Sunday, April 30, 2006






DESDE News Wire


When faced with increasingly complex litigation, many corporations can benefit from employing national coordinating counsel -- outside counsel who provide a link between the company, the litigation and the local counsel who handle individual cases' day-to-day issues. Such coordinators can be crucial to ensuring a consistent defense strategy. Here are some tips on what to look for in a law firm and a lead partner if you ever encounter "bet the company" litigation.

Visit In-House Counsel

Incerely tours Rodrigo González Fernandez, lawyerschile.blogspot.com



Fw: Law.com blog: One Way to Get Rid of the Billable Hour

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Sent: Friday, April 28, 2006 9:05 PM
Subject: Law.com blog: One Way to Get Rid of the Billable Hour

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More Well-Funded Plaintiffs' Actions, Coming Soon to ...
In this post, Billions from corporations to tort lawyers, fueled by victories with contingency, Rees Morrison reports on a recent law review article that estimates that "contingent fees in tort cases are generating upwards of $22 billion in annual income and are increasing at a substantial rate." Even more interesting, Morrison notes that "the average effective hourly rate of the contingent fee bar has increased by 1,000 percent to 1,400 percent.  And much of this money is flowing from corporate defendants.  Plaintiffs firms then  invest those billions in more lawsuits, with the end result being more suits against companies and more work for their in-house and outside defense attorneys.  Morrison concludes that "Lucre like that will draw in talent and encourage investments, all to the detriment of law departments."

Posted by Carolyn Elefant on April 28, 2006 at 04:15 AM | Permalink

One Way to Get Rid of the Billable Hour
In Bruce MacEwan's post, Let's Assume Everyone Here's An Adult, he floats one suggestion -- which he calls the McKinsey Billing Model -- that law firms could use to replace the billable hour. 
Under the McKinsey model (so named after  McKinsey, a management consulting firm, which may be famous in some circles, but not even well-known to me; I had to look it up), no one at the firm has an hourly billable rate.  Consultants have a "per diem" rate but it is not disclosed outside the firm or even to clients.  Instead, McKinsey has three sizes of project teams, each of which have different monthly costs.  When a project comes in, it's assigned to the appropriately sized team, which will then given an estimate of project cost based on the predicted length of time that the assignment will require.  Bruce gives this as a hypothetical example of how the system works:

"When a client asks McKinsey for help on something, McKinsey assesses the challenge and responds (hypothetically):  'Great; that will take a small team four months, so expect it to cost $880,000.'  The client decides whether that's a valuable economic proposition, and assuming they give the green light, McKinsey goes to work.

"One of three things now happens:

    * It indeed takes a small team four months, and the analysis/report/recommendation is delivered as promised.

    * It turns out to be simpler than McKinsey thought, so they report after two months, 'We think we're done; we'd like to show you what we have, and if you agree, we've stopped the clock.'

    * It turns out to be more complex than McKinsey thought, so they report after (say) two months, 'There's more to this than first appeared (if we're to deal with it in a fashion commensurate with our standards), and we now think it will take the team eight months.  Would you like us to proceed, or to call it off?'"

As Bruce explains, the McKinsey model presumes that everyone involved being "an adult," that is, has an appreciation for, and can rationally assess for themselves, what is value for money.   Bruce believes that most large firm clients have this capability, but that law firms haven't tried the McKinsey model because no other firms are doing it and no one wants to be first. 

While the McKinsey model has appeal, I'm not certain that it would work for all legal matters.  For litigation matters, I'm not sure that firms can predict the duration of litigation at the outset.  And once a client is stuck in litigation, the cost of stopping or switching to another firm could be exorbitant.   Put another way, the longer you're embroiled in litigation, the greater the value of sticking with a firm would be.  It seems like the McKinsey model would actually push upward rate pressure on clients to finish those jobs that can't simply be terminated mid-stream.  At least with the billable hour and forcing firms to give estimates, clients get some protection, as they do with "incentive" systems, where a firm, for example, charges a lower hourly rate up front and agrees to take a bonus for success.  But what protection do clients have in the McKinsey model?

I'm also not sure how the McKinsey model helps firms increase revenues off tasks that firms perform repetitively as Bruce suggests.   True, where firms have done a particular transaction many times, they don't require as many billable hours for Transaction 25 as they did for Transaction 1.  But wouldn't the same hold true under the McKinsey model?  Wouldn't the firm give a lower estimate or assign Transaction 25 to a smaller or lower-priced team because its expertise would reduce the time involved. 

Still, with so much time wasted on billable hours and the lack of incentives for efficiency inherent in the billable hour, I'd be curious to see what might happen if an alternative, even one like the McKinsey model, were implemented for large firm practice.

Posted by Carolyn Elefant on April 28, 2006 at 04:10 AM | Permalink

How Much Protection Do Employers Owe to the Public
Are employers obligated to protect the general public from off-the-job activity by their employees?   That's the question that Mike Fox tackles in this post, Mr. Employer -- You Should Have Protected Me.   For example, if an employer is aware that an employee has a drinking problem, is the employer liable when its employee leaves work drunk and injures or kills someone in a car accident?   Or what about an actual case in New Jersey, where an employer has been sued by the mother, whose husband molested her child  (his step-child).  The mother argued that if the husband's employer had policed  his Internet use and turned him in for viewing sties with child pornography, the husband might not have photographed the daughter and posted her photos on the Internet.  The connection sounds far-fetched, but the court refused to dismiss the case.

Fox summarizes:

The basic concept -- negligence on the part of the employer in selecting or retaining an employee -- has a long history in American common law, but extending that responsibility to conduct not related to work is a dangerous precedent. The more extenuated the connection to the workplace the worst policy it becomes.  Carried too far, it could at some point completely shift the risk of harm to third parties for all but the unemployed.

