The Bottom Line on Lawyers

Quarterly Reports

Lawyers may seem an odd subject for a financial column, but they underlie most things financial and, even if they didn't, we'd have a responsibility to sneak in the occasional gibe---if I wrote a cooking column, I'd slip in "Twelve Recipes to Poison a Lawyer"---because when you think about it, lawyers (and that elite subset, Congressmen) are at the root of a lot of the mess that keeps us from being richer than we are.

When Pennzoil won the first round of its 10.53-billion-dollar lawsuit against Texaco last year, Texaco stock lost 2.7 billion dollars in market value while Pennzoil gained $600,000,000. If the stock market is so efficient, someone wondered, with Texaco's loss presumably Pennzoil's gain, where did the other 2.1 billion dollars go? "Legal fees," replied Forbes's editor, Jim Michaels.

Shakespeare did not say, "The first thing we do, let's kill all the lawyers"; he had one of his characters say it. But he would have said it, he told me once, if he hadn't been loath to offend some of his personal friends who were lawyers.

That's the thing. Lawyers as people are nothing short of saints. Charming, honorable, intellectual---all that. Some of my best friends are lawyers. I've even slept with a lawyer. But lawyers as lawyers make me nervous, and lawyers as a group---a great, obfuscating, overbloated throng---make me buggy.

We have too many lawyers.

You know the ad that says, "If you, or someone you love, is over 55, I urge you to get a pencil and paper"? Well, if you or someone you know is in college, contemplating what to do next, I urge you, or him, to rule out law school. Be an entrepreneur, be an engineer, be a teacher, be a cop, fight fires, fly planes, lay bricks, sculpt---don't be a lawyer.

Ah, you say, what if there were no lawyers?

That would be terrible, true, but that's not the present danger.

Most of the lawyers I talk to agree---and not just to discourage competition. At 700,000 and counting in the U.S., there really are too many lawyers.

Fred of the Family

The first lawyer I ever hired was a friend of the family, partner in a small-to-middling New York law firm, in his late 30s. I was 23. I had made a book deal and he, hearing this, asked who would be looking over the contract. I stammered a little. My agent would be looking over the contract, I said. This is one of the three or four principal things agents do.

Sure, said Fred of the Family, but you can't sign a contract without having a lawyer look it over. And that was the very service he offered to provide.

"Gee," I said, "the whole thing's for only $6000."

"Don't worry," he said, "I'll just make sure everything's OK. It won't cost much."

So I gave him the contract ("Use a lawyer if you want," counseled my agent, "but you really don't need one for this") and he dickered with the publisher over a paragraph on my legal liability, lest the book inspire a lawsuit. This resulted in some essentially pointless rewording---pointless because, first, the paragraph still held me liable in the event of a lawsuit and, second, I was "judgment-proof," anyway. Even if someone had sued me, he'd have gotten nothing, because I had nothing. I was just beginning grad school. All I owned was a typewriter and some textbooks.

I signed the slightly reworded contract, wondering what the rewording cost.

Answer: $784. That was in 1971 dollars, equivalent to $2148 today. Some friend of the family.

"I'll be more than happy to talk with you about this," he said when I called, "and at no charge. But you should know that the time spent explaining a bill is ordinarily billed also."

Whereupon he explained---at no charge---that he'd done $750 of work on this, plus telephone and photocopying expenses, and expected to (continued on page 164) Lawyers (continued from page 107) be paid. Fool that I was, I paid him.

Shortly thereafter, he turned 40 and retired

Thus began my professional acquaintanceship with lawyers.

In the years since, while making every effort to limit that acquaintanceship, I've had a few entirely satisfactory dealings with lawyers ... and a few less so.

The Gypsy Curse

I've been sued twice. The first time was in 1982, for plagiarism. (Now I'm being sued for $15,000,000 by a former public official, for libel, but that's another story.)

