Links to other profiles of enterprising lawyers

ABA’s Legal Rebels project - Profiles innovative lawyers “finding new ways to practice law, represent their clients, adjudicate cases and train the next generation of lawyers.”

James Baron, Esq. - Special education solo practitioner.

Helen Gulgun Bukulmez, Esq. - Immigration law solo practitioner.

Lee Rosen, Esq. - Family law solo practitioner.

Posted in Inspiration, Profiles of Innovative Lawyers | Leave a comment

Should you incorporate?: Choosing an entity for your law practice

If you want to hang your own shingle, or change the structure of your existing practice, one of your first decisions will be whether to form an entity for your business, and, if so, which one. Here’s what I’ve gathered so far on the topic.

Keep in mind that the law governing entity formation is mostly a matter of state law, and that the law varies from state to state. I have focused on California law — and in some cases local San Francisco law — here, on the reasoning that it will give others an indication of what to look out for in their own locality’s rules, but please feel free to add more info on options in other states.

First some general considerations:

  • In San Francisco, every person or entity doing business in the City and County of San Francisco must obtain a valid Business Registration Certificate from the Office of the Treasurer & Tax Collector. (Article 12A of the San Francisco Business and Tax Regulations Code.) Most localities probably have a similar requirement that local businesses obtain a business license.
  • Every person or entity conducting business under a name  other than that person’s or entity’s full legal name must also file a Fictitious Business Name Statement with the County Clerk.
  • In California (and maybe elsewhere as well), you may not call yourself a firm if you are a solo practitioner, no matter what entity you practice under. (California Rules of Professional Conduct, Rule 1-100)
  • Employment requirements under the Labor Code are the same regardless of which entity form you choose.
  • Forming an entity does not protect your assets from your own personal malpractice. Liability insurance is therefore highly recommended, whichever entity you choose.
  • The Internal Revenue Service (IRS) considers you to be self-employed for retirement planning purposes if you are an S corporation (see below), are in a partnership, or, of course, are a sole proprietor. If any of these apply to you, you might want to look into self-employment IRAs.

Now for more detail on the entity options available:

Summary: In California, the only for-profit options available to solo practitioners are to operate either as  (1) an unincorporated sole proprietor or (2) a professional corporation (PC). The for-profit options available to groups of two or more lawyers working together are (1) unincorporated general partnerships, (2) limited liability partnerships (LLPs), and (3) PCs. (In other states, the LLC is becoming the legal entity of choice, but that option is not available to lawyers in California. See more below.) Solo practitioners and groups of attorneys alike can operate as non-profit organizations.

Sole Proprietor/”DBA”

If you don’t want to incorporate, you can do business under either your own name or under a fictitious name (“doing business as,” or “DBA”). If you do business under your official name, you don’t have to file a DBA, but you should anyway.

You cannot have partners as a sole proprietor (there can be only one owner), but you can have an unlimited number of employees. If there are any employees in addition to yourself, you must apply for a Federal Employer Identification Number (EIN) by filing Form SS-4 with the Internal Revenue Service.

When you file your personal federal income tax return on Form 1040, you will attach Schedule C to report your profit or loss from operation of your sole proprietorship law practice. Deductions for health insurance, SEP-IRA contributions, or solo 401(k) contributions will reduce your federal income tax.

In addition to your federal income tax, you must pay a 15.3% self-employment tax (12.4% social security tax + 2.9% medicare tax) on your net income. Increasing your business-related expenses is one way to reduce your net income (and hence reduce your self-employment tax). Net income above the first $117,000 is not subject to the social security tax.

Pros:

  • After you get your business license, DBA, and, if applicable, your EIN, you don’t have to go through the ongoing administrative hassle of following corporate formalities.
  • You pay only individual rates for federal and state income taxes.

Cons:

  • No corporate liability shield: With no legal separation between you and your practice, a sole proprietorship doesn’t offer premises or employment liability, which means your personal assets are subject to seizure or lien by creditors. *Note, however, that another way to protect your personal assets, other than the corporate liability shield, is just to take out general commercial liability insurance.*
  • The self-employment tax. Some other entities (e.g., the S Corporation) offer lower social security and medicare taxes.

Professional Law Corporation (PC) 

A professional corporation (known as a professional association, or P.A., in some jurisdictions) is the only corporate entity available to solos under the California Corporations Code and Business and Professions Code. It is also available to associations of attorneys. All owners of the corporation must be licensed attorneys. There are currently about 8,800 certified law corporations in California.

To form a professional corporation in California, you must file Articles of Incorporation with the California Secretary of State. You can either compose your own document or use Form ARTS-PC.  The California Secretary of State provides tips for corporate filing. The California State Bar provides tips specific to Law Corporations.

The Law Corporations Program monitors compliance with applicable statutes and court rules. (See California Corporations Code Sections 200-202 et seq. and 13400 et seq.)