The other adverse policy that I see coming out of holding employers liable is that it gives employers incentive to ignore their employees' personal problems like drinking, drugs or pornography addiction or simply terminate employees for those issues instead of trying to work with them.  For example, in the drunk driving case, an employer would be better off simply ignoring an employee's drinking problem or firing him for showing up drunk, rather than directing him to counseling programs.  I don't think employers should be penalized for showing compassion towards employees with various problems and yet, that's the direction in which we're heading as we try to hold employers liable for employee conduct that takes place after working hours.

Posted by Carolyn Elefant on April 28, 2006 at 03:50 AM | Permalink

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Tuesday, April 25, 2006



Limited Litigation in the Blogosphere
Cathy Kirkman blogs about the state of libel litigation in the blogosphere, linking to a recent  essay titled "Libel in the Blogsphere:  Some Preliminary Thoughts" by uberblogger Glenn Reynolds.   Kirkman writes that the paper posits two main reasons for a lack of online libel litigation:

(1) Section 230 of the Communications Decency Act, which immunizes  ISPs and others for publishing third-party comments; and

(2) technological and cultural aspects of the blogosphere, including  norms of rapid correction, third-party substantiation, and hostility to legal threats in the form of public exposure and criticism.

Of course, we're still in the early days of blogging, the initial honeymoon phase.   For me, the jury's still out on what happens when this initial infatuation wears off.

Posted by Carolyn Elefant on April 24, 2006 at 01:55 PM | Permalink

More on Law Department Sabbaticals
Rees Morrison again posts on the topic of law department sabbaticals.  Morrison cites statistics that 23 percent of businesses in the country offer paid or unpaid sabbaticals.  But while many of these companies have substantial law departments, Morrison notes that "I have never heard of one of their in-house lawyers who has taken such a leave."   Some companies allow lawyers to take a sabbatical as they wish, while others only permit the lawyer to work for a nonprofit. 

I'd certainly take time off if I had the option, particularly if the company paid for my leave.  I'd like to know why more lawyers don't take advantage of these programs.

Posted by Carolyn Elefant on April 24, 2006 at 01:47 PM | Permalink

Can A Firm Make Associates Enthusiastic Employees?
Bruce MacEwan starts this post with a quote about yet another disgruntled and unenthused law firm associate complaining about inefficiencies and poor management and treatment of employees at his law firm and others.  But unlike many other associates, this fellow did some research on management and came up with a book that MacEwan recommends to firms:  "The Enthusiastic Employee."  Granted, in today's law firm culture, an "enthusiastic associate" is almost an oxymoron. But it doesn't have to be that way -- and in fact, enthusiastic employees can substantially improve the firm's bottom line.  As the book's dust jacket reads:

"Enthusiastic employees far out-produce and outperform the average  workforce: they step up to do the hard, even 'impossible' jobs.  They'll rally each others' spirits in even the toughest times. Most  people are enthusiastic when they're hired -- hopeful, ready to work  hard, eager to contribute. What happens? Management, that's what."

Isn't that  what law firms want?   MacEwan thinks they should -- and  for those who don't believe the benefits, MacEwan reminds them:  "How much does it cost to replace an associate?"

Posted by Carolyn Elefant on April 24, 2006 at 01:14 PM | Permalink

Another Blawg Review
Brandy Karl  hosts Blawg Review #54, with a "through the looking glass theme."  Most interesting of her posts is the recognition of this month's trend toward the personification of the blogosphere. Among the in-person meetings between bloggers this month were last week's LexThink Lounge  and the Blog Law and Blogging for Lawyers conference and the Volokhs' planned get together at the Berkman Center's Bloggership conference. If you have the chance, jump on this new blogwagon and reach out and touch a blogger sometime soon.

Posted by Carolyn Elefant on April 24, 2006 at 01:05 PM | Permalink

The Sun Shines on Sons and Daughters Who Make Rain
Larry Bodine recognizes that women sometimes  have it tough  making it rain at law firms.  So he links to Ten Best Practices by Women Rainmakers, which lists various techniques that women can use to overcome obstacles to bringing in business.  These techniques include marketing as part of a team, focusing on a niche and seeing marketing possibilities in everything you do.  But those ideas benefit everyone, not just women.   In my mind, the tip labeled "Set Ground Rules" is the one that's most helpful to women (or men) concerned with maintaining a work-family balance.  Setting ground rules involves saying no to certain marketing endeavors, like after-hours cocktails, and instead proposing substitutes like breakfasts that better suit your schedule.  This kind of marketing rule ensures that women have an opportunity to market and to come up with marketing ideas that not only accommodate their own schedules, but might more readily accommodate a prospective client's schedule as well.

The article on best practices reminds us that successful marketing is the great equalizer in the legal profession.  As the article concludes:  "The sun shines on those who make rain."  So true.

Posted by Carolyn Elefant on April 24,


Saturday, April 22, 2006

Espectacular blog:




Tom Peters wrote a terrific post called Ha! commenting on a Financial Times column citing the poor track record of companies that Gary Hamel and C.K. Prahalad cited in their book Competing for the Future. Here’s a great quote from Tom:

"I guess my perverse pleasure comes because almost every "big" management book seems to need to devote a paragraph to trashing the companies Bob and I picked. None cites even a dollop of data to support their point...which doesn't slow them down in the least. We did indeed make our share of mistakes—but the bunch-as-a-whole have been remarkably resilient.
Ah, well."

Not only is his short post excellent, but, as is often the case on his blog, so are the comments. One person cited an excellent Forbes piece on what's happened to the companies cited in Excellence.

Speaking of this financial smell test, I’d love to see portfolios of model companies cited in the top 25 business books of the past 20 years. Hold up the performance of Good to Great versus Execution, or, say, Lean Thinking versus Innovator’s Dilemma?