A doctor in a well-to-do Boston suburb had written a book about the insurance industry. Through his agent, he had submitted it to 20 publishers, all of whom had turned it down. He subsequently had it printed up at his own expense, the bulk of which---350 copies---he sold to his mother-in-law's music-publishing firm.

One of the 20 publishers who had received and declined the manuscript, in 1979, was Simon & Schuster, with which, three years earlier, I had contracted to do a book on the insurance industry. When mine finally came out, in 1982, the doctor saw it and became convinced that Simon & Schuster must have passed his manuscript on to me. So he sued. (Technically, his wife sued, because he had transferred the copyright to her.)

As it happened, I had never heard of this man or his book nor seen a word of it.

How had it come to pass, you wonder, that passages in my book were the same as passages in his, published three years earlier? Are you to believe this was coincidence? How could this have happened?

You're curious; I was curious. As it turned out, when asked for examples of similar passages, the doctor's lawyer could provide none. It was the doctor's ideas I had stolen, they charged, not his words.

The lawsuit was without foundation, but you know the gypsy curse. ("May you be involved in a lawsuit in which you are in the right.")

Even if I had read the doctor's book and profited from his insights, he would have had no basis for a lawsuit. Ideas, as distinct from words, cannot be copyrighted. The doctor was the victim of monumentally bad advice in pursuing his claim.

Now, here's the way the matter should have been handled. I should have called the doctor---flown to Boston to have lunch with him, if need be---to persuade him I had never seen his manuscript. I would have looked him in the eye, he would have looked me in the eye; after an hour or two of discussion, the matter would have been dropped.

But for reasons you and I haven't the legal training fully to appreciate, that sort of approach is "very dangerous."

My guess was that this was a nice guy who'd busted his chops writing a book, who was bruised and frustrated by his inability to get it published and who genuinely believed the editor at Simon & Schuster to whom he'd sent it had shown it to my editor, who passed it on to me.

That was my guess.

The lawyers' guess was that this was just another cynical nuisance suit, to be dealt with in the normal legal way. The plaintiffs were either crazy or else well aware they had no case but hopeful of holding us up for a few thousand dollars, anyway.

A smallish but prestigious Boston law firm was retained to represent us. A formal answer was drafted to the complaint, with a copy sent to me as a courtesy. You know how this goes:

Count I, they allege their names are such and such and reside thus and forth. Count II, they allege our names are such and such and reside hither and yon. Count III, they allege I plagiarized and wrecked their lives. Count IV, they reallege all facts as to counts I, II and III and demand punitive damages. And so on. To which we respond, as to count I, that we neither admit nor deny what their names are or where they live; as to count II, that we admit, subject to appeal, that our names are so and so---I'm reading this stuff, feeling that since they sent it to me and are about to file it with the court, I ought to try to make sense of it---and I see that on all the counts that don't really say anything, we have great answers. But count III, where they say we plagiarized, we do not answer.

Feeling very foolish---this is doubtless an elementary technique of the law---I call one of the lawyers. He reviews the page in question (which is hours away from being filed formally with the court), mutters something about the word-processing department and express-mails a corrected draft the next morning.

But we're not just answering the complaint. That's no way to fight a battle. We are also asking the doctor's wife for a little information, pursuant to Fed. R. Civ. P. 34 (Rule 34 of the Federal Rules of Civil Procedure)---40 documents, including all research notes and research materials used by the doctor in writing his book, all drafts of his manuscript and copies of all his Federal and state income-tax returns from 1977 through 1982.

It seems to me we are proceeding exactly as we would if we were guilty. If the doctor retained any doubt as to the validity of his claim, this would erase it.

But what else can we do? This is the way the system works, and the Boston firm, we can only assume, is doing everything it can to end this matter as quickly as possible, to limit the size of its fee.

In excess of 400 pages of depositions are taken from the doctor, his wife and brother-in-law. Our Boston attorney, whatever the imperfections in his word-processing department, wields a gracious but deadly foil. ("Is it your testimony," he asks our assailant politely, "that you filed a Federal lawsuit, but you can't remember where the ideas that you are charging someone with stealing are in our own property?") The transcripts read like a rowboat meeting a battleship.

