great.

                But I think you are definitely on the right track

in focusing the firms around the country on how they look at

themselves as businesses.

                PROF. CUNNINGHAM:    I have a quite specific

suggestion, to respond to your question.          Coming off the

comments of the panel, let me toss out two hypotheses, which

we won’t debate right now.          But my suggestion comes off

these hypotheses.

                One, there are a number of associates and partners

in large firms who would like to buy back some of their

time.      They include many of the most talented people there.

That is, at least for some part of their lives, they would

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trade less income for more time.

                Number two, a major problem is not the billable

hours or anything like that, to that happening, but the

structure of the large law firm that either does not create

a way to do that or the options that currently exist don’t

feel like the mark of a successful lawyer.             The lawyer who

wants to buy back time fears, as several people have pointed

out, that that is a mark of ―you’re not a successful lawyer;

you’re not a leader.‖

                My concrete suggestion – and I think we do need to

try concrete experiments ― if you talk about changing the

culture, how do you do that?             Here is the suggestion:    That

large law firms experiment with sabbaticals for both

promising associates and productive partners, very much

along the line of academic sabbaticals – three months, full

pay, as a reward for particularly promising, productive,

exceptional members of the firm.             For people who get these

sabbaticals, this is a mark of pride.             This is not, ―Oh, I’m

on a part-time mommy track.‖            But it is a true sabbatical.

You can walk away.             You maybe do something very different,

but you are not hooked to your cases.

                Also offer what some law schools do.      You can

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either take three months at full pay or six months at half

pay.     My hypothesis would show that a lot of people would

actually take six months at half pay.             But no one would say,

―Oh, that person is a slacker and is taking time off,‖ and

so on.

                I think something like that, which makes the

option to buy back your time viewed as a mark of progress

and success – and I don’t think law firm structures – pro

bono is a little like that, but it isn’t really.             It ends up

being extra time.              Alternate compensation packages, I have a

feeling, don’t feel like that is a mark of a successful

rising lawyer.

                MR. STANDARD:       I don’t know if there is anyone

here from Cravath, but it is my recollection that Cravath,

at one time, did partners sabbaticals.

                MR. STUCKEY:       There is one firm in Charlotte that

did that.        An Assistant U.S. attorney in Charlotte who used

to work there told me that they discontinued it because they

were losing some of their best partners, who took sabbatical

and decided not to come back.

                But it is an interesting idea, that if lawyers are

allowed to essentially purchase the time, that might be

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viewed differently.

                MR. STANDARD:    Any other questions from the

audience?        Yes?

                PARTICIPANT:    John Berry.    I have a couple of

comments, and then maybe you can comment on that.            I thought

the panel was fantastic.

                As I was trying to think through this process a

little bit – and we are going to talk in our panel this

afternoon about it – in some regards, we are trying to treat

this as if it is a single disease.             It is like let’s find a

cure for cancer.

                In many regards, I don’t view it that way.       I

think we have a lot of different issues we are talking

about.      For instance, one of the issues that we haven’t

talked very much about, which we just skirted around, is

truly the issue of challenging students and new lawyers to

know who they are as human beings and what it is they are

willing to do.

                We like to treat ourselves as victims – ―We are

having to work too hard.          I would like a $500,000 job, work

thirty-five hours a week, and be intellectually challenged.

I just want to let you know that.             Give me that

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opportunity.‖ It is unlikely that we are going to get all

those combinations to work together.

                So, as human beings, we have to decide for

ourselves whether we are going to balance off the money

versus the challenge, versus the effort.              Some people will

sell their souls.              In many regards, that is not just the law

firm’s fault; it is the person’s fault.              We want to treat

them as victims.               Are you willing to not spend any time with

your child or grandchild?              Are you willing to not go to your

church or your synagogue or your mosque?              You are doing

that, and then we are saying, ―Poor us.              We’re doing this.‖

                What scares me about large firms is, if we don’t

change it, what we are going to have are more and more

similar kinds of people at law firms.              Instead of having the

woman that wants to raise a family and the man that wants to

raise a family and the person who wants to do something else

in the community, there are probably two types of person,

either the one that is driven by ego – I love the kind of

person who says, ―I don’t need anything else in life but the

law‖ – or somebody that is driven by money.              That is sort of

where we are going.