Posted by Tom Ehrenfeld, 800CE0READ, UN BLOG ESPECTACULAR , CON INFORMACION MUY RELEVANTE PARA EL MUNDO DE HABLA HISPANA Y PARA Chile en particular.  Saludos Rodrigo Fonzález Fernández, consultajuridica.blogspot.com


Espectacular blog:




Tom Peters wrote a terrific post called Ha! commenting on a Financial Times column citing the poor track record of companies that Gary Hamel and C.K. Prahalad cited in their book Competing for the Future. Here’s a great quote from Tom:

"I guess my perverse pleasure comes because almost every "big" management book seems to need to devote a paragraph to trashing the companies Bob and I picked. None cites even a dollop of data to support their point...which doesn't slow them down in the least. We did indeed make our share of mistakes—but the bunch-as-a-whole have been remarkably resilient.
Ah, well."

Not only is his short post excellent, but, as is often the case on his blog, so are the comments. One person cited an excellent Forbes piece on what's happened to the companies cited in Excellence.

Speaking of this financial smell test, I’d love to see portfolios of model companies cited in the top 25 business books of the past 20 years. Hold up the performance of Good to Great versus Execution, or, say, Lean Thinking versus Innovator’s Dilemma?

Posted by Tom Ehrenfeld, 800CE0READ, UN BLOG ESPECTACULAR , CON INFORMACION MUY RELEVANTE PARA EL MUNDO DE HABLA HISPANA Y PARA Chile en particular.  Saludos Rodrigo Fonzález Fernández, consultajuridica.blogspot.com



Twelve Books That Changed the World

I was enthralled by a great TV programme over the Easter Weekend. (His lordship!) Melvyn Bragg, the eminent writer and broadcaster, has selected the 12 books that he contends have been agents of social, political, and personal revolution. The only work of fiction that made the cut was William Shakespeare's first folio of 1623, with everything from Darwin's Origin of Species through to the First Rule Book of the Football Association being on the list. You can see all 12 here.

As Bragg himself explains, "When people think of things that change the world, they tend to think of extraordinary events: the assassination of leaders, the invasion of countries, the havoc wreaked by natural disasters. There is something less attention-grabbing, but just as powerful, which changes the world—books. The series aims to show that the lives we lead have been formed as often as not by a single book."

The closest we get to a 'business' book that makes the final 12 is Adam Smith's The Wealth of Nations, which set me thinking ... would any of the great business books from the 20th and 21st centuries qualify for such an esteemed status? Which of them could we say, hand on heart, have truly changed the way we lead our business lives? What's your nomination for the most influential business book since The Wealth of Nations? And what is your evidence of its impact?

Madeleine McGrath


Friday, April 21, 2006


Se nos consulta por los juegos de azar ilícitos, que normativa se aplicará…en que estado está , que objetivos tiene el proyecto, que se busca. Veamos

Marcelo Venegas en Gobernabilidad.cl ha desarrollado un excelente trabajo respecto del proyecto de ley de juegos de azar.

§         Origen. Proyecto de ley, iniciado en Moción de los Honorables Senadores señora Matthei y señores García y Ominami y de los ex Senadores señores Boeninger y Foxley, de 20 de julio de 2005

§         Estado de tramitación.Primer trámite constitucional, con informe de la Comisión de Constitución. Unanimidad (5-0)

§         Objetivos del proyecto. La iniciativa busca introducir modificaciones al Código Penal tendientes a crear una normativa ágil y moderna, que desincentive la actividad ilícita que las máquinas de juego conocidas como “tragamonedas” están generando en nuestro medio.

§         Concretamente, se propone elevar el nivel de las sanciones aplicables a los juegos de azar realizados al margen de la ley y se introduce una nueva tipificación referida a la comercialización e instalación de juegos de azar mediante máquinas de autojuego o “tragamonedas” en lugares no autorizados legalmente.

§         Constancia.La Comisión tomó en consideración una Moción del Senador Ávila, contenida en el Boletín 3.996-07, que introduce ciertas modificaciones a los Códigos Civil y Penal en materia de juegos de azar.

Moción de los Senadores señora Matthei y señores García y Ominami y de los ex Senadores señores Boeninger y Foxley.

Luego de la exposición de motivos, concluyen que se ha generado en Chile en los últimos años una actividad económica al margen de la normativa constitucional y legal vigente, de enormes repercusiones en la economía pública, generando una competencia desleal para las empresas de loterías que por ley han sido autorizadas para administrar juegos de azar sujetos a un estricto régimen jurídico y para los casinos dentro del ámbito territorial que la ley les permite, como también para los hipódromos que captan apuestas respecto de carreras de caballos, también en virtud de una autorización legal.

Puntualizan que la actividad de los juegos de azar ilegal afecta además a los beneficiarios de las empresas de loterías que están establecidos en la ley, que son instituciones de bien común y asistencia social indispensables en la vida nacional, como son Fonasa, Cruz Roja, Coanil, y Bomberos, entre otros.

Dicen que también afecta al Fisco, toda vez que los recursos que genera esta actividad ilegal van en desmedro de los aportes que le efectúan las empresas autorizadas por ley para administrar juegos de azar y apuestas, y por la no percepción de los tributos generales y específicos que los gravan, como el establecido en el artículo 2° de la ley 18.110, para las ventas de Polla y Lotería.

Aseveran que las normas legales contenidas en nuestro Código Penal relativas a la represión y sanción de juegos y apuestas ilegales se han visto superadas por los medios y avances tecnológicos y los resquicios que utilizan los partícipes de estas actividades ilícitas, razón por la cual el presente proyecto de ley viene a rectificar esta situación, modificando las normas penales correspondientes.

Informan que para reprimir adecuada y eficazmente el juego ilegal, el proyecto de ley tiene como objetivos:

1) Introducir mejoras y modernizar la tipificación de los delitos asociados al juego ilegal, generando cambios sustanciales en la legislación tendiente a la prevención y represión del mismo.