Pros:

  • Limited liability: Shareholders of a corporation do not have personal liability for liabilities that arise in the normal course of business (premises liability, employee liability, etc.). Note, however, that you can get similar protection by buying general commercial insurance. 
  • Shareholders of a corporation do not have vicarious liability for liabilities that arise from he malpractice of other attorneys in the firm. Note, however, that you can get the same protection by forming an LLP rather than a PC. Note also that incorporating does not protect your personal assets if a malpractice claim is brought against you personally or someone you supervise. (See California State Bar Rules of Professional Conduct, Rule 3-400.)
  • Safety from losing liability shield: If your professional corporation is administratively dissolved for failure to file the annual report, it may be reinstated at any time by paying the applicable reinstatement fee and filing the applicable form. The reinstatement is retroactive to the date of administrative dissolution. This is safer than an LLP (see below), where you lose liability protection altogether if you forget to file your annual report.  This is a main reason to operate as a PC rather than as an LLP.
  • If your profits are high, then you may pay lower taxes as a corporation than you would as a sole proprietor or partnership (see below). *This is the other main reason to operate your practice as a PC rather than as an LLP or sole proprietorship.* 

Cons:

  • Administrative burden: To maintain liability protections it is necessary to follow all corporate formalities: annual reports, meetings, minutes, separate bank accounts for the corporation and the lawyer’s/lawyers’ personal funds, etc.
  • There is $100 filing fee.
  • Two-tier taxation (see below). Unless you have very high profits, this two-tier taxation will result in you paying higher overall taxes than if you operated in some other form.
C Corporation or S Corporation?

If you form a professional corporation, it is presumed to be a C corporation (named after subsection C of the Internal Revenue Code) unless you specifically elect to make it an S corporation (named after subchapter S of the Internal Revenue Code) by filing Form 2553 with the IRS.

A C corporation has two levels of taxation on all profits: The corporation pays tax on its net income and then individuals shareholders pay tax on distributions. You should therefore not operate your PC as a C corporation unless you have little to no profit; you can minimize profit by designating income as salary.

An S corporation has a hybrid level of taxation that is usually better for lawyers. A lawyer incorporated as an S corporation can designate a reasonable salary for herself from the corporation’s profits. If the corporation’s income exceeds this salary, the remainder will be distributed to the lawyer as a dividend. The benefit of an S corporation is that this distribution income is taxed at a lower rate than the salary.

Other tax benefits that may depend on the particular circumstances of the individual lawyer(s) are that a C corporation can include greater deductions for health insurance and medical expenses, and an S corporation will have  lower payments for social security and medicare taxes.

C-Corps file federal taxes on Form 1020, and California state taxes on Form 100. In California, C-Corp is taxed on its net income at a rate of 8.84 percent; C-Corps (and LLCs that elect to be taxable as a C-Corp) are subject to a minimum tax of $800.S-Corps file federal taxes on Form 1020S and Form 1020S Schedule K-1, and California state taxes on Form 100S and Schedule K-1. In California, business and California non-business income is taxed at 1.5% or a minimum tax of $800, whichever is greater.

Take-aways:

  • If you are a sole practitioner, there seems little point to operating your law practice as a PC unless you make a lot of money. 
  • If you are not a sole practitioner, an LLP is generally more economical and less of an administrative burden than a PC, unless you make a lot of money. The one main benefit of a PC is that, unlike an LLP, it offers the security of being able to maintain limited liability protections even if it files its annual report late.
  • If you do decide to become a PC, for most law practices it makes sense to choose the S-Corp election. 

General Partnership

A partnership is a business that is not incorporated and is owned by two or more people. (A partnership is therefore not available to solo practitioners.) If you start a law practice with any partners and do not incorporate, then your law practice is by default considered a general partnership.

All partners in a law partnership must be lawyers. (California Rules of Professional Conduct, Rule 1-310) All partners in a partnership are owners of the partnership and can take an active role in managing the day-to-day affairs of the business. Each partner’s share in the profits and losses is determined by the partner’s percentage interest in the general partnership.

To form a partnership, you must file a partnership agreement with the state, stating how much each partner will put into the venture, how profits and losses will be allocated, how debts will be handled, etc. You can ensure the stability of the partnership by putting in the partnership agreement that the departure of one of the partners won’t automatically dissolve the partnership.

Pros:

  • Lower taxes: Partners are taxed on a pass-through basis under state and federal law. That is, the partners pay individual income tax on their respective distributive share of the partnership’s annual profits, as reported to each partner on Schedule K-1, but there is no separate entity-level taxation. The partners will therefore pay very little in taxes if their profits are low (and no taxes if they make no profit).
  • Lower administrative burden: Aside from applying for an EIN and filing a federal tax return each year on Form 1065, a general partnership doesn’t have to follow any corporate formalities, such as creating a board of directors and hiring a registered agent.

Cons: 

  • Vicarious liability: Each partner in a general partnership is jointly and severally liable for all liabilities of the law practice business, including for one another’s malpractice. All personal assets of each partner are subject to seizure or lien by creditors. Each partner’s financial risk is therefore unlimited.
  • If you make a lot in profits, then you might pay fewer taxes as a corporation than as a partnership.
  • Vicarious disqualification: Having a partner will raise the prospect that you will be vicariously disqualified from a matter if your partner has a conflict of interest in the matter. (California Rules of Professional Conduct, Rule 3-310)

Takeaway: Because of the liability risk, you should never join a general partnership. If you run a law practice with one or more other lawyers and are not incorporated, you should register as a limited liability partnership (see below).

Limited Liability Partnership (LLP)

A limited liability partnership is like a general partnership except that it gives all partners protection from vicarious liability for the malpractice or other tortious conduct of their partners and employees.  A limited liability partnership must be registered with the state bar. In California, partners in an LLP are each required to carry at least a million dollars in malpractice insurance.

Pros:

  • Same as general partnership: (1) Pass-through taxation (same as in general partnership). (2) Lower administrative burden than a PC — no need to follow corporate formalities, except for filing annual reports with the state bar.
  • Limited liability. Partners are not jointly and severally liable for the malpractice of other partners.