As the legal fees mount, I keep trying to think of a way to short-cut the formal legal process. It just seems crazy. If the doctor and his wife only knew I'd never seen their book, surely they'd drop this.

I decide to take a lie-detector test. Having less than complete faith in such things---I'm sufficiently high-strung to jostle a seismograph, let alone a polygraph---I decide to do so on the QT. But if the machine works and "proves" I'm honest, we'll send the test to the plaintiffs, they'll drop the case and that will be that.

I find some highly accredited polygrapher, go sweaty-palmed to his office and, for $750, submit to one of the stranger hours of my life (on the basis of which I'm convinced it would be awfully tough to lie and get away with it but relatively easy to be found "lying" when one is not). Anyway, the polygrapher pronounces me honest---all neatly typed up with his polygraphically prestigious credentials in a brown-Leatherette binder.

Finally. The doctor and his wife will see this, we'll have our little talk and that will be the end of it.

The lawyers, however, strongly recommend I not let the doctor and his wife see this. It would be best, they say, to win the case on conventional grounds.

And win they did. In little more than 15 months, and for a fee of something less than $40,000, the suit was thrown out without trial. So groundless and poorly conceived was it found to be, in fact, that---and this rarely happens---the doctor was forced to pay a portion of our legal expenses. (Simon & Schuster, bless its heart, absorbed the rest.)

But was all this necessary?

After the suit was thrown out, I finally spoke with the doctor and his wife. I probably wasn't supposed to; but by then, what harm could it do? They didn't sound crazy or cynical or money-mad. "I told your lawyers that if I could just talk with you," the doctor told me, "I could be convinced. But they wouldn't let me, and the way they went about harassing my wife in the depositions convinced me you were guilty."

Law school training, Harvard's Derek Bok complained in 1982, is geared "more for conflict than for the gentler arts of reconciliation and accommodation."

Lawyers as Provocateurs

Fact is, there's not all that much money to be made in accommodation and reconciliation. You surely know the line about the town that had too little legal work to support a lawyer---but more than enough to support two.

The client's challenge is to obtain good legal advice, when needed, without losing control. The lawyer works for you, but your interests and his may not always coincide. The most obvious potential conflict---and I stress potential, because many lawyers resist it---is simply that the faster and more efficiently he gets your case resolved, the less money he makes. But there are others.

I almost lost the best investment I ever made, a $41,000 Manhattan apartment, because my lawyer---a fine fellow eager to do a good job---was trying to include the window-unit air conditioners in the contract, while the sellers, it developed, had gotten a better offer and were looking for any honorable way out of our deal. My lawyer didn't want to see me screwed out of what was rightfully mine; but neither, air conditioners be damned, did he want to be bested by their lawyer. On top of that, their styles clashed. The "done deal" came within a whisker of coming undone.

No one cares about your business as much as you do. Keep your eye on it.

Lawyers as Liars

Lawyers never lie---technically. On the other hand, engaged as they frequently are in defending folk they know to be guilty, they're not always probers for ultimate truth, either.

Listen to an attorney quoted in Kenneth Mann's Defending White-Collar Crime:

"I can remember years ago when I represented a massive case of political corruption. I was very young and I asked him, 'Would you please tell me everything that happened.' And he said, 'What---are you out of your mind?'

"Today, I never ask anybody to tell me anything except what they want to tell me. I think it is absolutely ridiculous for a lawyer to say I can't help you unless I know everything. If a fellow wants to conceal something, that is because if you probe unnecessarily, he is going to tell you what you don't want to hear and it is going to be devastating. Most clients, I think, have enough brains not to tell everything."

Similarly, lawyers may not encourage clients to destroy evidence; but they can hope. Of an incriminating daily diary, one attorney told Mann, informally, "I hope he's smart enough to get rid of it."

