Your phone system may not be functioning when you pick up the phone to call for repairs or to rent new computer equipment. The repairs are relatively simple, but because of demand, it might take several weeks to receive, schedule and install them.
Besides your computer system, other equipment and office systems might fail as a result of the Y2K problem including your fax machine, copy machine, security system, elevators, and HVAC systems (heating ventilation and air conditioning). Some even suggest that widespread power outages may also occur, rendering most office equipment useless regardless of whether or not it is Y2K compliant.
The legal malpractice threat
The second source of concern for lawyers with respect to Y2K is legal malpractice claims. The most predictable cause of Y2K malpractice claims will be critical deadlines that are missed due to Y2K malfunctions in computerized calendaring systems. This could include, for example, a statute of limitations date for a personal injury lawyer or a deadline for filing a federal estate tax return for a business lawyer.
Another area of potential legal malpractice claims involves legal advice rendered by business attorneys to clients purchasing businesses. Assume that a lawyer represents a client purchasing a small business, and six months after the closing it is discovered that it will cost in excess of $500,000 to do the necessary Y2K remediation work to make the company Y2K compliant. Upon a review of the closing documents, it was discovered that the documents contained no representations or warranties concerning the company's Y2K compliance. The lawyer representing the purchaser is sued for negligent draftsmanship and for rendering of negligent advice for not including Y2K representations and warranties regarding the company's Y2K status.
Alternatively, even though the company is Y2K compliant in its internal operations, the client learns that its suppliers' and distributors' or transportation systems are not functioning due to Y2K malfunctions. Without parts or inventory, the company cannot sell its finished products or, even if it could make product and not be able to ship product, it will sustain losses and look to the attorney for redress. Among the allegations includes the assertion that the lawyer should have recommended a Y2K due diligence checklist of the company's suppliers, distributors and customers. Also alleged is the fact that the contract should have provided for adjustments for future Y2K costs or that the contract should have allowed for consequential damages. All of these might be legitimate claims stemming from the transactional attorney's unfamiliarity with the potential scope of Y2K related issues.
Lawyers can also expect to see third party actions brought by shareholders against both management and its legal advisors when such losses occur. Because directors' and officers' liability policies may exclude or deny coverage for Y2K losses, outside advisors or consultants such as those rendering legal advice will be the "deep pockets" that many will look to for redress.
The biggest thing that we as lawyers should recognize about Y2K is that what we do not know about Y2K could cause us to be liable. We as legal service providers must all reach a certain level of Y2K awareness, particularly those of us who provide legal advice to corporate clients or purchasers in business transactions. All such lawyers should familiarize themselves with Y2K issues to alert clients to issues that may become critical. Lawyers who are informed about Y2K issues will also be in a better position to assist clients who have Y2K problems and are considering legal action to recover Y2K losses.
Many other issues that lawyers should be aware of include: tax and accounting treatment for Y2K expenses. Check with your accountant as remediation expenses may be deductible under Revenue Procedure 97-50; insurance coverage issues; whether there are industry-specific regulatory requirements for industries such as banking, securities and insurance; whether Y2K fixes involve copyright infringement and a myriad of other issues.
We simply do not know whether Y2K will "wreak havoc" in our homes and our offices. The prudent lawyer will conduct an inventory of potential Y2K problems associated with "mission critical" office functions--ones without which you cannot survive on January 3, 2000, and thereafter. Do Y2K remediation where deemed necessary, and prepare a disaster recovery plan for the unexpected. Do your due diligence, and be ready for anything. Learn basic Y2K areas of potential risk to your practice and areas where you advise clients.
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Roger L. Rutherford is a principal with Rutherford Law Offices, Springfield, and a member of the Law Office Management and Economics (Standing Committe on) Council and the Standing Committee on Legal Technology (CoLT) of the Illinois State Bar Association.
AUTHOR'S NOTE: This article is not intended to provide legal advice. Readers should seek specific legal advice before taking or refraining from any action with regard to the matters discussed herein. The recommendations contained in these materials do not represent a complete analysis of Year 2000-related issues.
Legal management consultant Ezra Tom Clark identifies six challenges facing lawyers
By Roger L. Rutherford
The recent ISBA-sponsored seminar in Champaign-Urbana entitled "The Small but Dynamic Law Firm--Management, Marketing and Technology for the Year 2000," featuring legal management consultant Ezra Tom Clark from Mesa, Arizona, was worth the price of admission.
Clark provided the audience with six challenges that he suggested one must overcome to be a successful lawyer: 1) specialization*; 2) marketing; 3) technology; 4) managing the delivery of legal services; 5) billing; and 6) compensation systems.