Cons:

  • Same as general partnership (except the joint and several liability): (1) If your profits are high, you may pay more in taxes as a partnership than you would as a PC. (2) Higher risk of vicarious disqualification.
  • $70 filing fee.
  • Higher taxes than a general partnership, but not really that much higher — something like $800 per year.
  • Risk of losing liability shield: LLPs must file an annual report. Failure to file the annual report can result in loss of LLP status and the personal liability of each partner for the liabilities of the partnership. This is one of the greatest disadvantages of the LLP as compared to the PC (see above).

Note that a limited liability partnership is distinct from a limited partnership (LP), which must have at least one limited partner and one general partner (with unlimited liability), or a limited liability limited partnership (LLLP), which is a limited partnership with additional limited liability protections for the general partner(s). I am discussing here only limited liability partnerships (LLPs).

Limited Liability Companies (LLCs)

In some states the LLC (or PLLC, professional limited liability company) is becoming the legal structure of choice, but in California the LLC form is not available to law practices.

An LLC is owned by members rather than by shareholders. It offers the same liability protections as a corporation, but is considered a pass-through entity under federal and state tax law — thus combining the major advantages of the corporate and partnership forms. Or members can choose to be treated as a corporation for tax purposes; or, different members of an LLC can each individually incorporate under a different form (C corporation or S corporation), depending on how they want to individually structure their tax responsibilities.

Nonprofits

Most nonprofits are corporations (though they an also be trusts, unincorporated associations, or LLCs). Not all nonprofits are tax-exempt; to be tax-exempt, a nonprofit must, among other things, (1) be formed and operated exclusively for the public benefit, and (2) its charter must include irrevocable dedication of assets to the organization. That is,while it can generate revenue, it cannot have shareholders and cannot distribute assets as dividends.

Pros:

  • Limited liability: Nonprofit corporations can limit liability, just as with any corporation.
  • Tax benefits: Nonprofits who meet the above criteria are exempt from state and federal income taxes.
  • Funding sources: Nonprofits are attractive to foundations and other charitable donors because contributions to a nonprofit are tax-deductible.
  • Other financial perks: Nonprofits are exempt from federal laws regarding unpaid interns and often enjoy other perks such as free software licenses.

Cons:

  • Administrative burden: A nonprofit corporation must maintain corporate formalities, just like any other corporation. Plus, to maintain tax-exempt status,  a 501(c)(3) must submit annual or biennial filings with the state, filings with the state attorney general.
  • Non-distribution restriction: Nonprofits cannot have shareholders and therefore cannot raise equity capital. All profits must be put back into the nonprofit.
  • Other restrictions on organizational activities: Tax-exempt nonprofits have other restrictions, including restrictions on political activity or lobbying and, most relevant to lawyers, on taking on contingency-fee cases.

In California, a professional law corporation can incorporate as a nonprofit public benefit corporation under the California Nonprofit Public Benefit Corporation Law. (Calif.Corp.Code §5110 et seq.) Such a corporation must either (1) be a “qualified legal services project” or a “qualified support center” within the meaning of Business & Professions Code §6213(a) and (b), or (2) must show that all its directors, officers, shareholders, and members are licensed to practice law in California, that 70% of its clients are “lower income persons,” and that it does not have contingency fee arrangements.

A similar corporate form, which does not have to comply with the Nonprofit Public Benefit Corporation Law, is a nonprofit “advocacy” corporation that provides legal services.

Hybrid Forms

Many states have passed legislation creating new hybrid corporate entities — known as benefit corporations or flexible purpose corporations — that combine the corporate attributes of shareholder ownership and equity capital with the nonprofit attributes of operating, in part, for the general public good. As yet, these hybrid forms present no tax advantages over traditional corporate forms; their principal benefits are that, in theory, (1) they are eligible to raise both equity capital and money from foundations and other charitable donors, and (2) their status as benefit corporations signals to socially and environmentally conscientious consumers that they are socially responsible corporations worth patronizing.

Sources:

Posted in Choosing an Entity Form, Home | 2 Comments

Behind the Veil: Visiting Someone in Prison

We . . . turned our courts into giant unthinking machines for sweeping our problem citizens under a rug. . . . [I]nstead of dealing with problems like poverty, drug abuse and mental illness, we increasingly just removed them all from view by putting them in jail.”

~ Matt Taibbi, “Cruel and Unusual Punishment,” Rolling Stone 

The Myth

Criminal punishment was at one time often very public: we whipped or executed outlaws before throngs of onlookers, or displayed them in the stocks in the public square.  Now we spirit the condemned away to hidden prison cells, forgotten by the rest of us, a modern-day form of ostracism.  The punishment of convicts occurs behind closed doors, much of it in secret.

English: Cell of a prison on , , USA

Adding to the cloak of invisibility is the popular media, which saturates us with fictionalized and misleading versions of what prison and the people inside it must be like. The new show Orange Is the New Black, about a yuppie serving a prison sentence in upstate New York, portrays prison conditions as pretty bad – unpalatable cafeteria food, insufficient hot water, noisy bunkmates, sexual harassment – but (with some exceptions) kind of in the way that seventh grade is pretty bad for the new kid in school with bad acne and an out-of-style wardrobe.  There’s a light humor behind the horribleness of the experience, which – like seventh grade – the show depicts as a “temporary” plight: the protagonist has a sentence of 15 months, another main character has a 34-month sentence, and a guard mentions a crack dealer sentenced to 9 months and – as an example of a truly extreme sentence – another inmate sentenced to 4 years.  There’s a nice enough looking library and contact visits with family members and a functioning hair salon.  An inmate with sufficient clout can barge in on a guard sitting on the crapper and demand new kitchen equipment from him with impunity.  This skew is understandable — the show is supposed to entertain us, not traumatize us.

