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Wednesday, February 22, 2012

Morse on Underlawyering vs. Overlawyering

This article is reprinted with permission from the February 17, 2012 edition of The Recorder.

Underlawyering vs. Overlawyering

Young attorneys and law students should learn to do just the right amount of work for a client: no sloppy mistakes nor needless documents, advises Susan Morse of UC Hastings.

I am a law professor, but some of my best friends are clients who like to complain about lawyers.

If measured by frequency, my client friends complain the most about overlawyering. Who wants to miss dinner because a lawyer sends a slash-and-burn indemnity agreement redline to the other side after refusing to believe a client agreed to accept a particular risk? Business relationships damaged, legal fees increased, indigestion inevitable.

Yet, if measured by intensity, my client friends complain most about sloppy mistakes with disproportionately bad results. How about an error in the way a compensation formula is drafted that results in a failure to bound the amount payable as the client thought had been agreed, leaving the amount due subject to significant uncertainty and open to litigation? Many lawyers in training are rightly quite scared of underlawyering, of making such a sloppy mistake. They overlawyer because they are determined not to miss anything, and they communicate, often to clients as well as to their supervisors, all of the gory details to try to confirm that they have caught every possible issue, and to show that they are doing what they think is their job.

Is it possible to train new lawyers to steer clear of both overlawyering and underlawyering? Of course, observing and working with an excellent lawyer is likely to remain the most valuable way to build this crucial skill. But formal law school education can contribute to this project. It is possible to contextualize many law school subjects using the frame of giving advice to a client. And a number of UC Hastings professors have figured out how to do this even in large podium-style classes.

Here is an example. I teach several tax classes at UC Hastings. With nearly every topic covered, there is an opportunity to direct the focus of the students' inquiry away from what the law is and toward how they would advise a client based on the law. (There is also the important, separate, project of considering what the law should be and why.)

Let's say that the topic of the day is the income exclusion for damages on account of personal physical injury. A typical string-of-hypotheticals approach to teaching this topic might imagine injuries ever-more-remote from an accident; distinguish physical and emotional injury; and examine the additional time value of money exclusion benefit available for a structured, rather than a lump sum, settlement. This approach is excellent for developing the ability to read a statute and case law and identify doctrinal fault lines.

Then we introduce the client. She has been involved in a car accident and has made a claim for damages. The letter from the client to the other driver states that the client was physically injured in the accident and hospitalized, and requests a settlement. In an accompanying, one-page settlement agreement, the other driver agrees to pay a lump sum in exchange for a release of liability. The litigation partner and the client have signed off on the settlement agreement and it is forwarded to a lowly tax associate for review, "just to make sure the settlement won't be taxed." Students are asked what edits or comments they would suggest, if any, and why.

Some students cover the page with red ink. The letter doesn't even mention tax — surely it must do so, since the assignment assumes a tax associate who reviews a document. It could be made more perfectly and explicitly clear that the settlement is excluded from income. This one-pager needs some official-looking Internal Revenue Code cites. It needs to plainly say that there is a physical injury, not just emotional distress. The stream of payments should be changed so that the payments are made over a period of years; that way, the time value of money over those years will also be excluded from income.

Right? Wrong. The agreement plus the demand letter, on these facts, is a perfectly sound basis for excluding the settlement from income. No redlines necessary. I love to tell this part of the story to my friends who are clients.

But we aren't done yet. There remains the real inside baseball of lawyering, the part that clients may not see, although it is essential to real lawyering excellence. This is the part where the lawyer does his or her best to avoid underlawyering.

We start with the question of what, precisely, our tax associate ought to do with the conclusion that the agreement is just fine. Usually the room falls silent. Perhaps this is because it sounds like a trick question prompting the citation of some other relevant, contrary, hidden law. But it is not such a question. Finally someone will volunteer the right two-pronged answer: check in with a direct supervisor, for example, the tax partner with whom you work, and return with an answer to the litigation partner who asked the question.

Now, I ask my students, what do you say to your supervisor and to that busy litigation partner? Do you give in to a feeling of intimidation and squeak out simply that the agreement is fine as it is? Or do you take this opportunity to make sure you understand the client's key facts and objectives, thus guarding against sloppy mistakes? The second, of course. But you have to figure out how to do it economically. These people are busy.

We work on the essential points that the tax associate must communicate. The students might spend time brainstorming in twos or threes, or take the assignment home overnight. In class, we reach consensus. First, the tax associate must communicate that the essential legal requirement is that the settlement is "on account of" physical injuries, and confirm that the declared existence of a physical injury caused by the accident is factually accurate in this client's case. Second, the tax associate should explain that damages for emotional distress only would require a different analysis — thus reducing the chance of a sloppy mistake in a future case. Third, the tax associate should confirm that the litigation partner and the client were aware of the possible tax benefits of a structured settlement rather than a lump sum settlement when they struck the agreement — thus minimizing the possibility of a sloppy mistake in the instant case.

I also have friends who are lawyers, and they prefer the second half of the story to the first. They appreciate the less observable part of the craft, the thorough yet economical lawyering backstory. These skills — the willingness to give judicious advice, effectively communicated, and the ability to think carefully about whether the answer you give is really right under the client's facts and the law — separate the rock-steady, in-demand advisors from the cowards on the one hand, and the cowboys on the other.

Susan Morse is an associate professor of law at UC Hastings.

In Practice articles inform readers on developments in substantive law, practice issues or law firm management. Contact Vitaly Gashpar with submissions or questions at vgashpar@alm.com.

Reprinted with permission from the February 17 2012 edition of The Recorder. © Copyright 2012. ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, call 415.490.1050.

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