Avoiding claims: The managing partner's role in avoiding professional liability claims

At a mid-sized law firm that recently transitioned from one managing partner to another, the question of the requirements of the role was raised. The strengths of the former managing partner (of many years) and that of the newly-installed individual were different on the surface. But, the real separation between the two was in their differing perceptions of the managing partner’s mandate.

There was a strong sense on the part of the newly-installed managing partner of the need for greater involvement in all aspects of practice management. Meanwhile, the approach utilised by the retiring managing partner could best be described (not pejoratively) as more laissez-faire, with low involvement in many of the activities by the firm’s lawyers.

The question they then faced was: What exactly are
the appropriate responsibilities of a managing partner in a mid-sized law firm today? Should these rest upon the native capacity of the individual, or should there be a more structured position description, including an articulated set of responsibilities against which the managing partner’s skills and performance
would be measured?

In most firms, the dynamic that exists between the
partners (and within the historic setting of the managing
partner’s role) still determines the role that the managing
partner will play today. That may not be for the best, however,
as the practice of law has changed considerably in the past
20 years.

In fairness to the long-time managing partner, these changes in the practice environment require a greater level of due diligence and a very different approach to the role. Success as a managing partner today equates with spending more time in managing the firm and being more involved in the practices of individual lawyers. That, in turn, means more focus on the safety and security of the firm and its ability to resist professional liability claims and claims circumstances.

Growth pressures

The overriding requirement for law firms that have a poor claims record is to better manage their practices. This may not necessarily relate to the role of the managing partner, but it always reflects the degree of control that is exerted in key aspects of practice management, including:• the evaluation of new clients and files;

• the infrastructural integrity of the firm’s systems;

• the quality and quantity of communications with clients; and

• the ancillary aspects of the practice matrix, including hiring, supervision and management of the firm’s lawyer population.

Law firms with 30 or 40 lawyers are very much like children in their ‘terrible twos’. This is because, most of the time, their systems, methods and practice structures are the hard-won product of their developmental years – when they grew from 10 to 20 lawyers, for example. Reaching a larger lawyer population level serves to stretch those systems, methods and structures past their point of efficiency or effectiveness. At that pivotal time in firm matriculation, many if not most of these elements require replacement with more appropriate (comprehensive) tools.

Firms with managing partners who perform what may be considered appropriate duties and responsibilities are far more likely to be able to make this transition without suffering losses in personnel, disaffection of lawyers, diminution in revenues and, most importantly, professional liability claims. So, what form should these responsibilities take and what should the role of a managing partner be in a firm of around 50 lawyers?

Managing partner’s role

Figure 1 provides a delineation of the categories of responsibility that should be addressed in the overall management of a mid-sized firm. A very strong managing partner role is favoured here, because most of the categories of responsibility have a direct impact on issues related to the potential for professional liability claims.

Our analysis of 100 firms and over 600 professional liability claims between 2009 and 2011 found that missing critical dates constitutes about a third of the claims against law firms, which are directly relational to systems and procedures (such as docketing and calendaring or conflicts determinations) within the firm.¹

Client selection is always an important element to claims avoidance and should be a centrepiece of a managing partner’s list of duties. Client communication was also found to be a major issue, which falls into the categories of both systems and procedures and lawyer oversight.

All in all, conservatively stated, over 80 per cent of the claims made against mid-sized law firms fall within the areas of responsibility of their managing partners. Certainly, tagging a managing partner for each and every claim that the firm might experience is unfair. It’s clear, however, that without the managing partner’s involvement in these critical areas of responsibility,
claims may be presumed to increase accordingly.

Establishing and delineating the managing partner’s authority appears to be not only a necessity but also common sense. Why, then, is it still an issue in so many law firms?

Alluded to earlier in the story of the two managing partners
with differing philosophies was the difficulty that so many firms have in making the transition in practice structure from a firm of
20 lawyers to one of, say, 50 lawyers. In some cases, this transition is smoother than in others; sometimes it’s a cathartic experience and sometimes it doesn’t happen at all. Mid-sized firms like this are in demand as merger partners and, put graphically, as ‘absorption’ candidates. Some firms never reach the size where the transition might be made before they lose critically-important partners or are subsumed by another law firm.

Smart firms make the transition between 20 and 30 lawyers directly into the practice structure category of 50+ lawyers because it’s simply easier to digest all of the required changes at once. There is a point in time at which, if the partners are paying attention and are sensitive to these issues, they begin to understand that the methods they have traditionally used to manage matters and associates are simply not working as well
as they did in the past.