Films like The Lincoln Lawyer and TV shows like Law and Order depict prisoners themselves as deranged, irredeemable, or just plain hardened.  They’re tough guys (and gals) that really aren’t too fazed by the whole prison experience – or at least not worthy of sympathy if they are.

The Reality (or at Least One Tiny Sliver of It)

Last month I made my latest prison visit.  After a two-hour drive under California’s cloudless sky, my firm’s partner, a summer fellow, and I pulled into the visitors’ parking lot at X___ State Prison, the fourth correctional facility I’ve visited in this state.  We had come to meet with two clients, each serving a life sentence under California’s three-strikes law, and each appealing their sentence under Proposition 36.  The third strike for each was heartbreakingly trivial.

(Until the passage of Proposition 36 last November, California was the only state that gave out three-strikes life sentences for nonviolent offenders.  In California, convicts with prior criminal records have been sentenced to life in prison for stealing a $2.50 pair of socks, a slice of pizza, a pair of baby socks, or five children’s videotapes from Kmart.  The typical third-striker in a California prison is homeless, mentally ill, and, of course, a person of color.)

In a tiny cinderblock visiting room, we met with the first of our young clients.  He talked animatedly about what he would do once he got out of prison: care for his daughter, raise horses on his uncle’s ranch.  He knew everything there was to know about horses.

“The city is not for me,” he said, and indeed it had not done him very many favors.  Born to a drug-addicted absentee mom, he had spent his youth caring for his younger siblings and disabled grandparents, doing odd jobs wherever he could get them.  He fell in with the wrong crowd as a teenager, got high one night, and got into trouble.

He showed us the novel he had just written in prison.  “Gotta keep busy,” he said.  He wrote it in one month.  He had already found a publisher.

A large part of these meetings is about managing expectations.  Though Proposition 36 prohibits imposing a life sentence for someone who has not committed a “serious” offense, those already serving such life sentences have an uphill battle in appealing their sentence.

Another part of these meetings is balancing the need to temper expectations against the need to keep the client motivated to stay on good behavior, to maximize their chances of success.  It can be a tricky balance.

“I have a good feeling about this appeal,” he told us at the end of our meeting.  “That’s what’s keeping me going.”

***

Our second client was only four years older than the first, though he seemed much more.  Otto (we’ll call him) was a tall but frail-looking man, his spine curved under the weight of an invisible burden.  He wore a goatee and glasses with small rimless lenses that magnified his large gentle eyes.  He looked child-like and scholarly at the same time; in a way he was both, and neither.

His background, like our first client’s, read like that of so many others in his shoes: born in poverty to a drug-addicted mother and a murdered father, he became enamored as a youth of the seemingly glamorous lives of the criminals around him and was sentenced first to juvenile detention and then prison before he was 20.  Prison was a shock to his system: he witnessed routine guard-on-inmate and inmate-on-inmate brutality, including the murder of close friends, and developed PTSD.   He received a life sentence for fleeing the wrong way down the highway after a cop pulled him over for speeding (to get to his hospitalized pregnant wife) and triggered his PTSD by pulling a gun on him.

As he shuffled into the visiting cell, Otto’s left hand clutched a clear plastic garbage bag, which he set beside him on the ground as he took his seat.  The bag contained a thick stack of papers held loosely together by a rubber band, and a paperback book.

As my partner introduced herself, he looked up slightly smilingly at her with his wide, patient eyes.  “We’ll be working closely with your trial lawyer on your appeal, so you have a great team working for you.”

“I really appreciate that,” he said with a humble nod of his head.  He was soft-spoken and gracious.

“It’s important that you understand that this is an appeal, though, which makes your chances of success very slim.”

He nodded deferentially again and said, “I know.”

“Thank you for sending all those documents,” she went on.  “I wouldn’t have known all that about you from the record the trial court sent me of you – the facts around your conviction, your background, the psych report, your record of rehabilitation.  We’re going to augment your record with all this stuff – it shows what a great candidate you are for this remedy,” she said.

The documentation on Otto – probation reports, reference letters, and the like – described a somewhat remarkable record of rehabilitation.  A psychologist running one of the prison programs described him as one of the inmates most respected by his peers – a quiet man others heeded and emulated, as he steadily tread the path of self-improvement.  A white supremacist who had previously refused to even speak to a black man had asked Otto for a hug during one of the program sessions.

“Thank you,” Otto replied.  He broke out in a wide grin, almost in spite of himself, like a schoolboy receiving his first accolades from a teacher.

“Do you have more for me there?” my partner asked, pointing to his bag.  He bent down and gingerly pulled the stack of paper from his trash bag.  He set it on the table and started turning over the pages.  “This is the certificate from the Life Skills program I did . . . and the Anger Management program . . . .”  He carefully set each sheet aside as he pulled it from the top of the thick pile.

“A___ will talk to you about the rehabilitation stuff in a minute,” my partner said.  “First, I’d like to go over a bit what happened at your trial.”

Otto poked through the stack of papers again.  “The DA said it was an accident.  He said they weren’t charging me with having done it on purpose.  I can’t find the transcript.  I’ve been doing research to try to find it, but I can’t find it.”