2) Incrementar las penas que castigan las conductas vinculadas al juego ilegal, ya que las sanciones actualmente existentes son leves e intrascendentes, lo que permite continuar sin inconvenientes el desarrollo de estas actividades ilícitas.

3) Imponer sanciones a los participantes o jugadores de las loterías no autorizadas que actualmente no son considerados por la legislación, para así desincentivar a la población en participar en juegos de azar desarrollados al margen de la normativa vigente.

Moción del Senador Ávila

La iniciativa busca especificar la calidad jurídica en la que se encuentra el uso de las máquinas de apuestas de monedas y la interpretación que hace nuestra legislación de éstas y otros juegos de azar físicos, eléctricos y electrónicos.

El autor señala que dado el sistema de importaciones que nuestro país exhibe, se advierte que es el libre mercado el que permite la internación de todo tipo de insumos, artefactos, materiales y utensilios, a excepción de aquellos que expresamente la ley prohíbe. Y, concluye, ha sido nuestra legislación la que no ha sabido interpretar certeramente el status jurídico con el cual debe analizarse la operación y uso de estas máquinas.

En virtud de estas razones, su iniciativa pretende especificar la calidad jurídica que tendrá el uso de las máquinas de apuestas en referencia.

Antecedentes legales

Constitución Política

Artículo 19, 21. En su párrafo primero, asegura el derecho a desarrollar cualquiera actividad económica que no sea contraria a la moral, al orden público o a la seguridad nacional, respetando las normas legales que la regulen.

Artículo 63, 19. Señala que sólo son materias de ley aquellas que la misma norma establece, entre las cuales figuran, como número 19, las que regulen el funcionamiento de loterías, hipódromos y apuestas en general.

Código Civil

Artículo 1466. Dispone que hay objeto ilícito en las deudas contraídas en juego de azar, en la venta de libros cuya circulación es prohibida por autoridad competente, de láminas, pinturas y estatuas obscenas, y de impresos condenados como abusivos de la libertad de la prensa; y generalmente en todo contrato prohibido por las leyes.

Código Penal

Artículo 275. Establece que es lotería toda operación ofrecida al público y destinada a procurar ganancia por medio de la suerte.

Artículo 276. Prescribe que los autores, empresarios, administradores, comisionados o agentes de loterías no autorizadas legalmente, incurrirán en la multa de once a veinte unidades tributarias mensuales y perderán los objetos muebles puestos en lotería.

Agrega que si los objetos puestos en lotería fueren inmuebles, la pena será multa de veintiuna a treinta unidadestributarias mensuales. Manda que en los casos de reincidencia se les aplicará además la reclusión menor en su grado mínimo.

Artículo 277. Dispone que los banqueros, dueños, administradores o agentes de casas de juego de suerte, envite o azar, serán castigados con reclusión menor en cualquiera de sus grados y multa de once a veinte unidades tributarias mensuales.

Artículo 495. Expresa, en su número 14, que será castigado con multa de una unidad tributaria mensual el que en caminos públicos, calles, plazas, ferias u otros sitios semejantes de reunión estableciere rifas u otros juegos de envite o azar.

Ley 19.995, sobre Bases Generales para la Autorización, Funcionamiento y Fiscalización de Casinos de Juego

Su artículo 3° define “juegos de azar” como “aquellos juegos cuyos resultados no dependen exclusivamente de la habilidad o destreza de los jugadores, sino esencialmente del acaso o de la suerte, y que se encuentran señalados en el reglamento respectivo y registrados en el catálogo de juegos.”.

El artículo 4° establece que sólo se podrán desarrollar los juegos incorporados oficialmente en el catálogo de juegos y siempre que se sometan a las disposiciones que esta ley y los reglamentos determinen.

El catálogo de juegos, así como sus modificaciones, se aprobarán mediante resolución fundada de la autoridad fiscalizadora y será confeccionado con arreglo a los criterios que especifica.

El artículo 5°, por su parte, dispone que los operadores sólo podrán explotar los juegos de azar que esta ley y sus reglamentos autoricen y siempre que cuenten con la licencia para ello.

Por último, su artículo 6° establece que los operadores sólo podrán utilizar las máquinas e implementos de juegos de azar que se encuentren previamente homologados e inscritos en el registro que al efecto llevará la Superintendencia de Casinos de Juego.

Opinión de Superintendente y operadores de máquinas:

El Superintendente de Casinos de Juego,señor Francisco Leiva. Señaló que, en la medida en que tales máquinas constituyan juegos de azar, su funcionamiento y explotación en dichos lugares estaría infringiendo el ordenamiento jurídico vigente, de conformidad con lo establecido por el Código Penal, el Código Civil y el artículo 63 número 19 de la Constitución Política. De acuerdo con esta normativa, los juegos de azar en Chile constituyen una actividad excepcionalmente lícita, sólo para aquellas situaciones expresamente autorizadas por ley, como son los casos de los juegos de azar administrados por Polla Chilena de Beneficencia y Lotería de Concepción, los hipódromos y los casinos de juego.

AbogadoHéctor Salazar. En particular, destacó que el proyecto en estudio es represivo y afecta la libertad de emprender garantizada por la Carta Fundamental. No persigue, aseguró, defender la salud mental y moral de la población, sino mantener el monopolio del Fisco en este rubro. Es decir, dijo, el tema comprometido es netamente económico y vulnera una actividad comercial perfectamente lícita. En cuanto a la naturaleza de las máquinas que opera la Asociación que representa, resaltó que el principal argumento esgrimido por los entes fiscalizadores se basa en la premisa de que estos juegos son de azar y soslayan el hecho de que no se ha presentado ningún estudio pericial realizado por personal calificado que así lo demuestre.

