Tag Archives: california legal market trends

Associates have much to be thankful for this Thanksgiving

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As any associate will profess, the life of a relatively-new attorney certainly has its ups and its downs.  In many cases, billing is up and bonuses are down.  However, there are many things associates can be thankful for this Thanksgiving.  For the first time in two years, associates can look at the positive road ahead and the struggles behind them.

  1. Things are finally, finally looking up in the legal market.  In 2011, we saw an increase in legal jobs across a variety of practice areas.  It’s possible/probable that many associates noticed these increases in their firms.  This is fantastic news even for those associates who already have a job.  Now they have the option of making a lateral move much more easily.  Partners are more willing to hire and more willing than ever to look at associates with 1-3 years of experience.   Associates with more experience will also benefit by being able to negotiate a higher starting salary than one year ago.
  2. The market is on the other side of the worst legal market in decades.  It wasn’t easy, and it most likely brought doubt into the minds of many an associate, but it appears that the market has taken an up-turn.  Although we see the legal market move cyclically (the beginning of each decade seems to have a down cycle), this was certainly one of the worst we’ve seen in decades – and associates can take pride in the fact that they survived.  The upside to this struggle is employability.  Although associates may not be aware of their flexibility and adaptability, employers are.  They know that associates who worked and thrived in this market have the stamina, the tenacity and the sheer willpower to keep going.  These traits make for excellent attorneys, and the best hiring partners know this.
  3. Mergers have, in some ways, helped.  Associates working in a firm that acquired or was acquired this year should definitely give thanks.  California was a hotbed of activity when it came to mergers and acquisitions this year.  As a result, many of the acquired firms actually grew in numbers.  Numerous acquisitions were made by larger firms without a strong West Coast presence.  Now that these larger firms have the “California office,” they will likely be expanding their presence.  This means more jobs and more opportunities for associates throughout California.
  4. Experience has increased among associates.  The last two years have been learning experiences for many attorneys – both personally and professionally.  Many associates learned more about the law than they would have two years ago because of cuts in staff and resources.  As a result, the associates’ resumes likely show much more experience and expertise now than associate resumes a mere five years ago.  This makes today’s associates more desirable.

Law school (almost) grads, rejoice!

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It looks as though those of you who are graduating in the next couple of months have something to celebrate – a greater likelihood for a legal job!  According to The National Law Journal, a recent study indicates that associate hiring is almost back to pre-financial-crisis levels.

In 2009, offer rates for associates who worked in the firm’s summer programs were at the lowest rates in years. Fortunately, 2010 rates bounced back considerably, and 2011 offers seem to be heading in the same direction.

It seems that there is light at the end of the tunnel:  at least for new law school grads.  For the rest of us, the recruiting rate still looks a bit sluggish.

“Things are turning around in the legal market, but they’re still a bit slow,” said Delia Swan, president of Swan Legal Search.  “All attorneys need to make sure that they are really getting themselves out there actively networking and keeping optimistic.  In the current legal hiring climate, that’s what it takes.”

So, what does that mean?  “That means that attorneys need to brush up on their interviewing skills, have several people review their resumes, research like crazy and, if possible, start generating revenue.  Nothing is more attractive to a firm than an attorney who can bring business when they join the firm.”

California legal trend alert! Law firms publishing attorney names and hourly rates

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We at Swan Legal Search love to bring you the latest trends from across the state, as we see them.  To that end, we’ve recently seen a few firms announcing that not only will they adjust the rates of associates based on performance reviews, but that they’ll ”publish” to their clients the names of each JD class of associates along with the firm’s assigned hourly rates.

Ostensibly this is to give clients more latitude to themselves make more informed choices about whom they want to work on their matters. Those with the lower rates look at this differently. They see this as the equivalence of hanging “loser” signs on them. Even in these tough economic times it’s fair to assume that most clients with sizable matters at stake aren’t likely to select an associate with a cheaper rate, but rather will want those whom the firm itself values as the best of the best. The likely result? Those with the low price tags will be shunned so their billables will drop, and eventually (and pretty much inevitably) the firm will dump them because they’re not meeting hourly requirements.

All firms do performance reviews. However, the traditional approach has been (and for most firms, remains) that the substance of the review remains confidential between the firm and the associate. The idea is to benefit the associate by letting her know those areas in which, in the firm’s view, the associate is doing well or needs improvement. In turn, this gives the associate the opportunity to work on those skills in which there was criticism. For those firms changing the rules and using the new ”publishing” doctrine, we wouldn’t be surprised to see a drop in morale amongst associates generally (“it could be me next time”) and perhaps a lawsuit or two from some enterprising associate who gets dumped as a result of this new procedure, thereby proving that maybe she wasn’t such a poor performer after all. Sometimes the old ways really are the best.

