Leaders of Nevada’s major law firms met recently to discuss issues vital to their profession, which included topics such as staffing, competition from national firms, and the image of attorneys. Connie Brennan, publisher of Nevada Business Journal, served as the moderator for the event as part of Nevada Business Journal’s monthly Industry Focus series. This program brings Nevada CEOs together to discuss pertinent issues in their industry or profession. Following is a condensed version of the discussion.
National Firms Entering the Market
Connie Brennan (Nevada Business Journal): In the last few years, several national law firms have entered the Nevada market. Are local firms threatened by that?
Mike Bonner: It’s a reality we have to deal with. The markets are changing in Las Vegas. We are becoming a much larger city, so it’s natural the large firms are coming here. I think for local firms, it’s an issue of serving your clients and making them happy. Competitive pressures are being brought out by the national and international firms that are setting up flags here, but at the end of the day, clients typically stay with lawyers who take care of them. Where Nevada law firms are being most impacted by the influx of out-of-state firms is the effect it’s having on hiring and recruiting. Salary levels are being driven up, based on non-Nevada markets, making it much more competitive for hiring for most of us.
John Frankovich: I agree. It’s certainly a reality, particularly in Las Vegas, and to a lesser degree in the Reno area and other parts of the state. In my opinion, it indicates that the market is good. I think it raises the competitive bar for all of us. There has always been a place for Nevada law firms, and everybody’s going to need a Nevada law firm. And, as Mike said, if you do a good job with your clients, it shouldn’t be a threat to any of us.
Brennan: Is there a shortage of attorneys in Nevada? Is recruitment an issue?
Frankovich: No, there isn’t a shortage, and you can quote me on that.
Mark Tratos: Recruitment is an issue in specialty areas, like intellectual property. There’s a great need here for lawyers to service intellectual property needs. Recruiting intellectual property lawyers is not easy, so we frequently have to look outside the state. Recruiting can be challenging because Las Vegas does a superb job in marketing itself in a unique way to the rest of the world, sometimes creating a false impression of who we are and what we do. That makes it a little difficult sometimes to convince both an attorney and a spouse to relocate.
Joseph Dempsey: About 20 percent of my clientele are Spanish-speaking. Although I speak Spanish, it’s very difficult for me to find competent attorneys who speak Spanish. If you find an attorney who does, it’s very difficult to keep him or her because the salaries for people who speak a foreign language are very competitive.
Jason Bach: I graduated from the Boyd School of Law at UNLV, and this is one of the few markets – if not the only market – where new law school graduates have virtually no problem finding jobs. There are very few jobs out there in most of the other markets. Everyone I graduated with has found a job.
Brennan: Is retention an issue? Once attorneys join the firm and build their practice up, do you have a hard time keeping them? Do they tend to jump around a lot?
Joe Brown: Younger lawyers don’t seem to place as much emphasis on loyalty as I did, and there’s a lot more fluidity among younger lawyers. They stay with you long enough to get their own clients or familiarity with the city and then move on. It’s an economic issue, I’m sure, but there’s less emphasis today on loyalty to the people who trained you and gave you your first job.
Brennan: Do you think it’s a generational thing?
Brown: Yes, I think it is. A great majority of my contemporaries in law school are still with the same firm they started with.
Mark Ricciardi: I think part of it is generational, in terms of people wanting to do their own thing and not necessarily be loyal to one company or one firm. But part of it is that there’s less certainty as to advancement in partnership as there was years ago. As firms are under more pressure both with rates and salaries, in a lot of firms, partnership is not an absolute certainty. So we find people who move around looking for a job where they think there’s a better partnership opportunity, even though they might be a non-equity partner.
R. Gardner Jolley: I agree with Mark. Part of it is generational, but when you hire young attorneys, they don’t realize that for the first couple of years, the firm loses money on them. They think they’re worth a lot more than they are. I started practicing about the same time as Joe, and in the old days there were small firms that were a lot more flexible, and it was also easier to go out on your own as a sole practitioner if you wanted to do that. Not all people are going to make partners like they did in the old days, and so people today tend to look for other firms where they might have a better chance.
Frankovich: I think the economic question – “What am I going to make in the next three years?” – is a bigger factor than it used to be, rather than loyalty or dedication to the firm. Newer people frequently don’t appreciate the history, especially for a firm that’s been around for a long period of time. With outside national firms coming in and elevating the market for compensation, associate compensation is a bigger factor than it used to be. The rate right now for a brand new associate is approaching $100,000. I compare that to when I started out, which was more than 30 years ago, and if the same thing happens in the next 30 years, the starting salary for a new associate is going to be $850,000.