El texto aprobado por la Comisión es el siguiente:

Artículo Único.- Introdúcense las siguientes modificaciones en el Código Penal:

1.- Sustitúyese el artículo 276 por el siguiente:

“Artículo 276. Los autores, empresarios, administradores, comisionistas o agentes de loterías no autorizadas legalmente serán castigados con reclusión menor en su grado mínimo y multa de cien a trescientas unidades tributarias mensuales.

En caso de reincidencia, la pena se elevará en un grado.“.

2.- Agrégase el siguiente artículo 276 bis:

“Artículo 276 bis. El que comercialice, distribuya o instale en cualquier lugar, ya sea en espacios públicos o privados que no sean casinos de juegos autorizados en conformidad a las leyes vigentes, equipos de autojuego electrónicos o mecánicos, que entreguen premios en dinero o canjeables por éste, en los cuales el jugador debe efectuar el pago de un precio o prestación avaluable en dinero, destinado a procurar ganancia por medio de la suerte o azar, serán castigados con reclusión menor en su grado medio a máximo y multas de cien a trescientas unidades tributarias mensuales. En el evento que estos equipos de autojuego electrónicos o mecánicos se instalen en casinos de juego, se les aplicará toda la normativa contenida en la ley Nº 19.995.

Los que jugaren en loterías no autorizadas legalmente serán castigados con reclusión menor en su grado mínimo y con una multa de once a veinte unidades tributarias mensuales.”.

3.- Modifícase el actual artículo 277 del Código Penal, sustituyéndose la frase “serán castigados con reclusión menor en cualquiera de sus grados y multa de once a veinte unidades tributarias mensuales”por “serán castigados con reclusión menor en su grado medio a máximo y multa de trescientas a seiscientas unidades tributarias mensuales.”.

4.- Agrégase, en el inciso final del artículo 495 del Código Penal, antes del punto (.) final, precedida de una coma(,) la siguiente frase: “y la multa para la falta señalada en el número 14 será entre cincuenta a cien unidades tributarias mensuales.”.”.

Proyecto de ley sobre juegos de azar ilícitos: Un muy buen trabajo que servirá a los estudiantes, profesionales , a todo el mundo de la profesión legal, saludos “ Rodrigo González Fernández” , consultajuridica.blogspot.com



"Lawyers and innovation are not words that people automatically put together," is how the FT starts its announcement of the launch of a ranking of the most innovative law firms, and individual lawyers, co-sponsored by the accountancy BDO Stoy Hayward and managed by RSG Consulting, a new firm to me identified as "a legal research company."

Why this?  Why now?  As the FT explains it, the world is changing:

  • "Before 2000, no law firm could claim to be genuinely global."   Did you notice that's no longer so?
  • Clients are becoming savvier and more demanding about fees and firm selection.
  • The Clementi Commission has set the stage for what I believe will be law-firm-land's equivalent of the "Cambrian Explosion."
  • "Deliver[ing] the law and deliver[ing] it competently" are merely, as they should be, table stakes; clients are demanding more.
  • Top law firms are rethinking aspects of the traditional partnership model and looking at management techniques of large corporations.

And, most simply, the existing array of awards for innovation in business have heretofore simply ignored law firms; the FT plans to fill this gap.

Here are the submission guidelines.  The categories are:

  • value for money
  • billing
  • client service
  • management
  • use of technology
  • legal expertise/strategy
  • HR/employee relations
  • pro bono/corporate social responsibility (CSR)
  • general/open, and
  • individual lawyers.

Submissions should be no longer than 1,000 words and are due 5:30 pm Friday, May 5.  Let the games begin.

Posted by Bruce



In the classic "The Innovator's Dilemma," Clayton Christensen analyzed how companies at the top of their game, with brilliant and successful products, and focused on their core clients, could be undercut and eventually dethroned by small, pesky start-ups with demonstrably inferior technology.  No less than Andy Grove had this to say:

"This book addresses a tough problem that most successful companies will face eventually. It's lucid, analytical-and scary."

If you haven't read it, first of all, shame on you, but second of all, here's Christensen's key insight: Market-leading, highly-functioning firms that are (rightly) focused on their best clients will ignore newly introduced "disruptive" technologies which typically begin life cheaper, smaller, and easier to use—but far less capable—than the market leader's offerings.  The leader's best clients know and appreciate the fully-featured products they buy, and have no use for what the inferior upstart sells. Meanwhile, senior and middle management of the market-leading firm has no incentive to adopt the new, inferior technology either, since (a) their best clients have rejected it; and (b) at least initially, the market niche is so small it would contribute negligibly to the firm's growth, and could even dilute profitability (cheaper generally being associated with lower-margin).

Sincerely yours Rodrigo González Fernández, consultajuridica.blogspot.com, lawyerschile.blogspot.com

Wednesday, April 19, 2006

Inside vs. Outside: When Does it Make Sense for Law Firms to Outsource?

A Roundtable Discussion

April 2006

Is outsourcing something real or just another area of hype? What do you see happening today in the world of law firm outsourcing?

Ron Friedmann (RF): Law firms have long outsourced many functions, from the mail room to travel services. In the past, outsourcing was restricted to what almost everyone would agree are "back office" tasks. Today, however, some firms outsource functions closer to the "front office," that is, what lawyers do, for example, legal research, drafting contracts, or document review by contract lawyers. There is no magic in where to draw the line between front and back office. Ultimately, law firm economics, ethics considerations, and market demand draw the line. Today, the trend is to outsource more. I've talked to lawyers who'd like to explore offshoring document review and to CIOs who want to investigate outsourcing help desks. So in my experience, outsourcing is not hype but serious consideration of this option, however, does not guarantee rapid growth.