Harvey L. Gould, Esq. is an experienced trial lawyer and a business attorney.  He’s tried over 100 cases to verdict and has mediated and arbitrated hundreds more, both as an advocate and as a trained mediator and arbitrator. He’s also handled numerous complex business transactions.  We’re happy to have Harvey on the Swan Legal Search team.  He works exclusively on lateral partner moves and recently had a very successful placement.

How to Recover Your Client’s Fair Share Part II: Enforce Contract Compliance

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Once again, the talented and exceptionally brilliant Cedar Boschan has agreed to appear as a guest blogger this week.  To learn about laying the groundwork for maximum royalties, please see her first guest post, “How To Recover YourClient’s Fair Share: Negotiate Better. “

How to Enforce Contract Compliance

Even if contractual language is less than ideal, you can take action to ensure that licensees and business partners honor their agreements with your clients – and that your clients realize their full potential with respect to both earnings and contract renegotiation leverage.

1.    Pay attention - Many of the claims a trusted royalty auditor makes are matters that could have been resolved without an audit.  The moral: Don’t assume the business manager or the client is paying attention.  Here are some things to look out for:

a.    Track rights that “trigger” royalty rate escalations and payments:

i. Did you approve a reduced royalty rate on a “most favored nations” basis for one or more hit products?  If so, requisition rate analysis before your client’s right to object expires.

ii. What contingent payments may be due your client?  For example, a certain major record label frequently agrees to pay publishing fees worth hundreds of thousands of dollars upon certain criteria.  Yet, many artists who are eligible for the fees have not sought to collect them.  My firm is pleased to provide this service as part of an audit, but if attorneys and accountants tracked the clauses that were triggered, clients could receive the fees years earlier.

iii. What costs are not recoup-able?  Thorough cost analysis requires a thorough auditor, but there are ways to identify problems by matching approval rights and other contractual provisions to charges on your clients’ royalty statements.  For example, in the video game industry, contracts may require a publisher to credit a developer’s account upon its return of assets borrowed from the publisher.  TIP: If the first statement of account has not been rendered yet, an attorney may wish to request a detailed cost accounting from a client’s licensee upon the release of a product, or possibly sooner.  This should be analyzed immediately because, by the time product sales peak, it may be too late to audit costs.

b.    Watch the clock if you want a shot at reducing the charges to your client’s account and claiming unpaid royalties.  At Hurewitz, Boschan & Co., calls come in on a daily basis from potential clients who want to audit the royalties for a hit product … a decade after most of the sales occurred.  If your client has a spike in earnings, depending on a number of factors, you could have as little as a year to audit those earnings.  Further, as mentioned above, most of a project’s costs may be incurred early on – before there are royalty earnings.  Calendar your client’s objection deadlines in connection with costs, not just earnings.

c.    Read the news to know where the cash will come from tomorrow:

i. Follow relevant court proceedings.  For example, if you represent recording artists, make sure you read the September 2010 9th Circuit opinion on appeal in the case of FBT Productions LLC v Aftermath Records, which may impact whether your clients are entitled to a royalty or half of net receipts in connection with music downloads.

ii. Share with clients and their accountants news of major industry settlement and license agreements if you expect that it will result in earnings for your client.  Ask your client’s accountant to advise you if this income goes unreported.

iii. When their clients’ licensee is the subject of an upcoming merger or pending sale, savvy attorneys call me to discuss sending out audit notices (because the licensee might pay the client to go away, in order to look more attractive to a potential buyer).

iv. Join Twitter – it is a great resource for breaking IP legal and business news (follow me @Auditrix) – and read the trades for more in-depth analysis.

2.    Audit strategically – Every client’s case is different, but that doesn’t stop attorneys from asking me for a rule of thumb to determine whether it makes sense to audit.  Some say that if a client has $1 million in earnings, and the account is recouped or nearing recoupment, it will make sense to audit.  This may be true, but I have conducted many successful audits for clients with less than $1 million in earnings and for reasons beyond financial recovery (i.e., to identify breaches of contract, to gain negotiation leverage).  The question you should ask as your client’s counsel is not whether to audit, but how much to audit.  This is because even clients where a full audit does not make sense may benefit greatly from a “desk audit,” and/or the “Pay Attention” tips above.  Therefore, you must have in your network a trusted auditor review the circumstances of all of your clients and guide you in the cost/benefit analysis of determining the how deep to go, in order to ensure the best interests of the client are being served.