Patrick Byrne: I think it’s more of a generational thing. Younger lawyers want different things than I wanted when I came out of law school. Partnership was important to me. Lifestyle, autonomy and flexibility in hours are the things that are really driving the next generation. They have a different mentality. They have seen layoffs in their families with people who worked for corporations that used to take care of employees. They’ve seen the lack of loyalty there, and so they have grown up with an element of distrust. It’s also a reflection of the change in the practice of law as we move from a profession to a business.
Brennan: Do you think the work ethic is different in the new generation?
Byrne: Young people coming out now are willing to work hard. Older people usually think they work harder than the younger ones do – like they walked barefoot through the snow to work every day. Young people work hard, but they’re not necessarily driven by the same things that drove us 10 or 15 years ago.
Joshua Harmon: With the computerized timekeeping records now, it’s a lot easier for the associate to see exactly what he is contributing to the bottom line, and what his clients are contributing to the bottom line. and compare that with his salary or the salary of other people working in the firm.
Brennan: Do law school graduates have realistic expectations?
Byrne: Absolutely. They have access to more information than we ever did from websites with insight regarding firms. They read the American Lawyer magazine. They know what the expectations are.
Alan Sklar: The system is a little out of sync. Someone said you don’t make money the first couple years on associates, and you don’t. But mid-level lawyers who’ve been there five to 10 years, who really do make money for your firm, don’t necessarily make that much more as a salary. It’s an odd dynamic.
John O’Reilly: Even though young attorneys know more about salary expectations, I don’t think they know much at all about the business of practicing law. That’s probably true for the vast majority of lawyers and the vast majority of firms. For the first couple of years with the firm, young lawyers think they contribute a lot more than they do to the bottom line, and they somehow equate gross billings to net return. They don’t figure this out until they get into trying to calculate the bottom line and figuring out how to get there. Most lawyers aren’t very adept at business, you know.
Brigid Higgins: It’s important for young lawyers to understand the business side of law firms. This helps them understand decisions the law firm is making. It also gives them a vested interest in the firm as a business and as an enterprise, rather than just billing every month and walking out the door.
Dempsey: Do you know the difference between an accountant and an attorney? The accountant knows exactly when he goes out of business. Brennan: Some law firms have mandatory retirement policies. Are your firms pushing out the older guys?
Samuel Lionel: I hope not. I have no intention of retiring. I’m still in the courthouse, as you know.
Frankovich: Sam is the poster child for why you shouldn’t have mandatory retirement. I don’t think anybody here would dispute the contributions Sam has made to the legal profession, as well as those he continues to make. In our firm, we have a couple of partners in their 70s, and they’re very active. They have a wealth of information that I don’t think we should ignore or disregard easily.
Lionel: Older lawyers who still want to practice can really contribute. To the extent they can continue to do it, they should, and they help younger lawyers as well.
Tratos: The old “up-and-out” mentality is changing, largely because of the longevity we are experiencing as a culture, and the recognition that you don’t want to lose the talent and experience of people like Sam.
Jolley: You may cut back on your hours, but you can still have a pretty good practice if you want to spend the time.
Gregory Kamer: I don’t think the issue is mandatory retirement. It’s transitioning older attorneys. Especially with the baby boomers coming of age, you’re going to see a societal change. Older lawyers want to continue to work, and they’re valued for that, but it’s not going to be the 50-, 60- or 70-hour work week. It’s going to be the 25- or 30-hour work week. The challenge will be adjusting salary compensation to make business sense. I think you would have legal problems with mandatory retirement. In addition, I don’t think it’s practical. There is a great value both with the marketing and the legal experience of a good lawyer.
Brown: I think I can talk about the rationale of why a great many national firms have a mandatory retirement policy. When you get into your 60s, some of us just don’t want to work as hard. You may have health problems. Some people have alcohol dependency problems. That policy gives thefirm a way to phase out everybody, rather than telling your best friend you practiced with for 30 years, “Sorry, you have to go.” A guy like Sam Lionel would no longer be a partner in the firm, but would have a very special side deal with the firm to continue working. He’d cut his own deal.
Jolley: So are you saying we’re the exception here because Nevada firms don’t have mandatory retirement?
Brown: Our firm belongs to a national networking organization, and at a recent partners meeting, we were in the minority of firms that do not have mandatory retirement.
Byrne: I think at the end of the day, it’s really a compensation issue. If you have flexibility in the compensation system, there’s not as much pressure. If you have flexibility, it’s just crazy to let somebody go who is still productive, regardless of his or her age. To put an arbitrary age limit on it is nuts.
Frankovich: I think part of this also relates to the national firms that are now practicing in Nevada. The larger you get, the more difficult it is to focus on the uniqueness and the personality of each individual lawyer. And if you have a large firm that is just looking at numbers, they’re more inclined to say 62 or 70 – whatever the age – is a good age to start being phased out. When you have a smaller group that’s been together for a long period of time and you know everybody, you’re more sensitive.
