I was having a perfectly pleasant Friday afternoon until a member of the LME posted about the Texas Center for Legal Ethics’ Opinion 642:

CONCLUSION

Under the Texas Disciplinary Rules of Professional Conduct, a Texas law firm may not use “officer” or “principal” in the job titles for non-lawyer employees of the firm.

The Texas Disciplinary Rules of Professional Conduct also prohibit a Texas law firm from paying or agreeing to pay specified bonuses to non-lawyer employees contingent upon the firm’s achieving a specified level of revenue or profit.  A Texas law firm may, however, consider its revenue, expenses, and profit in determining whether to pay bonuses to non-lawyer employees and the amount of such bonuses.

What is the problem that the Texas Center for Legal Ethics is attempting to correct?

While most likely a plaintiff’s firm or SEO marketing company pissed somebody off, the following questions posed could apply to any corporate law firm:

QUESTIONS PRESENTED

1.  May a Texas law firm include the terms “officer” or “principal” in the job titles of the firm’s non-lawyer employees?

2.  May a Texas law firm pay or agree to pay specified bonuses to non-lawyer employees contingent upon the firm’s achieving a specified amount of revenue or profit?

In other words, let’s just prevent a law firm from, gasp, attempting to act like a business.

You know. Hiring professional people to run the marketing, finance, IT, and other business operations.

Hiring a professional sales team to go out and bring in new business opportunities, like every other professional services — accounting, finance, advertising, real estate, etc. — firm does.

The law firm’s proposed plan for paying bonuses is the type of plan that Rule 5.04(a) forbids: one that is tied to achieving a specified level of revenue or profit.  Such a plan would provide an incentive for the firm’s non-lawyer employees to increase revenues, which could be accomplished through soliciting clients, or to reduce expenses, which could be accomplished by interfering with a lawyer’s independent judgment in practicing law.  Furthermore, tying a bonus to achieving a specified level of profit is similar to tying a bonus to achieving a specified level of revenue because profit is a function of revenue and expenses.

Seriously. If you think we “non-lawyers” have the ability to interfere with a “lawyer’s independent judgment in practicing law” please let me know how. Because I can tell you, our jobs are to interfere with how they conduct business. As in, BRING IT IN. And any tips on how we can do that better are welcome.

Yes. Many of these professionals are bonused based on personal revenue generation and cost savings. Some of those at the top are bonused based on the PPEP. Gasp.

And, double yes. Many of these professionals have snazzy titles like, Chief Marketing Officer or Chief Finance Officer or Chief IT Officer or Chief HR Officer.

Some are even double Harvards or Stanfords like the lawyers. Their names just end in comma MBA or MS.

Law firms, like any business, want to attract the highest talent to help run their businesses. To do so they must compete with industries outside of the legal bubble.

Do you really think that Latham could have recruited Elizabeth Hughes Eginton from Morgan Stanley to run their firm’s marketing department with the title of Marketing Director? Or without a hefty salary and bonus?

Do you think Baker & McKinzie could have lured Gregory Fleischmann from Deloitte to set up their sales team on base salaries alone?

I understand that bar associations are primarily concerned with consumers being taken advantage of by less than ethical plaintiff and consumer attorneys.

However, the unintended consequences to the corporate law firms, which include firms with global footprints and nine zeros in their revenue statements, cannot be ignored.

If bar associations want to get technical about titles, I have a suggestion: Let’s get rid of the misnomer title of “partner” or “shareholder” for every attorney who has been with the firm for a certain amount of years.

I probably shouldn’t share this little secret, but not all partners make day-to-day decisions as to the running and operating of their law firms, let alone their individual practices.

The EEOC recognized that the term “partner” doesn’t mean what a layperson would infer that it means.

To me, the term partner means that all the attorneys are equal and have an equal say in running the firm.

Ha! Not according to the EEOC.

What the Sidley case says is that you have evidence that people are called partners, but in reality are not active in the governance of the firm and don’t control their own destiny in the firm,” he [John Hendrickson, the EEOC’s regional attorney in Chicago] tells the Times. “You can call them whatever you want, but for the purposes of the Age Discrimination Act they are employees.”