Dennis Kennedy (DK): I see a growing amount of outsourcing of all kinds, although sometimes law firms don't call it outsourcing. For example, how many firms have their own janitorial staff? I'm not sure that they would say they've "outsourced the building maintenance functions," but they have. You see a growing use of temporaries, from staff to, as is increasing common, lawyers for document review and other projects. Payroll and financial functions has been a subject for outsourcing for many years. Two of the final frontiers seem to be outsourcing technology and, perhaps most controversial, outsourcing legal services in ways other than simply hiring onsite temporary contract lawyers.

John Tredennick (JT): There is more going on that meets the eye. Business process outsourcing companies like Office Tiger are now targeting the legal market as the next candidate for outsourcing. As I wrote in an earlier article, Office Tiger provides outsourced legal secretaries to a major U.K. firm at a 3 to 1 ratio. That isn't 3 attorneys to one secretary as you might expect. Rather, that's 3 secretaries to one attorney--round the clock secretarial support for about 30,000 Euros a year. Another major company has just entered into a $4 million contract to outsource much of its litigation support work--scanning, coding, subjective review, etc. This work often went to law firm paralegals and US companies. Now it is heading overseas. This company is a longtime thought leader in corporate circles so you can bet that others will follow quickly. It won't take long for them to start outsourcing some of their legal efforts as well.

Stephen M. Nipper (SN): Thomas L. Friedman in The World is Flat, notes that "...you are not going to go to Bangalore to find an internist or a divorce lawyer, but your divorce lawyer may one day use a legal aide in Bangalore for basic research or to write up vanilla legal documents..." ["Chapter 6: The Untouchables"]. As for my opinion, I think the biggest impact on law firms that "outsourcing" hype will cause is increasing the rate at which clients question the fees their attorneys are charging them. While a client may not REALLY send their work overseas, this "outsourcing" discussion may increase their desire to seek lower cost alternatives, including sending work to smaller firms and "farmshoring" (working with law firms in smaller metropolitan areas where billable rates are lower but quality is just as high).

Often, outsourcing experts refer to the need to understand your "core business" before you outsource. What is a law firm's core business? What are some good examples of operations a law firm might outsource?

DK: Startup law firms tend to focus on this issue more than established firms do. They consider and calculate carefully what makes sense for them to do, and not do. Will an outside vendor do it faster and cheaper? I suspect that before many outsourcing decisions have been made in law firms, someone stood up and said, "I don't think that we need to be in the ______ business." More and more, the notion of core business is directed at actually providing legal services to clients. As firms get larger, many parts of a firm start to look like their own businesses. Focusing on the "core business" helps you make better decisions about outsourcing. What operations are not related to serving clients and can be done better and cheaper by someone in that business? Payroll processing was a first step for many firms - it took a lot of effort, staffing and was complicated. Administrative functions are common choices for outsourcing, but, increasingly, law firms are wondering if they need to be in the IT support business. Security, disaster recovery and help desk services all have become candidates for outsourcing in the last few years.

Wendy Werner (WW) : I think a lot depends on the size of your firm and where you want to focus your energy. I agree that payroll is usually the first thing to go, and I think rather quickly bookkeeping/accounting in general. Other areas ripe for outsourcing include security, IT, and even some kinds of marketing. Who will determine your logo, the look of your Web site, etc? In part, I think it depends on what your skill sets are as the law firm principal, or as the head of a small firm. I do think you want to understand your business, but I watch a lot of small firm people deal with the frustrations of spending a limited amount of time practicing law because of all of the other things that they are working on. There is a cost/benefit analysis that I recommend that people do as they are thinking about the best use of their time.

RF: The core business of law firms is a combination of solving legal problems and helping clients cope with difficult situations. An old adage says that lawyers are finders (business getters), minders (relationship managers), or grinders (ones who crank out legal work). Today, lawyers who are great at "client hand holding" typically rely on a partner or associate to do the legal work. Could the minder instead outsource this to a lawyer in another organization? The point is that even in what many would consider the core business of law firms lie potential outsourcing opportunities.

JT: There may be less in the core than most suppose. Some firms have already offshored their IT staffs. Orrick outsourced its group to West Virginia (onshoring). I heard recently that the Orrick facility was purchased by a British outsource company which specializes in facilities management, another common outsourcing play. Clearly partners are safe and probably associates as well. But, anything else is up for grabs.

What are your best tips for choosing a third party vendor for outsourcing?

JT: References and history would be key to me. Anyone can put up a shingle as an outsourcer but you don't want to be their first client. Start with a small project and build from there. Management is more important in an outsourcing relationship than when the team is close at hand. Consider having a project manager from your partner on site so you can communicate daily and he/she understands your business. We have a team of 10 developers in Bangalore, for example, but we brought the project manager and a lead architect here to be in our offices. Having a couple members of the team here is more expensive but it has helped make the projects successful.

RF: Know your supplier well, document your requirements carefully, specify the processes and deliverables, ramp up slowly, and verify the deliverables early and on a continuous basis. If a process or function is broken, don't try to outsource it - fix it first.

DK: Reliability, reliability and reliability. Cost, of course, is significant, bit you have probably made a calculation that it is cheaper to outsource than to keep the work in-house from the beginning, so cost savings are a big part of the equation. Finding vendors with real-world experience with law firms and the unique requirements that law firms have with respect to handling client confidential information and complying with ethical rules is a key. In a real sense, an outsourcing vendor will become one of your business partners, so you want to do your due diligence.

WW : I get concerned about the use of terms like "third party," "vendor" and "outsourcing." As a person who provides services to law firms, I like to think of myself as a business partner, a support person, or a consultant. When I hear the term "vending" I think of the machine that provides soda and chips to the office. So when I would want to choose a service, I want that to be someone who has the best needs of the business at heart; and someone who understands some of the unique aspects of a professional services firm. If you were to find yourself explaining what you do to a potential services provider, I think it would make sense to talk to someone else who already understood your line of work.