Sklar: There are a few things older partners bring to the firm that no one else will. They do mentoring better than others, but the thing they really give you is good judgment. You can’t calculate the value of 50 years of judgment. The most important thing we give our clients is good judgment.
Brennan: Insurance costs, both for malpractice insurance and healthcare insurance, take away from a law firm’s bottom line. Is the situation getting worse?
Jolley: I don’t know how people make it anymore in business with the costs of healthcare. When we had a smaller firm, we were able to pay insurance for our employees without any problems, but now the expense is out of sight. You have to cut back on some areas and change some things.
Frankovich: Other than payroll and office rent, it’s the single biggest expense we have. We change our health plans every two to three years. That means we get only a 10 percent or 15 percent increase instead of a 20 percent to 25 percent increase on an annual basis. And what we have ended up doing is increasing deductibles, reducing benefits, and having employees pay for their family.
Kamer: I’m concerned that many firms lack viable disability policies. Early on, we took on disability insurance for the firm, and we’re seeing a lot of benefit from that. We have had individuals who developed cancer or ALS or other serious illnesses. The disability benefit is not as costly as health insurance. When you’re an old-fashioned firm like we are and we think of ourselves as a family, when that secretary or that runner gets sick, it’s going to come out of your bottom line if you don’t have insurance to cover it. I recommend that all of you make sure you have some disability coverage, both for your lawyers and your support staff. It’s affordable, and it’s great to have when something happens.
Brennan: Has the cost of malpractice insurance also increased?
Dempsey: We used the same company for many years, and I like the constancy of loyalty. But the premium went through the roof; it doubled from one year to the next, so now we shop around. You have to make sure the insurance company is giving you the proper coverage for the price, which just keeps going up. Part of the problem is that some attorneys are suing other attorneys, and they’re not paying attention to the frivolous lawsuits, which drives costs up.
Tratos: Some specialty areas, like intellectual property, have had major increases in malpractice coverage. Of the seven carriers that used to provide coverage for patent lawyers in Nevada, four are no longer offering it here. And when you have a reduced number of providers, you can have a rate increase that’s very significant. One of the advantages our firm saw when we merged with a national firm is that we suddenly had a significant reduction in our malpractice rates because the risk was spread across the entire nation. Our rates really went down.
Brennan: The image of attorneys has suffered lately, especially with all the ads that are now appearing on television. Do you worry about being thought of as “ambulance chasers”?
Richard Myers: This is a subject near and dear to my heart, because I’m an “ambulance chaser” myself. Our firm has advertised during certain periods and not advertised in other periods, and we are currently off the air. I think we’re all a little bit tarnished by the personal injury TV ads we see. And beyond the advertising, there are apparently practices in this community that are very unethical and unprofessional. It’s a terrible thing. An older lawyer made this comment to me the other day – he said we have fouled our nest, referring to plaintiffs’ lawyers, and it had a real chilling effect on me. Beyond the damage it’s done to our profession and our integrity as lawyers, let’s not forget the public, particularly in the area of medical malpractice. Because of the limitations that have been placed on malpractice litigation, people can’t get claims lawyers to take an otherwise perfectly valid and meritorious case. So there are a lot of people in our state who are going without justice in that field. Of course, I believe in advertising and competition, and it’s hard to regulate it constitutionally. I know that. I’ve been on the committees and that sort of thing. But it’s been a very negative thing, not only for trial lawyers like myself, but also for everybody.
Brennan: So how do you rise above it?
Myers: The only thing we can do individually is to try to stay clean, but there are a lot of lawyers out there who aren’t clean and they tarnish all of us.
Frankovich: I don’t think this issue is limited to plaintiff lawyers. I think that might have been the start of the issue. But, unfortunately or fortunately, advertising is now a way of life. However, I do believe that the image of lawyers right now is as low as I recall it, and I think advertising is one of the contributing factors.
Kamer: Those of us who still believe in the Constitution recognize the First Amendment right of freedom of speech, and so the ABA (American Bar Association) standard for advertising is “false and misleading.” If it’s “false and misleading,” it’s illegal. We are challenged with how to protect the integrity of the profession and also be true to the Constitutional concern of freedom of speech. It’s a horrible problem. We need to do a better job disciplining false and misleading advertising. I’m not talking about preventing people from calling themselves “The Heavy Hitter” or wearing a gorilla suit or dressing up like a sanitation man. But when law firms advertise a discounted retainer of 20 percent and then 60 days later, it’s up to 40 percent, we have to take action. When individuals advertise, “I’m going to represent you personally,” and the client never sees a lawyer, we have to discipline them.
Bach: You have to believe that the public is smart enough to realize when they’re hiring an attorney – whether it’s for a personal injury case or for a business case – they don’t want some guy who’s spinning around like a tornado on TV. But, obviously there are law firms doing great business by advertising. I just don’t understand why people would select an attorney who portrays such an immature image.
