New Business Review: What are Your Colleagues Doing?
(County Bar Update, January 2005, Vol. 25, No. 1)


New Business Review: What are Your Colleagues Doing?


The way in which a law firm screens new clients and new matters is extremely important to safeguarding the integrity of the firm. Law firms know that screening for high-risk clients, identifying potential conflicts, and using standardized engagement letters are key to that process. Many attorneys do not know, however, the different ways in which their colleagues have institutionalized these practices. Two models used by various firms are "primary contact" and "new business committees."


Primary Contact


Some firms either establish a small committee (two or three partners with one as chair), or simply identify one partner within the firm to function as the gatekeeper regarding new business and new matters. Usually, the gatekeeper function includes dealing with a variety of ethics issues and general quality control matters.


The gatekeeper(s) take responsibility for (1) reviewing and approving all new clients and certain new matters from existing clients (e.g., those matters that substantially and significantly vary from previous work done for the client); (2) addressing accounts receivable problems; (3) acting as an ethics resource for firm attorneys and staff; and (4) developing procedures and forms within these areas. Where multiple offices exist, most firms elect to centralize these functions within one office to maintain consistency.


Within this model, larger firms tend to prefer committees with a dominant partner, while smaller firms may choose to have these functions more centralized in one individual. However, in both cases, there is no rotation of function for what is generally a period of years.


In either event, where the firm elects to use a chair or dominant partner, or where the firm elects to forego a committee in lieu of selecting only one partner to oversee these functions, greater success is achieved by selecting individuals who are (1) unafraid to question or say "No" to peers regarding prospective clients, (2) extremely thorough in reviewing new client information, and, perhaps most importantly, (3) are perceived as being impartial.


The latter characteristic is particularly important because the chair may need to reject prospective clients, making overall goodwill among colleagues extremely important. In a difficult economic cycle the importance of this characteristic is heightened by increased pressure to accept all prospective clients and increased dissatisfaction whenever clients are rejected.


In most firms where a committee chair exists, the attorney proposing a new client completes and submits to the chair/gatekeeper a standardized intake form that provides basic client and matter information, conflict of interest information, docketing information, and an engagement/fee agreement status report. Most firms also require providing financial information to the chair. The latter is usually presented to the chair by completion of a financial information form that requires some detail concerning a prospective client's financial resources and ability to pay, past history with law firms, and the proposed fee arrangement.


The chair makes an assessment whether to conduct further investigation (e.g., a D&B search). The chair also considers whether a retainer is necessary and the appropriate amount for any retainer as well as whether the proposed fee arrangement or type of matter involved requires additional approvals from other partners.


If the proposed fee arrangement is hourly, some firms allow the chair to grant approval at this point. In other firms, more than one vote is necessary (e.g., the chair plus one other committee member). Often, where other fee arrangements are contemplated, as in the case of contingency fee arrangements, many firms require a higher level of approval from the committee (e.g., a certain number of committee members in addition to the chair, or even the entire committee, may need to approve the arrangement).


Most firms only review new matters in cases where there has been some problem in the past with the particular client, including billing problems or disagreements, or where some new type of fee arrangement is contemplated.


Larger New Business Committee with an Officer of the Day


Some firms choose to have larger committees, and instead of designating a chair, they rotate that function as an officer of the day. These larger committees are usually made up of several partners, typically all of whom are prodigious business generators within the firm. The committee then reviews all new matters through the designated officer of the day.


In the case of larger committees with no chair or gatekeeper, usually more attention is paid to creating standardized intake forms and procedures, and to documenting the firm's practices. This is done to achieve consistency among the various committee members when they function as the officer of the day. Firms have found that where the responsibility rotates between large numbers of individuals, it is critical to formulate and maintain uniform practices to uphold standards and to combat confusion among firm attorneys. In addition, using documented and standardized practices increases the perception that the intake process is impartial, objective, and universal in application.


As in the case of those firms that use a small committee or gatekeeper, the larger committees focus on the appropriate staffing of matters, the sufficiency of any retainer, the billing rate and fee arrangement, and conflicts of interest issues.


Firms generally establish guidelines for the level of approvals necessary for particular matters. Most large committees tend not to give as much discretion to the individual serving as the officer of the day as they would to an individual gatekeeper. Generally, the officer of the day may be required to obtain additional member approval. For example, where an unusual fee arrangement is proposed, approvals may be required by the officer of the day together with a majority of the committee.


Firms that employ the larger committee approach commonly feel that the committee should be large enough to include partners from all subject matter concentrations, which is critical to obtain input from all areas of expertise and to dispel concerns related to inequality among practice groups. Where all practice areas have input, there is less feeling of the dominance of any one group, resulting in better firm dynamics.


The greatest advantage to the larger committee approach is that it eases some of the time constraints that normally accompany such committee positions. Often, firms that appoint a single gatekeeper find that the individual devotes significant amounts of time away from practice and becomes unhappy with the situation.


Similarly, where there are individual gatekeepers, those persons may not document their practice to any great degree because they embody the decision making authority. If this continues over a long period of time, as is often the case, the result can be mixed for the firm -- on the one hand, consistency and history over that time period, but, on the other hand, should something happen to the individual, the information and experience is lost.


This article is intended to inform the reader of potential liability exposures for attorneys. This article reflects general principles only and does not render legal advice. Readers should consult legal, financial, insurance, and other advisors if they have specific concerns. Neither the Los Angeles County Bar Association nor Aon and its affiliates assumes any responsibility for how the information in this article is applied in practice or for the accuracy and completeness of the information. Reproduction without written permission is prohibited. This article is made available by Aon Direct Insurance Administrators, administrators of the LACBA Sponsored Aon Insurance Solutions Program, to the LACBA members.

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