First, Rename All the Lawyers

By John Fabian Witt
The New York Times
October 24, 2006

IF a rose would smell as sweet by any other name, will trial lawyers smell better with a new one? That’s the question posed by the impending self-reinvention of the Association of Trial Lawyers of America. After Election Day, the 65,000-member outfit whose lawyers brought us multibillion dollar settlements in cigarette cases, millions of asbestos injury claims and lawsuits over McDonald’s coffee will change its name to the American Association for Justice.

There’s already been much wry snickering about the organization’s vaguely Orwellian new banner. But it’s not the first time the kings of torts have changed their name, and it probably won’t be the last. For a half-century now, trial lawyer identity crises have been exquisitely sensitive barometers of American politics.

In the late 1940’s, a cadre of poorly paid and status-starved lawyers representing injured workers (the claimants) in the workers’ compensation system banded together to form a lobby dedicated to the advancement of their own and their clients’ interests. They called their group the National Association of Claimants’ Compensation Attorneys.

That name worked for only a few short years. The problem was that the workers’ compensation system was designed to streamline the resolution of worker injury cases by eliminating (or at least minimizing) lawyers’ fees. Lawyers in the system therefore had little hope of gaining wealth or prestige. With the assistance of early association leaders like the flamboyant San Francisco lawyer Melvin Belli, the group’s lawyers began to extend their expertise to personal injury cases in the courts, where the fees ran much higher and where their Perry Mason-like trial techniques might earn them a measure of respect.

In 1960, the association formalized its new outlook by changing its name to the National Association of Claimants’ Counsel of America, a moniker that repositioned the group as one of lawyers for victims not just in the compensation system but also in the courts. Four years later, the organization renamed itself the American Trial Lawyers Association. By then its transformation was complete: the lawyers had left the compensation system behind altogether for the free-wheeling, high-risk and high-return world later made famous by Julia Roberts in "Erin Brockovich" and John Travolta in "A Civil Action."

But the 1964 name stuck for less than a decade. Another lawyer organization — the American College of Trial Lawyers — complained that the names were too similar. The defense lawyers in the college apparently worried that it would be tainted by nominal association with the lowly lawyers’ group. In 1972, the American Trial Lawyers Association gave in to the litigation by the college and altered its name to the current (and now soon to be abandoned) Association of Trial Lawyers of America.

The trial lawyers’ struggle for identity is a near-perfect parable for the course of American politics since the 1930’s. In a political system long dominated by courts and political parties, Franklin Roosevelt and the New Dealers envisioned a new kind of federal government made up of administrative bureaucracies like workers’ compensation, which would provide rationalized services to citizens.

After World War II, however, American politics slowly reverted to form: resistant to European-style public bureaucracy, shaped by powerful courts and the legal profession, and highly susceptible to the influence of interest groups and party politics.

As American politics has changed, so have the trial lawyers. They began as cogs in the wheels of the New Deal’s bureaucratic machinery. They became legal entrepreneurs, identifying creative ways to produce higher awards for their clients in the courts and line their own pockets in the process. Thanks to mass torts cases arising out of things like cigarettes and asbestos, the association’s membership includes some of the wealthiest lawyers in the country. And in the past two decades, the trial lawyers have become a crucial source of financial support for the Democratic Party.

The problem for the lawyers is that the genius of the tort system — its capacity to marshal the entrepreneurial energies of the bar — is also its greatest public relations liability. Indeed, whether trial lawyers are part of a distinctively American regulatory solution or part of a distinctively American problem, the new name seems unlikely to change the way Americans view them.

At KFC (né Kentucky Fried Chicken), the chicken is still fried. At Altria (né Philip Morris), the cigarettes still cause cancer. And at the American Association for Justice, some will say that the trial lawyers are still chasing ambulances.

John Fabian Witt, a professor of law and history at Columbia, is the author of the forthcoming "Patriots and Cosmopolitans: Hidden Histories of American Law."

                  Recasting the Image of Trial Lawyers

By Patrick Danner
The Miami Herald
August 7, 2006

Rightly or wrongly, lawyers have been blamed for a lot of the ills in the United States.

Everything from costlier health insurance to pricier products on store shelves is the fault of greedy lawyers who win big settlements from companies, their critics contend. Opponents have sought to limit attorney fees while making it tougher to file negligence suits.

Miami lawyer Lewis S. ''Mike'' Eidson, who took over last month as president of the 56,000-member Association of Trial Lawyers of America, is vowing to fight back.