“I want you to understand, this appeal will not be a fast process,” my partner explained.

“That’s ok.”  He smiled.  “I’ve been here 11 years.  I can wait a little more.”

He wanted to know if he would have to appear in court.

“It would be better if you could.  Will that be a problem for you?”

“Well, last time I made an appearance, they had to hold me in transitional housing for 59 days.  That was hard.  They were transporting me quite long distances.  I had a pretty good cellmate before I left.  I was comfortable.  But when I got back I had a different cellmate.  They put me in a different unit.  Also, they were supposed to pack up my things when I left, but they didn’t, so when I got back I didn’t get my belongings back.”

After all of this, the judge had taken all of two minutes to deny Otto’s appeal.  Otto had not even been given the chance to speak.

“Oh, well, maybe we’ll see if we can do it without you having to appear.”

“Oh no, if you think it will help at all, I’ll go,” he said, his wide lips pulling apart into another humble smile.

The next main task for the visit was to make sure Otto was doing everything he could on his end to maximize his chances: staying out of trouble and taking active steps to demonstrate his rehabilitation.  “Have you signed up for any of the programs offered here?,” the summer fellow asked.

“I’m taking GED classes.  I already have a GED, but I want to work on my math, so I’m taking the classes again.  I have a really hard time with the math,” he smiled again.  “It’s good.  The teacher really works with us.”

“Great.  What about any of these other programs?”  The fellow brought out the list we had of prison programs.  “Drug programs, job training programs . . . .”

“Oh there’s a long waiting list for all of those.  I put my name on the list, but they don’t even let people with life sentences take them.  Lifers aren’t even eligible.”  (“So if you have a life sentence you’re as good as dead?,” my partner asked me later.)

“Have you been staying out of trouble?  Any disciplinary issues?”

“Oh no,” he stressed.  “I’m very careful about that.”  He was, in fact, a model inmate.

“Any contraband?”

“No.”

“Any drug use?”

“No.”

He later mentioned that he had been caught once with marijuana, which he had been using for the back pain caused by his scoliosis.

“So when I asked you before about drugs, you didn’t consider that a drug?”

“Oh, no, I guess not.  It was the only way I could sleep at night.  I couldn’t use Ibuprofen because the doctors said it was destroying my stomach lining.  But when they found me with marijuana, they put me in the hole for months.  I haven’t used it since then!,” he said wryly.  “I’d rather live with the pain.”

He writes poems in his spare time.  “I want to tell young people not to end up here.  I want to tell them what it’s really like.”  He pulled the paperback from his trash bag.  “This woman, she wrote a book for young people, about prison.  She put one of my poems in the book.”  He showed us the page.  His eyes shone with pride.

On his left ring finger he wore a band for a fiancée who waited for him on the outside.  He also had a daughter.  During our entire interview, that ring stabbed at my heart – that ring and the patient, earnest look in his eyes.

When it was time for us to go, he stood up, shook our hands, thanked us, and gathered up his trash bag of crinkled papers.  Then he turned away and stood stooped before the guard, his bag hanging from his hand, turning himself over to be escorted back to his cell.

“Thank you for coming to see me,” he wrote following our visit.  “It is truly rare that lawyers come and see inmates.  Second, thank you for taking my case.”

Posted in Criminal Justice, Interviewing Clients, My Story | Tagged , | 1 Comment

The hidden costs of pro bono

A friend of mine hired a lawyer to help him create a trust in which to put some of his earnings. The lawyer charged $800/hr.

Another friend needed a lawyer to appear with him (for a few hours) at his administrative hearing to help him contest his termination. The fee was $20,000.

The fee for a lawyer to advise a friend on a single provision in his mother’s trust was $1,500.

An attorney in my office once described the sense of guilt she sometimes feels when she looks at the total amount due on the invoice she is about to send out. “Don’t feel guilty!” a colleague told her. “Everyone else charges that much. You deserve it too!” If clients are willing to pay it, why should lawyers charge less?

Legal fees of $1,500 or $20,000 – or even $300 – are so out of touch with the cost of most goods and services in our economy that it’s as if they existed in a different currency.  Legal fees like this equate a few hours of legal services with taking a family vacation, making a down payment on a house, or hiring a home healthcare worker for an elderly parent.

I am not the only one whom it strikes as deeply problematic that legal services are accessible only to those who can afford a private jet or a summer home.  As the “gap” in access to legal services widens, calls for more pro bono commitments by lawyers have grown more strident.  Four years ago the American Bar Association created annual National Pro Bono Week, and states have followed up with their own.  The Chief Justice in Pennsylvania recently called on lawyers to devote more hours to pro bono work.  New York’s 4th Judicial Department is launching an appellate pro bono project.  State bar associations present Pro Bono Service Awards. The letter admitting me to the California bar urged me to do my pro bono bit.

Pro bono is not the answer

To put the access-to-justice problem in perspective, consider that around 83% of Americans have access to the food they need.  Around 84% of Americans have access to healthcare.  These rates are unacceptably low, but they make America look positively utopian next to rates of access to legal services.  Only 20% of poor Americans and a vanishingly small proportion of middle-class Americans have access to legal services. The U.S. ranks 66th out of 98 countries in accessibility of legal services.

Most people in this country have access to the food they need because they don’t need to afford a private chef to be able to eat, and most people in this country have access to medical services because health insurance covers what they cannot pay out of pocket.