3.    Know the game:

a.    The decision to advise a client to audit rests squarely on your shoulders. (Often, if an attorney does not suggest an audit, nobody will – not even a business manager, unless the business manager happens to do audits, which may present a conflict of interest, incidentally.)

b.    Don’t depend on the client to initiate an audit.  Many clients come to their first audit believing that their business partners would never shortchange them.  Sadly, these clients couldn’t be more wrong in most cases.  Further, many licensees will try to make a licensor feel guilty for asking questions or initiating an audit.  As a client advisor, you must understand that this is a business tactic of licensees and if you chose professional auditors, they will be respectful of maintaining your clients’ business relationships.

c.    Tolling agreements are the norm.  In the old days, staff employed at major companies responded to audit requests and settle an audit.  Not so, today.  Nowadays, the companies we audit refuse to provide more documents, while the documents that they agree to provide can take months or years to be produced.  Therefore, it is often necessary to enter into tolling agreements so that the clock on the statute of limitations stops ticking while the audit is completed.  Not every auditor is aware of this, so as an attorney, you need to be.

d.    Be prepared to go to court.  It isn’t common, but some audits don’t settle until they reach “the courthouse steps,” while others raise matters that land in court.  This is one reason why your client’s licensee or business partner must believe that your client may consider litigation.  (In my experience, licensees who know your client cannot afford a lawsuit may respond to an audit by refusing to provide key information and denying your client’s audit claims.)  Therefore, be willing and ready to request tolling agreements and file a complaint to begin moving forward with a lawsuit if the licensee does not cooperate with your client’s audit or other deadlines.  This has a few implications:

i. When you choose an auditor, you may be choosing an expert witness as well.

ii. If you need your auditor to serve as an expert witness, do not engage your auditor on a contingency basis.  If you do, your auditor cannot serve as an expert witness because he or she will have a financial stake in the outcome of the case.

iii. Plan the communication strategy and discuss with the auditor what types of work product may be discoverable.  I often communicate solely with the legal counsel of my clients and not directly with the clients in order to preserve attorney-client privilege.  Discuss this with your client and the auditor up-front.

iv. If you are a transactional attorney, is there a litigator you trust to whom you can refer your client?  Your auditor may be able to refer your client to a strong litigator.

Implementing the above steps – paying attention, auditing strategically and knowing “the game” – may deliver impressive results, such as additional payments to your clients and possibly the power to renegotiate their contracts.  However, you will need more than this article.  Working with a trusted auditor to tailor proactive strategies to your clients’ unique needs goes much further, and it will help you build a legal practice with loyal lifetime clients.

Additionally, since cost is a primary factor in determining the best course of action with respect to compliance enforcement, check back soon for my final guest posts on this blog, How To Recover Your Client’s Fair Share Part III: Minimize Audit Costs.

In the meantime, please share: Do you have a strategy or system for tracking contractual rights?  As an attorney, how do you work with auditors and business managers?  Do you share your clients’ contracts with their accountants?   Confess: Have you worked to negotiate contingent compensation for a successful client, only to have that provision go unchecked until now?

Cedar Boschan’s royalty audit firm Hurewitz, Boschan & Co. LLP serves those with intellectual property rights interests.  The firm focuses on royalty, participation and other contract compliance audit consulting services. It also provides litigation support (such as damage theories and expert witness testimony), administration and statement preparation, and forensic investigations.  Cedar can be reached at boschan@royaltyauditors.com or (310) 882-6381.  If you have music clients, follow Cedar’s links to music business news on Twitter to take a first step in “paying attention” to music royalty news.

Capital Market Deal Flow on the Rise

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After the devastation of late 2008 and much of 2009, to the delight of most transactional attorneys, the U.S. capital markets have seen a recent resurgence.  According to Renaissance Capital, there were 63 U.S. IPOs in 2009.  That amount has almost been matched in 2010 with 51 so far and there are still six months left in the year.  As further evidence of the improved capital market conditions, private equity funds have jumped on the bandwagon to increasingly use IPOs and secondary offerings as exit strategies for investments in which they have been locked-in for some time.

Pitchbook notes steady growth in both types of exit strategies in the fourth quarter of 2009 and the first quarter of 2010 relative to prior periods.  Similar activity is being seen in the venture capital industry; the first quarter of 2010 has already matched the eight venture backed IPOs in all of 2009.  In terms of industries that have seen the greatest growth in the number of IPOs, it’s been technology, financial and real estate.

With Los Angeles being home to large banking/financial and real estate industries, it is foreseeable that law firms servicing these types of capital markets in Los Angeles are witnessing some of the rewards of this increased market activity.  It is hard to foresee whether intervening events like Greece’s financial woes will curtail activity, but there is a general sense in the field that the positive momentum may very well continue.

Post by Alex Shukhman, attorney at Goodwin Procter LLP in Los Angeles.