Can Anyone Protect Clients From Bad Lawyering? Some Lessons of a Recent Appeals Court Case
By MICHAEL C. DORF
|Monday, Feb. 23, 2009|
Recently, in United States v. Beltran-Moreno, the U.S. Court of Appeals for the Ninth Circuit affirmed the respective 35-year prison sentences of two defendants, Jose and Abraham Beltran-Moreno, who had pled guilty to an assortment of federal drug and firearms offenses. Writing for the court, Judge Stephen Reinhardt chided the defendants' lawyers for appealing sentences that were defective only in that they were more lenient than required by law.
Only through dumb luck, Judge Reinhardt explained, did defense counsels' blunders not end up harming their clients. He concluded by raising serious questions about "the quality of counsel's advice when an appeal with essentially zero potential benefit and a significant opportunity for harm is pursued" in the manner that the Beltran-Morenos' lawyers pursued their appeals.
The court's opinion in Beltran-Moreno puts the lie to the aphorism "There's no such thing as bad publicity." Surely it cannot be good for a lawyer's business for him or her to be singled out as incompetent by a federal appeals court. And yet, given the nature of the market for legal services, the unusually harsh criticism of the Beltran-Morenos' lawyers will not likely be especially bad for their business either.
In this column, I will use the Beltran-Moreno case as a window on the difficulties that even relatively sophisticated clients encounter in shopping for lawyers, and the methods that might be used to overcome those difficulties.
The Beltran-Moreno Case
How, exactly, did the lawyers for the Beltran-Morenos err by appealing their sentences? According to the Ninth Circuit, federal statutes mandated 40-year sentences for each defendant; only through an error of the district court judge were they each given a 35-year sentence. In 2005, in United States v. Booker, the Supreme Court held that the federal Sentencing Guidelines must be treated as discretionary, rather than binding, but the relevant provisions of federal law in the Beltran-Moreno case are contained in statutes enacted by Congress, not guidelines promulgated by the U.S. Sentencing Commission--and thus they remain binding.
Therefore, the district court judge had no discretion to sentence either defendant to less than 40 years. The 35-year sentences were the result of the district judge's apparent ignorance of a 1993 Supreme Court case that deems multiple violations of a single statute in a single indictment to be "second or subsequent" convictions for purposes of sentencing. Even had the district court judge's view of the law been accurate, moreover, the Sentencing Guidelines would have imposed life sentences on the defendants, given the severity of their offenses, but the district court judge exercised the discretion granted by Booker to impose only 35 years.
"Such good fortune does not come often in our criminal justice system," Judge Reinhardt wrote. Judge Reinhardt, who is generally quite critical of the lengthy sentences federal law often requires (and for whom I served as a law clerk nearly two decades ago), made clear that his pique was directed at the lawyers, not their clients. These lawyers, he observed "exhibited anything but good sense" in pursuing appeals that were doomed to fail, given longstanding precedents that the lawyers apparently did not discover. Indeed, failure was the best possible outcome of these appeals, as an order vacating the sentences, followed by resentencing by the district court judge, almost certainly would have resulted in increased sentences.
Do Clients Learn of Lawyers' Incompetence?
Will the lawyers for the Beltran-Morenos pay a price for having been so publicly reminded by a federal appeals court of their "duty to research the relevant case law" and of their "ethical obligations not to present arguments . . . that are legally frivolous"? Perhaps they will be made uncomfortable in some professional contexts, but that effect will likely be short-lived. Moreover, criminal defendants are unlikely to search the case reports to determine whether a prospective lawyer has a history of spectacular incompetence.
One might think that the situation would be different for more sophisticated clients, and that is true, up to a point. A sophisticated corporate client, for example, has an in-house general counsel who would certainly be aware of the sort of public humiliation that befell the Beltran-Morenos' attorneys.
Yet the sort of tongue-lashing that Judge Reinhardt meted out to the Beltran-Morenos' lawyers is highly unusual. Merely sub-par performance by attorneys will typically result in no public notice at all. Indeed, poor to mediocre lawyering will often have no discernible impact on the outcome of cases, depending on the underlying merits. How, then, can a prospective client decide what lawyer to hire?
The Perverse Incentives Caused by Billable Hours
Traditionally, the answer was that well-heeled clients relied on the overall reputation of law firms. Top firms hired top law school graduates, who could then be expected to do first-rate legal work, all guided by a spirit of professionalism in which the client's interest came first.
Whether this system ever worked well is debatable. During the supposed golden age of lawyer professionalism, the most prestigious firms routinely discriminated in their hiring on the basis of race, sex, and religion, and so we know that, in fact, these firms were not employing all of the best talent available. But even assuming that clients once trusted law firms to provide high-quality services at reasonable rates, they no longer do.