"While it was evident that this attorney would take no active role in aiding or assisting concealment," Mann writes, "he thought that the client would be taking intelligent action if he were to destroy his diary and that the client would be naïve and lacking in savvy if he failed to do so."

The 175-year-old Lawyer

You know the story of Saint Peter's encounter with the 175-year-old lawyer. It was brought to mind by a young Sun Belt attorney at poolside one recent afternoon. "How was your day?" we asked.

"Great," he said; he'd billed 12 hours' work.

"Twelve hours," we marveled. "What time did you start?"

"I got in around 9:30 and left around 5:30," he said.

"Whoa!" we said (ignoring for the moment the incredible speed with which he had made it home---it being then precisely 5:17). "That's only eight hours. How did you manage to bill 12?"

It seems his firm has a minimum quarter-hour billing unit, so eight quick calls in 20 productive minutes are billed as two hours' work.

("What are you talking about, 175?" the lawyer asks Saint Peter, who's just congratulated him on being the oldest new arrival they'd ever had. "I'm not 175, I'm 57. I died last night of a heart attack."

"Oh," replies Saint Peter. "We were going by your time sheets.")

"Our firm bills in tenths of hours---six-minute units," chimed in a more senior attorney by the same pool, whose work is billed at $180 an hour, "but my personal minimum is two units for any call---12 minutes---because I figure any call disrupts my concentration at least that long."

The first attorney specialized in insurance-company defense work where, both junior and senior agreed, clients expect to have their hours padded. It's just a game, they explain, and everybody, including the insurance companies, knows it: They refuse to pay the going rate---the most they'll pay, for example, may be $100 an hour---so attorneys who normally charge $140 an hour, say, simply pad their time sheets by 40 percent. "It's accepted practice. The insurers expect us to do it."

("Do you?" I asked Maurice Greenberg, chairman of the hugely successful American International Group. "Hardly," he said. A.I.G. has set up in-house law firms around the country to cut costs of handling routine matters and has developed a computerized system to try to weed out excessive charges by the outside firms it retains for more complicated matters.)

Why, with the glut of lawyers, I asked the $180-an-hour man, aren't a lot of people willing to be billed out at, say, a mere $75 or $100?

"Oh, plenty are," he said, "but most lawyers are monumentally incompetent. Take estate work. Estate work can be done with the intelligence of a chimpanzee. It's really just a matter of following a lot of rules. But many lawyers don't have that level of intelligence or won't take the time to learn those rules. Make a mistake, and you can screw things up royally."

(Chief Justice Warren Burger has estimated that 25 percent to 30 percent of the lawyers stepping into court are unqualified to practice law. "We know that a poorly trained, poorly prepared lawyer often takes a week to try a one- or two-day case," he told the A.B.A. in 1984.)

On the other hand---in fairness---save a client from a mistake or point out an opportunity and, even if it took you ten minutes, the value of your advice can be worth millions. For example, merger-and-acquisitions attorney Stephen Jacobs suggested that client Leucadia National Corporation slip into its agreement to sell Avco shares a clause that would entitle Leucadia to as good a price as any future buyer of Avco might pay for the equivalent number of shares within a year. "That bit of fine print," reports Institutional Investor''s Suzanna Andrews, "earned Leucadia almost $40,000,000 when Textron bought Avco five months later."

Whiplash in Chicago

It's been said that the Japanese don't sue each other much because they're all from a common ethnic background, while we, a bunch of warring tribes, are kept from beating each other's brains out by the legal system. Instead of clubs, we beat each other over the head with lawyers.

We are also games players and out for a few bucks. Name a game that involves more bucks than the law.

Part of the problem is lawyers who consciously or unconsciously encourage needless or needlessly protracted litigation, or even encourage potential clients to fudge the facts a little so they'll have a case.

(American Lawyer once sent a reporter to 13 personal-injury law firms with a story about a slip and fall near---but in no way caused by or related to---some utility construction. Eight of the 13 attorneys told her, correctly, she had no case. Five suggested she move her recollected accident a few feet closer to the construction, so they could sue.)