What can go wrong when you outsource and how can you protect yourself?

DK: What can't go wrong? On the other hand, many things can go wrong if you try to do everything internally. There's a trade-off and you need to use your best business judgment and weigh the risks. Outsourcing, especially in the area of technology, places a premium on crafting good agreements that include explicit performance and support requirements (usually known as service level agreements or SLAs), coverage of what happens when a contract terminates, requirements on how data gets returned, and very specific directions on how client information may be accessed and handled. I often ask law firm IT people whether they feel that they get enough support from firm lawyers in negotiating these agreements and I can tell you that most of them feel that they do not. These are areas where you do not want to sign standard contracts. Due diligence is vital, but the devil often is in the details of the actual agreements.

JT: Putting aside the possibility that the work is done poorly, the biggest risk is losing control of the project. With a team thousands of miles away, it is easy to focus your attention elsewhere. Suddenly the project is out of control and you are running to catch up. Make sure somebody is reporting daily (weekly at least) and that someone from your office is scrutinizing the team's work and progress carefully throughout the process.

RF: Lots can go wrong. But lots can go wrong with performing functions internally or with people you hire as employees. With outsourcing, you typically spend more time specifying requirements and monitoring performance. Others can enumerate the legal and business risks of outsourcing but a key point is to weigh these risks against the alternatives. No option is risk free.

WW: I think the same things can go wrong that do so with any service. Creating specific and clear cut agreements is crucial. It is important to make sure that both parties are speaking the same language and that expectations, time frames and dates are provided. As with many other kinds of hiring, including hiring your own employees, lots of people do not do enough work up front. Sometimes these decisions are made out of frustration and are done so quickly to solve one problem, rather than with an eye toward a potential long term relationship. And it always makes sense to get references.

SN: In my line of work (patent law), I think there are substantial issues with sending a client's confidential information overseas to another country where if it is divulged, legal action to remedy the harm may be all but impossible. I'm not so sure that well drafted legal documents may be of much use to you...it is unlikely that you are going to pursue the expense of foreign legal process unless the benefit outweighs the cost.

Looking to the future, what do you see happening in outsourcing in the next three to five years?

JT: We are clearly in the trial and error phase, which I expect to continue for another year or so. Bold corporations are moving in this direction cautiously but the lure of cutting expenses by 70 percent is a powerful siren. So long as the results meet expectations, expect to see more jumping on this bandwagon. Law firms will be led by the large British firms which are already spread across the globe. Adding Indian offices and centralizing work there will feel natural to them. Americans will follow slowly at best.

DK: First, continued exploration of outsourcing in purely administrative functions, such as HR (benefits administration and the like). Second, more experimentation in temporary staffing. Third, much greater outsourcing of responsibilities currently handled by IT departments (especially security and disaster recovery). In fact, we may have hit the high level for size of IT department staffing in law firms.

RF: The costs of document review in discovery will kill the goose that laid the golden egg. Deploying armies of domestic lawyers to review documents is not sustainable. If document review cannot be "outsourced" to advanced software, then someone will figure out how to offshore this function to lawyers in India.

SN: I agree with Ron. The major benefit to cheap labor is brute force that can be applied to a project. That is why document review and data entry are going to be the most likely candidates for legal outsourcing.

Darryl Mountain (DM): Increased use of document assembly software. This would involve extending the “trap door” model that some corporations use currently. Picture a document as a flat surface with trap doors leading to in-house lawyers hidden below. A person is generating a document in a question-and-answer dialog session powered by document assembly software. If all questions are answered in a “safe” fashion, then the document is generated immediately. However, if the person answers a particular question in a fashion that requires the inclusion of a nonstandard clause, then he or she trips a trap door and the document goes to the law department for review. This system mitigates against the risks of employees using outdated versions of documents, making unauthorized changes, or involving the legal department too late in the deal process. If you were to extend the trap door model, you could have a model where contracts are drafted in-house in the U.S., the Indian lawyer handles exceptions only, and the U.S. lawyer reviews the Indian lawyer’s work.

This example illustrates the tradeoff between people and software and points out how one can easily disrupt the other. If document assembly software contained sufficient guidance that a person with no legal training could draft a document under most circumstances, then the exceptions handled by the Indian lawyer would become increasingly slim.

On the other hand, it is possible for people-based business models to disrupt software-based business models, as well. For example, it seems, anecdotally at least, that the availability of Indian call center labour has led to the scaling back of research into phone-service software that uses voice recognition. Call center workers and automated operators act both as complements and substitutes for each other, much like offshore labor and document assembly software. When one becomes significantly cheaper than the other, customers will switch.

Perhaps the true "frontier" in outsourcing, and it is a controversial topic, is outsourcing actual legal work. We hear about outsourcing document review and other "commodity" legal work to India or even the U.S. Midwest (sometimes called "home sourcing" or "homeshoring"). Tom Friedmann's book, The World is Flat, talks about this and certainly has influenced the thinking of many lawyers on this topic. What are your thoughts on this topic?

RF: I start from the premise that there is a long-standing domestic industry for outsourced legal research. Some large law firms have "insourced" legal work to automated expert systems. And some law departments use professionals in India for patent work or contract drafting. As far as I can see, the frontier has been crossed already, at least by a few firms and clients. The question is whether others will follow the pioneers.

SN: While not living in the Midwest, I do practice in Idaho (Intermountain West). About 50 percent of my work comes from out of state, thereby giving me direct experience with this "homeshoring" topic. On a patent attorney email mailing list I subscribe to, a big city patent attorney recently tried to make the argument that it is malpractice to work for a client you don't meet with face to face...perhaps his rant being evidence that big city firms are feeling the "homeshoring" pressure. Homeshoring is not only being driven by hourly rates, but by customer service (including how clients are treated by their attorneys) as well. Long gone are the days of "all my client needs to know about the law is my phone number." If you don't treat 'em right, someone else will.