Edison, president of the Coral Gables firm Colson Hicks Eidson, expects to travel to 40 states over the next year to get out his message that trial lawyers ``represent the ordinary man in trying to hold wrongdoers accountable.''

Coinciding with Eidson's installation was a vote in favor of changing the group's name to the American Association for Justice. The name is slated to go into effect this fall.

The lobbying group has tripled its communications staff in an attempt to recast its image. It has 176 employees and an annual budget of $42 million, Eidson says.

Eidson has been involved in a number of notable lawsuits. He says he handled about 150 lawsuits relating to the tread-separation of Firestone tires on Ford Explorers. At least 271 people were killed and hundreds were injured in accidents.

He also represents relatives of some of the 20 passengers and crew killed in a Chalk's Ocean Airways crash in December off Miami Beach. All of the families stand to split a reported $51 million settlement.

Eidson recently sat down with The Miami Herald to discuss his post as president of the Association of Trial Lawyers of America.

Q: One of your objectives as president of the Association of Trial Lawyers of America is to reframe the debate on the civil justice system. What do you mean by that?

A: I think our justice system, the part that I'm in, has been under attack by big corporations and foundations for the last 25 years. They are trying to make the average person seeking justice a bad thing. They have succeeded in a lot of ways.

I want to reframe the way we look at this. I want people to see this is the last place where we can hold corporations like Enron and WorldCom accountable for what they do to people.

Q: Have your opponents been more effective in getting their message across about tort reform than the trial lawyers have been?

A: Lawyers have been totally demonized, and it's part of a coordinated plan. To a great extent, it's worked because it's been difficult for the lawyers, who are the last line of defense for the average American. It's been hard for us to get this message out. People understand that what we stand for is their right to a level playing field in court. The average American understands that, but they don't understand how this system is being attacked in a very smart way by the way the other side has framed the debate.

You use the word tort reform. There is no such thing as tort reform. Reform automatically is a word used, if you're framing this debate, [to imply] that it's broken and needs something done to it. So you go out and make up laws to take people's rights away so they can't get justice in the courts. You change the procedural rules. You change the substantive rules. You change joint and several liability . . . so you can make more money and you're not held accountable for what you do. This is an attempt to destroy the system, to avoid accountability, to avoid responsibility for wrongdoing.

Q: How do you turn the tide?

A: There are two ways we can change that. One, we can support pro civil-justice candidates to Congress. We are involved in many of these races across the country, in providing financial support and providing people who will help them at the polls in September. We're supporting candidates for the House and the Senate who believe and understand that we preserve and protect the civil justice system for the ordinary man.

The second way is we are engaged in a communications plan . . . to respond to attacks on civil justice [and] attorneys who are trying to represent their clients in their quest to seek justice in the courts.

We're going to fight back with our own narrative, a story of the average American who is the victim of wrongdoing. We are going to show Americans that these are attacks on their rights and that these changes that big corporations and big insurance companies are trying to make are to increase their bottom line.

Q: There has been a push to rein in contingency fees because the amounts lawyers collect can sometimes be huge. Last month, for example, attorneys who represented Exxon dealers in a dispute with the giant oil company collected about $325 million in fees. How do you respond to criticisms of the fees lawyers pocket?

A: In that case, the court found that under all of the circumstances, that was a fair return for the investment that [the lawyers] had made. They took a risk on behalf of those [plaintiffs] who couldn't afford to hire them. I don't know whether or not I would have the courage to do what they did. But they were rewarded for the risk that they took.

The people who support changes in the contingency fees are the people who will benefit the most if they're changed. Consumer groups aren't seeking the change in contingency fees. It's big business, big corporations that are trying to change it.

[Contingency fees are] considered the key to the courthouse. The right to contract with a client is something that I thought everybody understood -- that we have a right to enter into a fair contract with a client.

Q: Doctors have been big proponents of capping contingency fees in medical-malpractice cases. Has that led to some lively debates in your household, given you're the husband and father of doctors?

A: No, it has not created any controversy in my household. My wife and my daughter don't agree with [caps on contingency fees]. Maybe it's because they've been around me for so long. But they believe that if somebody commits medical malpractice and hurts somebody that they should be held accountable and should buy insurance to cover it. So neither one of them supports caps in medical-malpractice cases.

There's certainly no tension because of this doctor-lawyer relationship. I think I've convinced [my wife] probably that there's no relationship between caps on medical malpractice and the insurance rates, that those are separate things. In the states that have caps, the insurance rates are just as high as in the states that don't have caps.