Free place to sleep

For some reason, however, (explained in many sources not covered here), the emphasis on solving the access-to-justice problem — at least from bar associations and legal insiders — has not been on lowering legal fees or creating legal insurance schemes or some such solution.  Instead, as noted above, it has been to exhort lawyers to work for FREE.

Problem 1: “Pure” pro bono work is financially unsustainable

Main Street lawyers – primarily solo or small-firm practitioners – . . . consistently express the belief that pro bono is ‘an elitist claim to good works. . . . [They] regard ABA mandates about pro bono to be just another mandate from elite Wall Street attorneys who “feel they can tell all practitioners what to do.”

~ Professor Luz Herrera, “Rethinking Private Attorney Involvement through a Low-Bono Lens”

I cannot afford to work for free. Most lawyers, unless they have a rich spouse or a trust fund, cannot afford to work for free.

“Free” legal work must be subsidized by someone.  Large firms subsidize their pro bono services with fees earned from high-paying clients. Solo and small-firm attorneys – who are far and away the biggest source of legal services for low-income clients – usually do not earn high enough fees on any individual matter to offset purely pro bono services.  They therefore depend on reduced-fee (“low bono”) arrangements to sustain their practice. They may charge only a little, and they may continue to perform legal services after the client has become unable to pay for them, but they can’t operate by charging nothing to anyone at any point.

These subsidies for free legal work are extremely limited.  A small-firm lawyer can only give away so much of her time and resources.  A large firm can give away only so much of its time and resources as it can offset with fee-earning work.  Needless to say, when the economy is bad, their ability to provide free legal services goes down precisely when it is most needed.

Problem 2: The supply of pro bono services does not meet the demand

Again, small-practice attorneys – on whom most of the poor and middle class depend for legal services – are limited in the amount of time they can devote to pro bono work because they must personally subsidize any pro bono services they provide.

Not-for-profit, government-funded legal services offices do not fill the gap. Not only are government funds limited (as we all now know all too well), but, in addition, government funders expressly prohibit their donees from taking on certain kinds of cases. For example, Legal Services Corporation (LSC), the primary funder of legal aid organizations, restricts the organizations it funds from filing class actions, recovering attorneys’ fees, representing undocumented people, and suing government agencies. A friend of mine who works in a non-profit organization that represents victims of domestic violence is prohibited by her organization’s funder from representing anybody against whom the Administration for Children’s Services (ACS) has taken any action.

And, of course, one of the principal restrictions on most not-for-profit legal service providers is that they cannot represent anyone earning above a certain very low income threshold (usually between 125 and 200% of the federal poverty line, depending on the location of the organization).

Because of all these limitations, legal aid organizations serve one-third to one-half as many poor people as do private solo and small-firm practitioners.

The end result of all of this is that pro bono services are unavailable for most low-income clients and almost all middle-income clients.

Problem 3: Pro bono services, even when provided by private attorneys, have hidden costs for the public and for clients.

When a big corporate lawyer who does mergers and acquisitions every day takes on a pro bono asylum or death penalty case, she requires training in the new field of law. She requires written training materials and supervision by lawyers with expertise in the new field. Her firm requires a third party to connect it to pro bono clients.

The intermediaries serving these functions – providing the training and supervision, researching and writing the practice manuals, and generating client referrals – are usually independent non-profit organizations. That is, they are organizations subsidized by favorable tax treatment. Currently, the big firm lawyers receiving this training do not finance this infrastructure – the public does.

And the costs do not end there.  A friend of mine who works in a non-profit legal organization told me that her organization preferentially hands cases over to outside pro bono attorneys in big law firms over staff attorneys at the non-profit organization.  Unfortunately, the big firm lawyers – being relatively inexperienced with these kinds of cases – usually make a lot of mistakes that the staff attorneys then have to go back and fix anyway.  This not only greatly increases the time and resources for any particular matter, but also the risks to the client.

To give a sense of just a fraction of the costs involved each time a lawyer is trained in a new area of law (sometimes for the purpose of taking on only one or two cases in that area): Several months ago I participated in a reentry clinic – a clinic providing legal remedies to help those with criminal justice backgrounds obtain jobs, professional licenses, housing, etc.  I met with one client that day.  Because it was my first reentry client ever, two attorneys and a staff person from the organization that had organized the clinic met with me for an hour before I met with the client, and met with me again for one hour after the meeting to debrief and provide guidance about further steps. At the end of the day, five licensed attorneys and one additional staff person had spent three hours (eighteen hours, including fifteen lawyer hours, collectively) basically just on the intake for a client whose legal issues were no more complex than navigating a few administrative agencies and employment applications.  Normally, a client intake takes half an hour for an initial screening; one or two hours for a more thorough assessment of whether to take the case.

Training these big-firm lawyers for occasional dips into different areas of pro bono practice for 40 hours per year is not only expensive, but also inefficient. These recurring training and supervision costs do not exist for solo and small-firm practitioners providing legal services in areas they are already practice on a regular basis as part of their practice.

Free legal services have their place.  But if the law profession’s unique focus on “free” services — as opposed to, say, economies of scale, streamlined procedures, insurance schemes, or other economic solutions — as the principal means of meeting the demand for access to critical legal assistance, seems impractical or puzzling, I recommend reading more about the historical origin of the profession’s pro bono mantra.