Myers: A lot of people make fun of lawyer advertising and say, “I would never go to that lawyer.” But when they get in an accident, that name recognition comes into play.
Craig Hoppe: How do we improve the image of attorneys? We get involved in pro bono activities. We continue to be defenders of the Constitution. We continue to represent our clients well. We embody the best law in our daily practices. And when people tell lawyer jokes, we say, “I’m not amused,” because we’re not. If you ask the public how many lawyers steal from their clients, they come up with a figure of 10 or 20 percent, but in reality it’s less than 1 percent. We are doing a good job with policing ourselves, but we can always do better. The bottom line is that you are not going to do it with unconstitutional regulation.
Brennan: Do all of you do pro bono work? If so, do you publicize it or is it just something you do because it’s the right thing?
Frankovich: We have an obligation to do it.
Hoppe: There are mandatory reporting obligations, so you have to report to the State Bar what you do.
Frankovich: It would be nice if somebody did a story on the State Bar that said in Nevada collectively, the Bar did 5,000 hours of pro bono, or whatever the number is. It would be interesting to have that number because I think it’s considerable.
Hoppe: As Rich pointed out, repetition is what drives advertising. If you get your name out and you have a catchy slogan, people are going to remember that. And if the Bar can develop some kind of program publicizing pro bono work by lawyers on a consistent basis, that might help improve our reputation.
Should Judges Be Elected or Appointed?
Brennan: What about the article that ran recently in the Los Angeles Times that talked about Nevada’s judges and lawyers in a very negative light? What did you think of that story?
Bach: A lot of attorneys have been sidestepping media questions and trying to avoid this issue. I thought perhaps if we discussed it here, we could get a little more insight as to whether or not the current system works, if it creates a breeding ground for corruption, and whether or not there’s support in the community for any type of change.
Brennan: Do you think the system works?
Bach: No. I think that most people and even most attorneys believe the system doesn’t work, but whether or not they will admit it is a different story.
Frankovich: Worse than that, I don’t think any judge will ever admit it because he or she has to run for election. I have never been involved in a judicial race where the judge didn’t find it distasteful to go out and solicit campaign contributions, for any judicial election. But rarely will a judge come out and say, “I don’t think the elective process [for selecting judges] is the best process,” because they’re afraid there will be retaliation by the electorate. The electorate probably thinks electing judges is a part of a check-and-balance system. It needs to be addressed because it certainly creates the impression that if you make a campaign contribution to a judge, you will get a benefit later. It’s not a Nevada problem – it’s a national problem. And I think most of us here would agree there should be a better way. I think the federal system is one that certainly could serve as a benchmark, but I don’t think the electorate would ever accept it.
O’Reilly: If we’re talking about whether judges should be elected or appointed, that’s a system that has been subject to debate for all of our lifetimes. But as to whether our judiciary system as a whole works, I feel it works pretty well. In terms of day-to-day in the courthouse, I think we get a fairly good call. It’s the typical L.A. approach to throw stones at Nevada when 39 other states do the same thing.
Kamer: Besides that, it’s no different in California than it is here.
O’Reilly: As long as you have judges who are elected, you’re going to have judges who make decisions that either look bad – or in fact are bad – based on campaign contributions. But on the other hand, I’m not sure I would like to have our state court judges appointed for life. History has shown that there’s a benefit to putting those people out of office who develop what I call a bad case of “robe-itis.” They get that robe and it goes to their head; then they treat the people before them like dirt.
Bach: I think there’s a middle ground between having lifetime tenure and being elected.
Kamer: It’s a hybrid plan where you get appointed for your first seat, then you have to run one time, and then it’s a matter of retention. Studies have shown that when lawyers advocate for a change in the judicial process, the public reacts against it. So the best thing the L.A. Times article could have done is to educate our citizen legislators that there’s a problem. Maybe in the next legislative session, the legislators themselves will put forth some changes that we all can live with.
Nile Leatham: I think this is a very important issue. One of the reasons we have the prosperous economy and freedom we do is because people by and large have confidence that when they stand in front of a judge, the decision will be made fairly, and will be based on the merits of the case. Anything we can do to assist our courts in maintaining integrity is very important.
Frankovich: We have to also maintain the right of a judge to make a controversial decision and not be afraid he or she is going to get ousted from office, either immediately or at the next election. Our history shows that controversial decisions have shaped our legal system, to a large extent. Judges have to be able to do that without fear of retaliation.
Byrne: And that’s the problem with our current system. It’s a political system. It should be a nonpartisan system, and electing judges is just the wrong thing to do. Unfortunately, it’s not going to change in Nevada because it’s in our Constitution. It would require approval in two general elections to change the current system, and the media here won’t get behind it.
Kamer: The L.A. Times article may have been a real catalyst for potential change.