                               Tort Litigation 2004

Editor's Note
By Aric Press
January 2005

Litigation 2004/A supplement to The American Lawyer and Corporate Counsel
While lawyers play a role in every aspect of American public life, it's seldom that they become a subject of public debate themselves. The one glaring exception is the plaintiffs bar, which, depending on the propagandist we listen to, consists either of the lawyers whom injured Americans love or the lawyers whom litigation-weary Americans love to hate. Are they vultures? Paladins? Or, a bit of both?

To cut through the noisy and distracting chatter, we set out to look at the plaintiffs bar using the one criterion that all sides agree they meet: as businesses. For almost two decades we have reported on the finances of the corporate defense bar firms that fill The Am Law 100. In this supplement, we publish the results of our first effort to pierce the finances of the plaintiffs bar with a list of the 16 plaintiffs firms with the largest gross revenues in 2003. The numbers are substantial--we set the minimum at $50 million--but a bit short of the eye-popping headline numbers that are often bandied about in public discussions. We found more than one business model for these enormously successful -- and for the most part rather small--institutions. And we explored two in depth. One is New York's Weitz & Luxenberg, which started as a small shop with a large asbestos case and has grown into a national mass tort powerhouse ("A Well-Oiled Machine,"). The other is Reaud, Morgan & Quinn of Beaumont, Texas, a 13-lawyer firm that built a mighty practice out of shipyard injuries, a friendly local jury pool, and the personal magnetism of one partner ("Wayne Reaud's Higher Power," page 22 in the print edition).

In our report, we also look at the jurisdictions--alternately damned or fabled--where the plaintiffs bar's largest victories have been scored. How did Madison County, Illinois, become as famous for litigation as for its namesake bridges ("Madison County's Litigation Factory")? We look at the latest turn in the securities class action wars, the massive Citigroup settlement, a particular branch of high-stakes litigation that Congress can swat but not suffocate ("Taking Citi to School," page 44). And we examine how technology has changed the way plaintiffs run their cases.

                                     Veil of Tiers

Alison Frankel
The American Lawyer
July 1,  2004

The glaring conclusion to be drawn from this year's Am Law 100 survey is this: Partnership isn't what it used to be.

It's better. Much, much better.

The median profits per partner figure at America's 100 top-grossing law firms in 2003 was $792,500, up almost 9.3 percent from 2002. The average was even more astonishing: $930,700, up about 10 percent. Ten years ago, million-dollar partner paydays were limited to two or three firms. No more. Thirty-two of the firms on this year's chart enjoyed average profits per partner of $1 million or more, and they aren't just the usual New York and Los Angeles suspects. Bingham McCutchen, Dechert, and Howrey Simon Arnold & White were all over $1 million for the first time, each with profitability jumps of 14 percent or more. Partnership was very, very good to a lot of big-firm lawyers in 2003.

But here's the catch. Partnership-equity partnership, in which a lawyer is a full voting member of a firm, with an ownership interest and a hefty share of profits-is an increasingly elusive prize. Just 23 Am Law 100 firms have only one partnership tier, compared to 55 in 1994, the year we first began tracking nonequity partnership. The average number of nonequity partners at Am Law 100 firms increased to 65 this year, up almost 11 percent from 2002. The average number of equity partners, by contrast, grew only 4 percent. There are now seven firms on the Am Law 100 chart with more nonequity partners than equity partners. (They are Bingham, with 60 percent nonequity partners; Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, 57.5 percent; Kirkland & Ellis, 54.5 percent; Pillsbury Winthrop, 53.3 percent; Shook, Hardy & Bacon, 52.3 percent; Winston & Strawn, 51.5 percent; and Foley & Lardner, 50.5 percent.)

Those wonderful profits per partner, in other words, are coming, in the aggregate, at the expense of partners who aren't truly owners of their firms. In the category of average compensation to all partners, equity and nonequity, the average is $825,500-still a pretty nice number, but 13 percent less than the average profits per partner, and skewed by the single partnership tier of the most profitable New York firms. The median compensation for all partners in 2003 was $792,500, 17 percent less than the median profits per partner. At 31 Am Law 100 firms, the average profits per partner figure was more than 25 percent higher than compensation for all partners in 2003.