But part of the problem is clients eager to get in on the game.

"As any cop or fireman will tell you," reports Chicago Tribune columnist Mike Royko, "at any big accident involving public transportation, the injury list just keeps growing."

"I remember when I was at a [train] crash a few years ago," a cop told Royko.

"There were dozens of people jumping from the other platform, trying to get into the wrecked train. I mean, dozens of people. It was an amazing sight."

A Chicago Transit Authority employee arrived at a wreck on the el to find "people actually shinnying up the el structure," he told Royko, "to get in on the accident. They could have broken their necks to fake a broken neck."

When a car hit a bus outside a scruffy West Side bar, the same man recalled, "you never saw a tavern clear out like that. One minute they were all inside, sitting on bar stools and drinking. The next minute they were outside, flat on their backs, holding their necks and yelling, 'Whiplash, I got whiplash.' "

But if the clients are partly to blame for courtroom clog, it's not always greed that fills our hearts. Sometimes it's spite.

The single

Stupidest case ever Brought

Ok, this is probably not the single stupidest lawsuit ever brought. But it's up there.

A guy dies, leaving in excess of $10,000,000. His kids contest the will. Their suit is to set aside not the entire will, which is highly favorable to them, but only the clause that names the executor, a big, respectable bank. They have no problem with the bank per se, just that it is the bank favored by their wicked stepmother, whom they would do anything to annoy. This action, they feel sure, will annoy her.

The essence of their complaint is that their father was fully competent with respect to his bequests when he wrote the will but that on the matter of an executor, he was unduly influenced by their wicked stepmother. They want a rival bank named as executor.

They are advised they cannot possibly win this lawsuit. For one thing, the will was drafted by a highly respected local attorney. No one in this town ever challenges his work. For another, the bank named as executor has so far, in the months since their father's death, been doing a superior job. Finally, it is pointed out, both sets of legal fees for this case will come out of their pockets---the fees for bringing the suit and also the fees for defending it, because the estate pays those, and they inherit the estate.

Deaf ears.

"Why do you want to bring this suit?" their lawyer asks. (He knows the answer is "to annoy our wicked stepmother" but figures forcing them to say that may lead to more rational behavior.)

"It's what our father would have wanted," they reply.

So the suit proceeds, the kids handing over what will be at least $20,000 in legal fees and the lawyer handing them, in return, a letter reiterating the impossibility of winning, lest he later be sued on the pretext that he actually encouraged them in this foolishness.

The court appoints a curator while the issue of executor is resolved---curators get higher fees than executors, all of which comes out of the kids' inheritance---and, to be curator, the court chooses the very same bank. (Well, it's doing a good job---why switch?) So the same bank, at a higher fee, is temporarily acting as executor. Moreover, lawsuits being the slow sorts of things they are, the estate will likely have been all wrapped up before the lawsuit wends its way to trial---so by the time it's decided which bank should be executor, there will likely be no need for an executor. But these people want their day in court, and they can afford it.

It's the principle of the thing

A large supermarket chain was advised by its counsel to settle a case for $40,000---that to fight it would cost a lot more. (Good lawyers do frequently give advice that serves to cut their own fees.) The firm insisted on fighting---it was the principle of the thing---and ultimately settled for $80,000, spending an additional $60,000 or $70,000 on legal fees in the process.

"They say it's principle," says the attorney in this case, "until the bill arrives." Then they bitch and moan.

"You really can't litigate any matter involving less than half a million dollars," this attorney continues. "It's uneconomical. Yet people want their day in court. They simply sue too much. They should settle more and, in many cases, just accept the fact that life's unfair."

Sometimes you do need Lawyers

A large utility needed a dam and figured it would save the $40,000 or $50,000 cost of drawing up a contract with the contractor. Instead, it commissioned the dam with a purchase order, as it would buy pencils, albeit listing the agreed-upon specifications in great detail.

The contractor, meanwhile, saw to it that a simple phrase absolving it of any liability for the performance of the dam be included in the purchase order.