DK: There is a compelling logic to this approach and there has been some push from clients as hourly rates for inexperienced lawyers have soared. The recent round of salary increases for starting associates will only cause more interest in this approach. My sense is that, not surprisingly, like all areas of outsourcing, we've seen mixed results at the beginning. As the industry matures and we can determine who does this well, the results are likely to improve substantially. I expect to see more of this happening, especially in "commodity" legal work, especially document review and standard litigation preparation work. I also expect state bar regulators, who seem to have become very aggressive in the last few years, will soon have legal outsourcing on their radars.

JT: Corporations will drive this trend. Many are already sending patent work overseas along with other issues such as those involving international trade and corporate regulation. If we can harness programming talent for some of our most complicated projects, we will increasingly realize that we can offshore others kinds of help including legal analysis. Trial lawyers can rest easy along with top deal makers. But anything relating to regulatory analysis is on the block.

DM:The outsourcing of legal work is known in India as Legal Process Outsourcing ("LPO"). In terms of brainpower and English fluency, there is no reason why Indian lawyers can't do much of the work that U.S. lawyers are currently doing. India's legal system is based on English Common Law, Indian legal training is conducted solely in English, Appellate and Supreme Court proceedings take place exclusively in English, and legal opinions are written exclusively in English. Virtually all Indian lawyers are conversant with the UK legal system.

While the quality of legal education in India varies tremendously, LPOs normally hire students who have attended one of the eight dedicated law universities in India. These universities, the best known of which is the National Law School of India University, draw from a huge talent pool. They offer a 5 year B.A.L.L.B. (Hons.) course that follows the first 12 years of education. Each law university has its own separate entrance examination. The introduction of dedicated law universities is making law more popular as a career choice. Students traditionally have preferred Engineering, Medicine, Indian Administrative Services, and Management over law.

Students attending law universities face high debt loads and increasingly prefer to work for LPOs, which pay about the same as top-tier Indian law firms (US$10,000 per year). LPOs are able to recruit students whose grade point average is in the lower half of the class, who have experience with the use of Internet based legal resources such as Westlaw and Lexis, and who often have completed an LLM in the U.S. or the UK.

LPOs are also beginning to recruit top students from the 106 law colleges in India. The LPOs offer these students better pay than do the law firms that recruit them. While the quality of work offered by some of the better LPOs is as good as that offered by any law firm, the downside is an uncertain career path and a lack of recognition or prestige. That may change as LPOs become integrated into the Indian legal profession.

Legal issues hampering the growth of LPO include Bar Council of India advertising restrictions, data protection laws in the United States and the EU, and security standards and confidentiality.

What do I need to know to get started on any type of outsourcing?

DK: You definitely want to take a hard look at the numbers and calculate the costs and benefits of outsourcing work as compared to using an employee. Remember, too, that outsourcing certain tasks can free up your best employees to do higher level work. Talk to your peers in other firms to see what works and doesn't work, but, and this is important, talk to people outside the legal profession to see what they are doing. There are a lot of good resources. Finally, think in terms of your firm's profitably - does outsourcing help you reduce costs or improve revenues? If so, you may take home more money, better serve your clients and sleep a little easier with some well-chosen outsourcing - not a bad combination.

WW: I think it's important to look at the time costs of keeping everything in house and also to look at the skill sets of the employees in the organization. Not only can outsourcing free people to do higher level work - in some instances it might help you get higher level work. People are generally both happier in their work and more productive when they are using their best skills. So knowing what the abilities are that you have in-house is important before you determine what you may want to off-load; and what the opportunity costs are of not sending some things outside.

DM: To obtain more information about what types of outsourcing are possible, contact an LPO provider. These include OfficeTiger , Integreon, Pangea3, Offshore Legal Services, Lumen Legal, QuisLex, Manthan Services, and Mindcrest.

JT: I think you start by looking at your internal processes. Think about each aspect of your work process and ask yourself the question: "Can we do this work more efficiently and effectively." If the answer is yes, think about "how." Could we automate repetitive processes? If so, you might look to an outside development firm to do this work. Could we use a service rather than buy and manage it ourselves? Litigation support software is quickly moving to a hosting model. Firms are increasingly realizing that it is expensive to maintain and run the enterprise programs themselves. Could the work be done better by an outside group (either because it would be cheaper or it would free you up to focus on what you really want to do)? Once again, this could lead you to consider outsourcing. Think electricity. At one time everyone had their own generator. Today we outsource that service to the local power company. Once you start down the outsource road, you may be surprised at where it leads.

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Ron Friedmann is the president of Prism Legal Consulting , which helps law firms with the strategic use of technology and legal market software companies with marketing and strategy. He is a lawyer by training and has held senior management positions at two large law firms and two legal software companies.

Dennis Kennedy is a well-known legal technology expert, technology lawyer and blogger. His blog and his web page are highly-regarded resources on technology law and legal technology topics. He is member of the ABA Law Practice Management Section’s Council and Webzine Board.

Darryl Mountain is a lawyer and president of Ontago Inc., a company that markets DealBuilder and GhostFill document assembly software. Mr. Mountain owes much of his knowledge of LPO to Shashank Krishna, a graduating student at the National Law School of India University.

Stephen M. Nipper is an intellectual property attorney in Boise, Idaho with the law firm of Dykas, Shaver & Nipper, the oldest and largest intellectual property law firm in Idaho. His blog The Invent Blog can be found here.

John Tredennick is the founder and CEO of CaseShare Systems, which has been providing secure document repositories for complex legal matters since 1998 for some of the largest corporations, insurers and law firms in the world.

Wendy L. Werner is the owner and principal of Werner Associates , a career coaching and law practice management firm.

For more information: http://legalblogwatch.typepad.com/legal_blog_watch/2006/04/look_out

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