The disparity is even wider when you compare profits per partner not to the average compensation of all partners, which includes the shares of equity partners, but just to the average nonequity partner compensation. Look at Bingham McCutchen, for example. Bingham's 100 equity partners averaged $1.06 million in profits. Bingham's 150 nonequity partners-partners who, under the definition The Am Law 100 uses to define nonequity partners, derive less than 50 percent of their compensation from the profits of the firm-averaged $430,000. That's 50 percent more people making 147 percent less money. At Kirkland & Ellis the difference is even more dramatic. That firm's 157 equity partners averaged an eye-popping $1.9 million last year. The 188 nonequity partners? They get an average $400,000-and no guarantee of ever moving up into the equity partner ranks.

What the mere numbers don't show is the increasing diversity of partnership models within The Am Law 100. Firms like Cravath, Swaine & Moore and Debevoise & Plimpton, with ingrained ideas about collegiality and democracy, stand at one extreme. Compensation is lockstep by seniority. Partnerships are relatively small-77 at Cravath in 2003, 119 at Debevoise-and close-knit. At Debevoise the weekly partner lunch, part business meeting but mostly a social occasion, remains a fixture of firm life. Leverage at both firms is high-5.7 at Cravath and 4.5 at Debevoise in 2003-and the partnership track is usually nine or ten years long. Most associates will never make it. But once they do, they're set.

Kirkland is at the other extreme. Lawyers can be elected to the nonequity tier, which Kirkland calls income partnership, after six years. But there's no pretense that they are true partners. Aside from their drastically lower compensation, income partners have limited voting rights, with no voice in such matters as amendments to the partnership agreement, lease arrangements, or compensation and partner selection. Elevation to the full partnership is a matter of tenure and merit. Most new Kirkland income partners will have to wait another four years before becoming equity partners-if they ever make it. Income partners undergo rigorous evaluations in which they're rated against their classmates. Those who are told they're at the bottom of the class usually leave the firm. (Kirkland does have some permanent income partners, but they're usually in specialty areas.) Kirkland has always had more income partners than equity partners, and makes no apologies for it.

Between the extremes is a range of gradations so broad that the concept of equity versus nonequity partnership is losing meaning. The American Lawyer defines nonequity partners as partners who derive less than half of their compensation from the firm's profits, or partners who do not receive Schedule K-1 forms for tax purposes [see Methodology, page 101]. Under that definition, Pillsbury Winthrop has more nonequity partners, 155, than equity partners, 136. But at Pillsbury, according to managing partner Marina Park, nonequity status serves mostly to ease young partners into ownership, with an ever-increasing share of their compensation dependent on firm profits. Partners considered nonequity by American Lawyer standards have full voting rights and are expected to become equity partners after several years of progressing through tiers with a declining percentage of guaranteed compensation. "Once you're a [nonequity] partner," Park says, "you're a partner for all purposes." Progress through the tiers can also, however, move in reverse for less-productive partners. Last year, for instance, Pillsbury elevated six partners from nonequity to equity tiers, but two other partners moved down to tiers in which more than half of their compensation was fixed.

Foley & Lardner, another firm that we define as two-tier for The Am Law 100, similarly calls the categorization a bit misleading. Under the American Lawyer definition, Foley, like Pillsbury, has more nonequity partners, 222, than equity partners, 218. But Foley considers itself to have "one class of partners only," says chairman and CEO Ralf-Reinhard Bööer, with no distinction in voting rights. The confusion lies in Foley's means of compensating partners. The firm guarantees a monthly draw to all of its partners, with the highest guarantee only about double the lowest. Additional distributions are discretionary, and when profits are up, the spread between the lowest-compensated partners and the highest-compensated increases significantly. The first year that Foley was identified as a two-tier partnership in the Am Law 100 survey, Bööer sent around a memo. "I had to explain we had no secret deequitization program," he says. Foley actually considered creating a formal second partnership tier at a management retreat two years ago, and unanimously rejected the idea. Says Bööer: "It doesn't improve our profitability."

Other firms believe it does. There have been any number of deequitization programs over the years, with firms stripping established but less-productive partners of equity status in order to improve profitability. But some of the firms whose nonequity ranks increased substantially in the last year say their nonequity programs are designed mostly for young lawyers on the rise rather than underproducing older lawyers.

In the midst of the associate recruiting frenzy of the late nineties, for instance, Morgan, Lewis & Bockius wanted to improve its retention rates by shortening its nine-to-ten-year partnership track. The firm surveyed other firms with tiered partnerships, and decided to create a two-to-five-year fixed-income partnership to which associates could be elected after only seven years. (The fixed-income track for young partners is distinct from Morgan's custom of negotiating fixed first-year compensation deals with lateral partners; partners who joined Morgan, Lewis from Brobeck, Phleger & Harrison, for instance, joined as nonequity partners.)