                Justice Veasey said, ―We are in a search for the

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heart and soul of our profession.‖          I really believe that.

You can find it in different places.            I have been in the

regulatory field, and I have hired a lot of these partners

who are sick and tired of it, and they are coming in to the

public sector.

                But I guess my point here is, number one, there is

no one silver-bullet answer.          I like some of your ideas.      I

like some of the ideas about changing billable hours.             But

changing it or not will not change who we are as human

beings and what we are willing to do with our feet and sell

our souls.

                I would conclude this with one comment.     This has

sort of been my song for years.          Some of you who know me

well also know I am probably one of the worst – you don’t

have to be in a large firm to sell your soul to the

profession.         You can be in public service, too.    You can go

to the conferences, you can go everywhere else, and you can

forget your family everywhere else.

                I will just give you one example.     I didn’t show

up for the ABA meeting last go-round for the first time in

twenty-five years.

                MR. GRECO:     We noted that.

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                PARTICIPANT [Mr. Berry]:        And everybody wondered,

―Are you sick? Are you dying?               Were you fired?‖    You know

what I did?         I told my wife for her birthday I wasn’t going

to go to the ABA meeting, that I was going to give her eight

days of my time.               I had to pay a price for that.

                I guess my final point is, we have to make the

tough decisions.               Justice Kogan of the Florida Supreme Court

once said, ―Some of us might have to get used to driving

around in a used Chevrolet instead of a Mercedes.‖                 Some of

us might have to spend their days with their wives instead

of –

                MR. STANDARD:        That’s the Mercedes; that’s not the

Chevy.

                PARTICIPANT [Mr. Berry]:        But it is more than a

new business model, and it is more than trying to put the

structure in.

                MR. STANDARD:        In the back.

                PARTICIPANT:        Elizabeth Chambliss.   I am going to

try that on my husband and see if he thinks that’s a good

birthday present.

                I wanted to say that it strikes me that a lot of

the comments about what we can do to influence firms assume

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a very basic economic rationality on the part of firms, a

very sort of neoclassical economic rationality.         Hiring is

an example.         Firms do a lot more with the hiring process

than simply hire associates.         They go to schools to signal

their place in the hierarchy.         They have some associates in

to maintain reputations among the law schools and among

other law firms with whom they are competing.         They compete

for rankings as well.

                So in thinking about what would influence firms to

change various practices, we have to remember the less

quantifiable, reputational, legitimacy, rank concerns, just

like law schools have, that law firms have, and that

motivate much of their behavior.         Even if we reduced, for

example, associate turnover and hiring, firms are still

going to recruit at top law schools, even if they hire no

one.     They are still going to have summer programs.      They

are still going to invest in internal training, which they

can advertise, in CLE and ethics, and things that make them

look a certain way to their competitors and colleagues.

                So I think we want to be careful about including

sort of a strict cost-benefit analysis.         We talk about a

business model and economics.         I think, given, especially,

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how under-managed most firms are, the idea that firms are

behaving with quantifiable economic rationality, with good

information, is a questionable assumption that is running

through a lot of the comments.

                MR. STANDARD:     I just want to thank all the

audience.        I want to turn to the panel.       We have to wrap

this up.        Does anybody want to give a ten-second final

comment, starting with Jim Stuckey?

                MR. STUCKEY:     Thank you.

                MR. STANDARD:     Jim Towery.

                MR. TOWERY:    Nothing further, thanks.

                MR. STANDARD:     Susan, a final comment, ten

seconds.

                PROF. FORTNEY:     The desire for revenue motivated

us to increase billable-hour expectations, and maybe the

desire for revenue will cause us to rethink some outdated

structures and systems within our firms.

                MR. STANDARD:     Thank you.    Steve?

                MR. KRANE:     Ditto.

                MR. MAC EWEN:     I agree.    There are other ways to

generate revenue than billing by the hour.               I think that

much more creative, collaborative partnerships with your

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clients will emerge as the way to go.

                MR. STANDARD:   Let’s hope so.

                I just want to thank all of our panelists for a

very distinguished presentation and our audience for very

stimulating questions and comments.




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