The dam was to hold back thousands of acres of water needed in the operation of one of its plants. And, for a while, it did.

Sometimes you don't

The system has been structured (by lawyers) so we need more lawyering than we otherwise might. The most glaring, outrageous example of this is the way a relatively small band of trial attorneys has kept us from having true no-fault auto insurance in any state. Instead, we have a wildly inefficient adversarial system that benefits only two classes of people: attorneys---of course---and victims of auto accidents in which the other driver was at fault, can be proved to have been at fault and was rich or richly insured. It's great if you're hit by a drunk in a Rolls-Royce and have witnesses.

Otherwise, it is a system that every objective critic throughout the ages has assailed, from Richard Nixon, in 1936, to Nelson Rockefeller's New York State Insurance Department, in 1970, to Ralph Nader, today (how's that for the political spectrum?).

In addition, it has a real impact on the rest of the judicial system. The New Jersey Law Journal in 1980 estimated that 42.9 percent of all New Jersey civil cases were automobile liability cases. Think of it! A 1982 Rand Corporation Institute for Civil Justice report found that automobile cases accounted for 60 percent to 70 percent of all trials in Cook County, Illinois.

In the words of Senator Daniel Patrick Moynihan, "The courts are overwhelmed, swamped, inundated, choked. In a futile quest to carry out a mundane mission---deciding who hit whom on the highway when every day there will be thousands of such events---we are sacrificing the most precious of our institutions: the independent judiciary, which dispenses justice and maintains the presumption and perception of a just social order that is fundamental to a democratic political system."

Said Derek Bok, who also called for nofault insurance in his 1982 report to Harvard University's Board of Overseers: "The blunt, inexcusable fact is that this nation, which prides itself on efficiency and justice, has developed a legal system that is the most expensive in the world, yet cannot manage to protect the rights of most of its citizens."

(For details on a better system, send a large, 39-cent-stamped, self-addressed envelope to the National Insurance Consumer Organization, 121 North Payne Street, Alexandria, Virginia 22314, and mention this column.)

It's hardly a startling notion that lawyers have tended to oppose such things as no-fault and probate reform, argues Wisconsin arbitrator Amedeo Greco in his forthcoming The Bar (to which I am grateful for a number of quotes in this column)---until you consider Greco's analogy: He likens the lawyers' intransigence to doctors' opposing vaccines, lest they get less work.

Doing it yourself

But this is the system we have. With luck, when you do need a lawyer, you'll find one of the many who are competent and who do place your interests above their own.

Shopping around is now easier than it once was, should you wish to sneak over, before engaging your regular attorney, for an inexpensive first consultation---just to get the lay of the land---at one of the new McLawfirms that have been springing up (Hyatt Legal Services and Jacoby & Myers are the best known).

Or consider laying out $22.95 for How to Avoid Lawyers (Garland Publishing, 136 Madison Avenue, New York, New York 10016). It is helpful in matters as diverse as buying a car, selling a house, writing a will, handling an accident, establishing a trust, filing small claims---the works, complete with 700 legal forms and the disclaimer that, obviously, laws vary from state to state and change from year to year, so this book has its limitations.

Don't go to law School

There are lots of reasons not to become a lawyer. For one thing, you'll be resented for making so much money. For another, despite the resentment, chances are you won't be making that much money---certainly not if you decide to defend the rights of the oppressed and all that other stuff you've probably thought of to rationalize opting for prelaw instead of organic them. And certainly not if the breezes of judicial reform gather force.

Oh, grow up. Of course you don't know what else to do come September, when school starts. Well, hey, guy---how about this? Get a job! (Brave words, I know, from a man who has no job. But don't you see? I'm saying all this for your good!)

Jesus said (I don't quote him that often, so listen up), "Woe unto you also, ye lawyers! For ye load men with burdens grievous to be borne, and ye yourselves touch not the burdens with one of your fingers."

And you are seriously considering law school? What, are you out of your mind?