"We realized it's good to give people a period of time to learn to become points partners," says Morgan, Lewis chairman Francis Milone. Fixed-income partners don't vote on the election of the firm chairman or on partner selection, but do vote on everything else. They're also eligible for bonuses based on the firm's profits. Not all fixed-income partners, however, will become equity partners. Milone says that that philosophy makes sense in a law firm economy in which you want to retain talented people, but compensate appropriately. "There are so many different relationships that the term 'equity partner' has less and less meaning," he says. "The black-and-white relationships have really changed."

Howrey Simon's Robert Ruyak calls his firm's three-year-old Level One partner program "a safety net" for young partners, offering them a fixed income and bonuses instead of the uncertainty of a share of profits. It's also a safety net for the firm. Like Morgan, Lewis, Howrey shortened its partnership track to seven years when it instituted a second partnership tier, but the firm does not promise that Level One partners will move up to equity status after the usual four-year track-or ever, for that matter. "There are some people who aren't going to make it [to equity status]," says Ruyak. "There is another very serious review for these people every year. The best really do rise to the top [but] I think a lawyer could be Level One indefinitely."

Traditionally, the most profitable New York firms have resisted the temptation to establish second-tier partnerships, relying instead on the willingness of associates to work at firms where they have little chance of making partner. On this year's Am Law 100 profits per partner chart ["Profits Remain Robust," page 133], it is still the New York firms that remain holdouts with regard to tiered partnerships. More than half of the Am Law 100 firms with only one partnership tier are based in New York, and fewer than a dozen New York firms have nonequity partners. (Many of those are not true tiered partnerships, but only a handful of lateral or first-year partners who are categorized as nonequity.)

Weil, Gotshal & Manges is the notable exception to New York's second-tier resistance. In 2001, says the firm's chief financial officer, Norman LaCroix, Weil instituted a formal nonequity program for entry-level partners. Weil had 70 nonequity partners in 2003, up from 55 in 2002, and the numbers will continue to rise as Weil adds what it calls fixed-share partners. "This was done in recognition that partners who are sharing in firm profits, who have a percentage ownership of the firm, should have certain characteristics," LaCroix says. "[The nonequity years] should be a period in which the skill sets are built-or not." Weil lawyers can become fixed-share partners after eight years, a shorter track than at similar New York firms. They make significantly more money than they did as senior associates-average nonequity partner compensation at Weil is $915,000-but have limited voting rights and no assurance that after the minimum three years they'll become equity partners. "It may be that Weil, Gotshal is able to give more people the chance to develop into equity partners," says LaCroix. "No New York peer firms have embarked on this kind of program. Maybe they will now."

The range of nonequity partner models creates confusion in interpreting Am Law 100 data. Profits per partner is exactly what we say, the average slice of profits for those who have a significant ownership share in the firm. But when more people whom the firm calls partner aren't owners than are, does that statistic have meaning? With so many components factoring into partner compensation-guaranteed draws, percentage shares, profits distributions, bonuses-firms can manipulate the number of equity partners to make themselves appear more profitable than they really are. Yet how can compensation for all partners ["The New Yorkers Keep Their Lead," page 147] be considered a more reliable gauge when the difference between equity and nonequity compensation at a firm like Kirkland is $1.5 million? And what does partnership mean when "partners" don't share significantly in the firm's good fortune or help determine its future? Is a nonequity partner at Kirkland any different than a senior associate at Cravath?

When Marina Park of Pillsbury called a meeting of associates to explain Pillsbury's tiered partnership program in May 2004, the explanation-and the comparisons she drew to seven other Am Law 100 firms-took more than a half hour of chart-reading and number-crunching. "My own associates were asking me, 'What does this all mean?' " Park says.

One thing it means is that the business of law is more complex and nuanced than ever, with partners facing difficult decisions about the historic divisions of law firm structure. Ownership doesn't only have its privileges, robust as this year's Am Law 100 shows those privileges to be. It also has its responsibilities.

The Am Law 100
Top 10
Transactions Leaders
A Pay Differential
Most Profitable Non-
New York Firms
Moving off the 100
Moving onto the 100
Litigation Leaders
Leverage Leaders
Fixed-Income Devotees
Associate Satisfaction Leaders In Review

                       Madison County's Litigation Factory
                  After the Steel Mills Closed, Suing the Fortune 500
   Became the Biggest Local Industry. An Inside Look at How it Works

By Carlyn Kolker

Litigation 2004/A supplement to The American Lawyer and Corporate Counsel

[Index to Articles]