Up to now, big banks have been the favored villains for all manner of bad business practices, like hasty home foreclosures, interest-rate manipulation and money laundering. But today’s report that DLA Piper, a large law firm, allegedly overbilled a small businessman by millions could give lawyers their turn in the spotlight. Are they ready?
As reported in today’s New York Times, a lawsuit alleges DLA Piper routinely overcharged for its work, running up charges of hundreds of thousands of dollars for unnecessary work. Thanks to emails included in the lawsuit, we get a peek inside the firm’s thinking, and it is not a pretty sight. According to the Times:
“Internal DLA Piper e-mails from the Project Orange bankruptcy appear to corroborate that criticism. Lawyers on the case openly discussed the inefficient use of junior lawyers, who are known as associates. Mr. Thomson, a DLA Piper lawyer, wrote that although the firm had reduced the amount of a bill for Mr. Victor, he expected his fees to escalate.”
The piece has definitely struck a nerve, judging by the number of comments the piece has generated (more than 350 since its posting last night) and its top ranking on the Times “most emailed” tally. It could be the spark that ignites a bonfire for not just DLA Piper but the legal profession.
If so, law firms could be in for the kind of PR nightmare that has struck the banking industry, which is now skidding into its sixth year of bad publicity, broken public trust and legislative grilling, with no end in sight.
The industry seems ill prepared to handle the onslaught if it comes. For one thing, law firms are private businesses that are unaccustomed to public scrutiny, and while most large firms have a public spokesman their consensus-driven cultures make it hard to keep pace with a crisis. DLA Piper’s timid “no comment” in the Times article indicates the extent of the problem.
The DLA Piper lawsuit could bring other fee disputes to the surface, but overcharging clients isn’t the big worry for law firms.
The larger problem for the industry is that all of the controversial practices at the heart of the financial crisis – from structuring complex mortgage transactions to creating aggressive tax-avoidance strategies – were done with the aid of law firms.
Other professionals, such as rating agencies and accountants, have felt the sting for playing similar roles in the crisis. But, so far, lawyers have not. That could be changing.