Sources:

Luz E. Herrera, “Rethinking Private Attorney Involvement through a Low Bono Lens,” Loyola of Los Angeles Law Review, Vol. 43: 1, September 2009

Debra Cassens Weiss, “Middle-Class Dilemma: Can’t Afford Lawyers, Can’t Qualify for Legal Aid,” ABA Journal, July 22, 2010

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Week 24: Oral argument

Today we had oral argument on a motion to dismiss. A beautiful sunny day in a spacious, peaceful courthouse. We arrived early, the partner and I, and waited in one of the corner courtrooms for the judge. After the court reporter and clerk were settled, and the lawyers had presented their business cards so their names could be entered into the minutes, the judge appeared from chambers, took her seat at the bench, and said a curt “Good afternoon” to each of the two lawyers standing at the podiums before her.

Courtroom

The judge directed her first question at us. I could see my partner’s back tense as she prepared to answer, her right heel rocking back and forth like a restless five-year-old’s.

She started to drift. She was spending too much time arguing about what the statute meant. We had agreed this morning that she would instead argue that the facts fit within the defense’s interpretation of the statute — that we could amend the complaint to add more of these facts, if necessary. I struggled to think of how to communicate this in one word to her, wrote “AMEND” on a Post-It, and leaned forward to slip the note to her.

My partner was flustered. In law school the judges who taught my judicial clerkship seminar always said, “Treat oral argument like a conversation with the judge.” But no judge I have ever seen behaves in a very conversational manner. (Doesn’t a conversation entail two-way traffic of questions and answers?) And even if they did, it would be hard to overcome the dynamic set up by the surroundings themselves: the judge seated on high, sheathed in a black robe, with her supplicants standing before her. The formalities. It tends to feel more like an inquisition. This makes lawyers ramble.

After the defense counsel spoke, I started to write another Post-It , but then thought maybe the judge was ready to move on to the next issue. It’s hard to read the judge’s mind — again, I couldn’t just ask her. Maybe I should have gone ahead with the Post-It. Maybe a short rebuttal to the defense would have helped. Ah, the post-mortem of an oral argument.

On the drive back to the office, the partner and I talked about what else she could have said, or what she could have said differently. I suppose if it were truly a conversation with the judge we would have been able to send an email to follow up, to say, “You know, this is something you should probably consider.” But it’s not really a conversation — if you don’t adequately anticipate the question and respond at the hearing itself, the chance to respond is lost forever. At least for purposes of that motion.

I was once at a Q & A with Solicitor General Donald Verilli, hot off the heels of his oral argument before the Supreme Court defending the Affordable Care Act. Someone asked him why the Justices didn’t email their questions to the lawyers in advance. That way the lawyers could prepare to answer those particular questions, rather than try to guess every possible question that might be asked and try to prepare for all of them. Verilli’s answer to this question boiled down to, “Tradition.” Actually, that might be what he said verbatim.

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Week 3: Inside our juvenile justice system

Two weeks ago I visited my client at Juvenile Hall. After locking my belongings in a locker in the deserted visitors’ waiting area, I was shepherded through four sets of locked doors by a female voice on the intercom. Inside, the voice told me to freeze until the transfer of one of the youths at the far end of the corridor was completed.

I caught my first glimpse of Julian in Unit 2, where he was sitting among a group of teens in navy blue uniforms in a small room off of a large, empty central space. I walked toward the room and a man sitting outside it gestured toward one of the tables in the room. Two boys stood, hesitantly. “Julian,” the man said to them a second time, and through the glass wall of the room I saw one of the boys point to himself and mouth, “Me?,” in a tentative, earnest gesture.

The boy who peeled himself from the group and walked toward me was slender and below average height. His manner was deferential and polite. He was shy but looked me in the eyes when I spoke. When it was his turn to speak, he seemed very engaged, somewhat nervous. He spoke with a marked stutter.

His background is unremarkable for a place like this: divorced parents, incarcerated father. African-American. Living “couch to couch” for at least the last several years. A passing reference in his record to a diagnosis of several learning disorders in elementary school (which immediately manifested in visible form when I met him). A failing high school transcript. He is here on a five-year sentence for his first offense.

As we sat down to talk, I was very conscious that the next hour we had together might be the only hour of real peer-to-peer interaction with an adult that he has had in a while. So, although I wanted to explain the appeals process to him and talk a little bit about his case, the main purpose of my visit was to (1) learn about his needs or desires (e.g., re: his home placement, schooling) that I may be able to help with and (2) counsel him on the importance of staying on good behavior while in custody — including showing that he has taken responsibility for his actions, establishing a good relationship with his probation officer, and, above all, not reoffending, which could extend his sentence or land him in CYA. (His widened eyes made me wonder if anyone had explained any of this to him before, in the many months he’d been in detention. “Oh no,” he said, with conviction in his voice. “I’m done with all that. I don’t want any more trouble.”)

Neither of these functions — advocacy writ large or counseling — is an activity we, his appeals lawyers, get compensated for. Both functions, however, seem so much more immediately critical to his well-being than the appeal the state is paying us to do, an appeal that has relatively little chance of changing anything for Julian.

I asked him about the incident that got him here and for the first time heard his account of events. It was consistent with but significantly expanded upon the police testimony offered at his hearing about the police’s roughness (physical and verbal) and his fear during his arrest. Frustratingly, there is not much I can do with his narrative, since it is not on the record, though it very well could have swayed the judge’s decision if she had heard it at his hearing. Because, truth be told, justice is not blind. Or, if it is, it is too often blind to things that matter, like whether Julian had a stable home and a school able to meet his educational needs, and not blind to things that don’t matter, like the color of his skin. (I did not see a single white youth in the facility that day — a facility that serves a major metropolitan area.)