Ironically, in many instances, firms at which there are a number of lateral partners brought into the mix find these changes are more easily accomplished. This is because they have much more variety of experience in their partnerships. Contrarily, firms that are more homogenous will generally experience more difficulty in making this transition. But, those that do so are in the best position to continue to grow. These are generally the firms that will become 100, 200 and 300+ lawyers in future.

Practice structure changes in firms where the overt manifestations of population increases are understood take
on a number of forms, all of which are designed to address
the four categories in which a managing partner may have the
most influence:

1. the methods used for new case and new client review;

2. the systems designed for the protection of statute dates;

3. the protection of the firm from conflicts difficulties; and

4. the management and control of client relationships.

 

Making a difference

Reviewing new clients and new casework is perhaps the single most important place that a managing partner can make a difference. It is also the simplest because it means that a second person is reviewing potential casework and new client assignments, with an eye toward the protection of the law firm entity. It is not necessarily the managing partner who needs to
be directly involved in the process each time. It is instead a matter of structure and utilisation of law firm expertise, which is applied
to each new representation.

Referring back to the credo of the new managing partner at the firm discussed earlier, he determined that, for a period of time, he wanted to be involved in the evaluation of every new potential client because he wanted to garner an understanding of the type of new business that was coming into the firm, as well as to better understand the lawyers involved in bringing in the new matters.

The process is currently a temporary one which (it is assumed) at some point will be replaced by the usage of department heads to make these determinations themselves. That managing partner has the right idea however, because, by doing it this way, he develops a visceral understanding of the quality and quantity of new assignments coming into the firm. He has assumed the unenviable role of traffic cop to ensure work that lawyers have chosen to accept is appropriate for the firm as well as consistent with its overall goals for the development of new work from its niche business community.

The other categories in which a managing partner can make a difference are more related to the firm’s actual systems and procedures. The procedures for handling conflicts determinations properly and in a timely manner; the strictures for managing docketing and calendaring; the management of client relationships; and the training, supervision and management of associates all require the efforts and hands-on involvement of the managing partner.

The first two are entirely systemic in nature. They require a neutrally-based evaluation of the firm’s current status in handling these responsibilities and a willingness to make changes as necessary. Here, again, the reason that firms with managing partners are more able to make necessary changes is that the responsibility is placed directly upon an individual whose duties and responsibilities include the overall management of such critical procedures. The dynamics may obviously differ depending upon other factors, such as whether the firm has an experienced non-lawyer chief administrative officer, but overall responsibility still rests upon the shoulders of the managing partner.

Management tools

There are a range of technological tools that are now available for law firms to use in handling these kinds of responsibilities. Just as the managing partner needs to play a strong role in managing the firm, every firm requires integrated practice management software to deal effectively and efficiently with these issues.

Among firms that have made the move to an integrated programme and those that have not made that choice, it is
clear that those that have this kind of a software backbone
are much more likely to have many (if not most) of these issues under control. The reason for this is very simple: an integrated system provides substantially more information and does so
in a more contemporaneous context (as its happening). Standalone software systems may provide some, if not all,
of this information, but it is not provided in a manner or means that facilitates the kind of control that a well-designed integrated system can provide.

A system that includes a conflicts determination process that is transparent to everyone in the firm is far more likely to be effective. The same is true of calendaring where, once the firm provides the appropriate protocols and the system is put in place, the chances of having a ‘miss’ are dramatically reduced.

A calendar system that provides transparency (and includes appropriate backups) is not only highly efficient but also provides for the safety and security of the firm. An integrated process is more tightly controlled and makes it easier for the managing partner (or any other manager) to know what’s going on in any given file
at any given time.

Control and management are very much key to avoiding professional liability claims. The advantages to a strong managing partner in a mid-sized law firm are significant. Firms that make this kind of a changeover have more effective institutionally-driven tools with which to control their businesses.

Practice management and risk management follow an entirely parallel path. Systems that work effectively and with a large degree of transparency are mostly found in firms with strong managing partners. The role is key to the safety and security of the practice.

Thomas Berman of Berman & Associates has been advising law firms on practice management and professional liability issues for over 20 years (www.bermanassociates.net)

Endnote

1. See Claims Potential for the Mid-sized Firm,
Berman & Associates, June 2012