What did the ABA do to address this issue of a partner not being a partner? They just got rid of mandatory retirement.

Problem fixed. Yes?

No.

What about non-equity partners who go by partner? or of counsel? What do those titles imply and mean?

Many Os are MORE invested in the business operations and function of these law firms than the majority of the partners. They are truly partners and have a personal (monetary and reputation-based) stake in the success of these firms.

They are strategic business partners. They have seats and voices at the table. They provide business counsel because while lawyers can make great lawyers, they cannot necessarily make great IT, HR, marketing, finance, business development, operations professionals.

What these attorneys writing these opinions need to realize is that the practice of law is no longer (just) a profession. It is a business. And, in some cases, a really, really big business.

For a state that prides itself on being business friendly (and attracting company after company from my business-backward home state of California), it is amazing to see that a very small group of Texas attorneys have the ability to throw an entire business model askew.

So what’s going to happen?

I don’t know. I cannot imagine every law firm with an office in Texas is going to demote, on paper, their senior business executives, or tell the sales team to not expand business opportunities in the state. But law firms are risk adverse in many ways and do follow and apply the individual state legal ethics to their operations (Florida’s crazy advertising restrictions, for instance).

Anyone know a good lawyer who wants to fight this? It’s time to mess with Texas.

  • Heather, thank you for this post. I urge the State Bar of Texas to revisit immediately this blockheaded ruling. In 2014, Texas law firms (and the Texas offices of law firms formed in other states) are making significant investments to improve their business processes, to operate their firms more efficiently, and to deliver higher value to clients. Their interests and those of their clients are not well served by a professional association that requires Texas law firms to operate as if they were in the mid-20th century.

  • I believe you. The target for these types of insane rules are the unscrupulous, (typically personal injury) firms that have a commodity based services model and push the envelope. That’s what the FL model rules are about. So sorry to hear this about Texas.

    This line in your post made me chuckle. So true…

    “… because while lawyers can make great lawyers, they cannot necessarily make great IT, HR, marketing, finance, business development, operations professionals.”

    Not too long ago we all probably worked with law firms that had a “technology committee” making decisions on everything from websites to social media and the purchase of software and hardware. The Chairperson was always a partner and committee members were a couple of associates (who had no authority) and another partner that never showed up for meetings. The Chair owned a laptop computer and knew how to access the web. Maybe he or she practiced intellectual property law; a practice which all other partners knew was about technology. Ha! Regardless, they were lawyers, not IT or MarCom professionals.

    It was a mess! In those days I personally saw hundreds of bad decisions made and hundreds of thousands of dollars spent on worthless software, websites and outdated equipment. Even the most talented network administrator in those days was viewed by attorneys as the “help desk.” The only IT strategy that mattered was the one that came from these committees and they had no hands on experience. Sadly, it still exists today.

    As Ann comments, making a law firm more business-like is good for clients that consume their services. More efficiency and value. The business pros do their thing, allowing attorneys more time to focus attention on issues of law. When people are working within their appropriate roles, everything works smoother. Clients appreciate that fact. People operating to strengths. And yes, titles count. It’s part of being organized. Hello Texas bar association…can you think a little harder? Maybe outside the box!

  • Stop. The. Nons-sense! These overseers are demonstrating how out of touch and irrelevant they truly are.

  • garyemerson

    Moving backwards. Another example is the Law Society of British Columbia does not give out CPD credits for leadership or business development/marketing programs. What? Baring on criminal.

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  • This post is superb. Must reading for anyone with an interest in how professional commercial staff in law firms can be compensated and their role structured. The Texas Bar ruling appears to create an impediment to private sector efforts to lure foreign direct investment at a time when Texas has much to gain from those efforts.

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  • This is just sad. This narrow-minded thinking is what’s going to be the death of this “profession”. I get ill thinking that we are a self-regulated industry and lawyers are doing this to themselves.

    Law firms are businesses and we have to start thinking and behaving that way.

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