Julian’s judge is not the only “blind” adult in his life. After the judge placed him into the guilty bin on the basis of a number of factors limited by the sometimes arbitrary lines of legal relevance, his teachers at Juvenile Hall have continuously denied him the individualized education plan he so visibly needs because, according to Julian, he hasn’t been able to produce his old paperwork. Julian lives in a system where youths are in or out, guilty or not guilty, special needs or not, good or bad, smart or dumb, but none of the myriad things in between. They are not treated as complex and nuanced and varied and ever-changing — i.e., as individualized.

What he needs most right now is not a lawyer but, like every young person, mentors and teachers (in the broadest sense of those words). He wants to get his GED and establish a career. He wants a job that will make him happy (“Someone told me, ‘Don’t get a job for the money. Pick a job that will make you happy, and the money will follow.’”). He doesn’t know what that would be. “One day I think I want to write poetry, the next day I think I want to be a businessman, then I think I might want to make movies, the next day I think I want to be a firefighter. Sometimes I think I would like to open up my own store.” (I told him the attorney I work for — his appeals lawyer of record — started her own practice. His ears perked up. “Really?”)

He wants to set up a home with his girlfriend and daughter. He wants to buy a house by the time he’s 25 and pay off the mortgage by the time he’s 40. He wants a place with a guest room so he can have visitors, a place that provides a sense of constancy and stability. He wants to create something with his life and have something to pass on to the next generation.

To do these things he needs guidance, role models, mentors, cheerleaders, critics, and supporters.

I try to serve a mentoring role for him as much as possible in the short time I have with him, offering whatever parental advice I can think of: to see what you like to do you have to try out doing it for a while (he’s already with me on that one); there is nothing you don’t know that you can’t learn how to do (he seems very doubtful); smarts are not something you are born with, they are something you acquire by applying yourself; don’t fear failure. I told him above all to reach out to people and use them as resources. (“How do I do that?” he asks. “I’m shy. I don’t even know what to say to people when I’m talking to them. ‘That’s a nice shirt’? I mean, how do I do that?” I told him it’s hard at first, but that it’s something he has to learn how to do.) I feel like I’m packing a lot in to few short minutes, but I hope that he takes some of it with him. Even if he does, it feels so hopelessly inadequate.

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How soon can you go solo?

How soon after graduating from law school can/should you start your own practice? I hear conflicting reports. On the one hand, I hear lawyers and entrepreneurs advising that you should not try to start a new business until you have worked in the field for several years, not only to build skills but also to build important contacts.

On the other hand, I have heard attorneys say that it is harder to start a new practice if you have first worked the grind in a D.A.’s office or large firm because you pick up too many bad habits that need to be undone and because the skills you learn as a bottom-level associate are not really all that transferable to — well, to anything. (See my post here.)

I don’t know which of these is “right” (perhaps both are true in some way), but I do know that I have personally spoken to attorneys who opened their own practice right after graduating from law school and are thriving, that there is a new movement afoot to prepare recent law school graduates to do the same, and that I really really want that for myself.

In an essay in a book recently published by the ABA, another lawyer who started her own practice right after graduation, Solo Practice University founder Susan Cartier Liebel, expresses many of my own motivations for wanting to go this route: a desire for independence, meaningful work, flexibility, responsiveness to real needs, control, and a well-balanced life. (For more on my motivations, see my posts here and here.) In this sense, Susan Cartier Liebel’s story is inspirational for the new grad (and not-so-new grad) aspiring to strike out on her own:

I had a desire to be an entrepreneur, the captain of my own ship, long before I went to law school 10 years after graduating college. . . . I saw law school as the ultimate entrepreneurial adventure . . . . . It had all the necessary ingredients: high portability, minimal overhead, one self-contained package — me. . . . Except, law school (and the profession itself) wanted to stop me. From the moment I entered law school, if I mentioned solo practice as the ultimate goal, the true measure of my success, the cherry on the sundae, the pinnacle of legal practice — I was mocked, disparaged, made to feel not only lesser than, but “insane.” I felt like Alice falling down the rabbit hole. I was in an alternate universe where black was white and wrong was right.

. . . . What was my definition of success? The traditional journey on the cattle car to the Big Law dairy farm to be milked daily in my billable hour stall? Never. . . . I knew with every fiber of my being that working in a large law firm was simply not an option. . . .

Success defined by me is freedom to choose. Freedom of time and space. . . . I knew I wanted to one day be married, have children . . . . I wanted to contribute in a meaningful way to our financial comfort while contributing in my own unique way to the world. I absolutely knew in my heart I didn’t require an employer to provide a paycheck. . . .

While in law school I met two kindred spirits, and upon passing the bar we opened our practice. . . . We found mentors and challenged ourselves through each process, knowing in our hearts we could figure it out or find someone who would help. . . . Every new client, every new retainer agreement, every client victory was a testament to my ability to make our three-lawyer firm succeed. It felt so good. And then I knew . . . I had to teach others how to do it, how to believe in themselves, how to become a legal entrepreneur, the solo practitioner, because it was not only not fair, it was dishonest not to teach this very real and very viable option to law students. . . .

. . . . Your law license gives you the freedom to choose. . . . Your degree should not handcuff you to an image of what a lawyer should be. It should free you to redefine that image as well as how it is practiced. . . .

Source: The Road to Independence: 101 Women’s Journeys to Starting their Own Firms. Karen M. Lockwood, Ed. (American Bar Association: 2011)

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