Clark told his audience of approximately 120 attorneys that practice concentration is the key to marketing, to using technology, to managing your practice and the key to dividing the compensation pie. Clark said we must become specialists by the second or third year of our practices or we are in trouble. He went on to say that legal specialization is the key to a good quality of life and the key to becoming a satisfied and successful practitioner in the new millennium.
We are in a competitive marketplace, and clients do not hire law firms anymore. They hire lawyers. Most of us are dabblers, according to Clark. He asked various members of his audience what they do, and one gentleman replied, "I am an attorney." Clark suggested that that kind of a general practitioner approach will not serve us well now or in the new millennium. He suggested a proper response should be, "I am an estate-planning and probate attorney, or a municipal/municipal finance attorney or a plaintiff's personal injury attorney concentrating in automobile injury cases or asbestos litigation or whatever your niche." Clark said he envisions a collection of boutique practices such as a personal injury attorney, an estate-planning attorney, a real estate attorney, all housed together in either an office-sharing or firm arrangement with a specially designed compensation system.
Every lawyer should spend a minimum of one hour per day engaged in marketing activities, according to Clark. Appreciate your referral sources and thank them. If you are a specialist, most of your work will come from other attorneys. The most powerful marketing tool you can do is to take an attorney, who practices in an area of law in which you do not, to lunch. The second most powerful marketing tool is regularly ask your clients how you are doing and develop successful client-driven practices.
Clark suggested that attorneys must find ways to distinguish themselves. Two of his suggestions to distinguish oneself were: 1) return every phone call within 30 minutes; and 2) never agree to do anything for a client that did not have a deadline that was communicated to the client. How quickly you respond and the level of responsiveness will go a long way to getting and keeping good clients. Many people will pay top dollar for good service, according to Clark.
Technology is moving toward voice recognition, said Clark. He added that Dragon Naturally Speaking is the leading voice-recognition software among attorneys. Like a lawyer with a telephone, a lawyer must be a regular computer user, and e-mail is absolutely essential to communicate with clients, other lawyers, bar association committees and other ancillary legal service providers in the future, according to Clark. The key with technology is how you use it and does it do anything to improve your productivity? Do not replace support staff with technology, cautioned Clark. He added that if word processing is all that you are using technology for, then you have not acquired the vision.
New and innovative approaches to the practice of law include the use of technology to give Power Point® presentations, such as an estate planning attorney with a lap top computer with Power Point providing clients with instant analyses and illustrations of recommendations for their consideration. Other examples of technology utilization in law offices is a "Virtual Office" with a legal assistant at one location, a bookkeeper at another and a secretary who lives three blocks away and never comes to the office. In the future, Clark suggested, your office will be where you are.
Clark reiterated that you must catch the vision about expanding your marketplace. All work in your marketplace in the future is going to go to the specialist, and if we as attorneys don't wake up and specialize, we will get only the crumbs.
Managing the delivery of legal services will require us to delegate work to the lowest-compensated person who can do the work most efficiently under the senior attorney's supervision. Clark suggested the way we hire, manage and utilize legal assistants, paralegals, and secretaries will, in many ways, dictate how successful we will be in the future. We are being threatened by ancillary service providers in many areas that were traditionally reserved for attorneys--real estate, estate planning, collections, to name a few. Clark suggests to hire some of the ancillary service providers and make them legal assistants as part of our law firms.
Billing systems will change according to Clark. Most lawyers bill hourly today. Thirty years ago, most lawyers did not bill hourly. Clark suggested that we are headed to fixed fees, percentage fees, percent sale of real estate, and per diem for trial work. He suggested we must find a less onerous way of billing. Specialists are not offended by fixed fees; dabblers are, according to Clark. He advocated throwing out the billing system and the time keeping system and replacing it with one that sets reasonable fees based on your anticipated time involved, to be adjusted as needed. Clark suggested that hourly rate billing systems put all the risk on the clients; fixed fee systems put all of the risk on the attorney service provider. But a specialist knows the cost of advising and delivering that service within reason and can set fees accordingly to minimize that risk.
Compensation systems should be consistent with our values, philosophies and methodology. To divide the pie, you must define what you want to reward and what you want to punish and come to a consensus regarding how to weigh each. If you cannot come to consensus, no compensation system will work for you.
In summary, Clark shared his 31 years of experience as a lawyer, a firm administrator, and a father of two young attorneys to delight his audience, inform them and even scare them about his vision of the future of our profession and the six challenges that we as attorneys must overcome to be successful in the new millennium.
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Roger L. Rutherford is a principal with Rutherford Law Offices, Springfield, and a member of the Law Office Management and Economics (Standing Committe on) and the Standing Committee on Legal Technology (CoLT) of the Illinois State Bar Association.