Over the last several decades, law firm clients have been paying increasing attention to the question of whether they are getting their money's worth from their lawyers. With budgets squeezed everywhere due to the economic downturn, that trend is likely to continue, if not accelerate.
In the last few years especially, the billable hour has come under scrutiny: Lawyers paid by the hour have a financial incentive to "run the clock," performing work that is of only marginal value. The problem is not so much bad faith (although that can occur) as a matter of mind-set. A law firm associate who knows that her chances of making partner depend in substantial measure on her billable hours will be inclined to think that spending an extra few hours or days researching some tangential legal question is worthwhile, even though it may cost the client thousands of dollars. From the associate's perspective, the extra research is (professionally if not personally) a win-win proposition: It generates more billable hours and it improves the end-product--even if the minor improvement is not cost-justified from the client's perspective.
Contingent Fees and Other Alternatives
Accordingly, and under pressure from clients, some firms have been experimenting with alternative billing schemes. But no alternative is perfect.
Consider the contingent fee approach typically used by plaintiffs' tort lawyers: The client pays nothing unless there is a monetary recovery, but if there is a recovery, the lawyer recoups her expenses plus a percentage of the net recovery. This system delivers legal representation to clients who have potentially winning cases but who would otherwise lack the funds to pay a lawyer. Yet the lawyer working on a contingent fee basis has her own set of perverse incentives.
Most prominently, a contingent fee lawyer has an incentive to accept lowball settlement offers. From the client's perspective, going to trial is cost-justified if the expected value of the trial--that is, the expected recovery multiplied by the probability of winning--exceeds the value of a settlement offer, with a discount for trial if the client is risk-averse. But going to trial is much more costly for the contingent fee lawyer, because of all the extra work she must do and expenses she must incur for a trial--work and expenses for which she will receive no compensation if she loses. From a financial perspective, therefore, the lawyer's best strategy is to take a relatively high volume of cases and attempt to settle them, even when the client would be better served by going to trial.
Here, too, the problem is not principally a matter of out-and-out disloyalty. Plaintiffs' lawyers have ethical duties of zealous representation, and ultimately clients make the decision whether to accept any settlement offer. But just as law firm associates and partners see the world through the distorting lens of the billable hour, contingent fee lawyers see the world through their own distorting lens, and advise clients accordingly.
The Problem of Asymmetrical Information
There are other alternatives to the billable hour besides contingent fees, but none of them perfectly aligns the incentives of lawyers with the incentives of clients. Moreover, even when an attorney's incentives are reasonably well-aligned with the interests of her client, there remains the matter of quality. How can the client tell whether the lawyer is doing a good job?
The core problem here is asymmetrical information. To know whether a lawyer is providing excellent services, the client must know the difference between excellent lawyering and mediocre lawyering. Some indicia will be apparent to any reasonably well-educated client: Briefs and other documents with numerous grammatical errors, for example, would bespeak a lack of basic professionalism. Yet beyond detecting minimal competence, clients will be hard-pressed to know when lawyers are providing value for money.
And that will be so, even when a client has an excellent internal general counsel's office reviewing the work product and billing practices of external lawyers. Clients hire external lawyers precisely because their in-house legal personnel lack the expertise and/or manpower to handle certain complex matters. But those very same deficiencies will greatly limit the ability of in-house counsel to supervise or even comprehend the value of the external lawyers' work. Hiring more and better lawyers in-house would ameliorate the problem, but would add new, recurring expenses.
"Moneyball" for Lawyers?
Must we conclude that clients are irreducibly at the mercy of their lawyers? In selecting lawyers or law firms, can prospective clients do no more than screen out the obviously unprofessional and those rare attorneys who have been publicly chided for incompetence? Perhaps not. In other fields, "outcome measures" can be used to gauge quality, and this may be true in the law as well.
Developing outcome measures for lawyers will not be easy, however. For one thing, much of the transactional work of lawyers does not lead to discrete outcomes. Moreover, even for litigation, good outcome measures will be hard to define. The simplest outcome measure is won-loss record, but this can be misleading. One must be able to distinguish the lawyer's contribution to an outcome from the merits of the case--just as useful ratings of doctors and hospitals need to account for the problem of adverse selection: The best doctors may have higher-than-average mortality rates because they treat the sickest patients.
One tempting model for measuring lawyer efficacy comes from the world of sports. As Michael Lewis explained in his book Moneyball, major league baseball teams have been able to use sophisticated statistical analysis to refine their assessments of players and game strategy. And as Lewis wrote in a recent New York Times Magazine article, professional basketball teams are beginning to adopt similar techniques to measure players' impact on games.
Such analyses can yield surprises. As Lewis observes in his magazine article, on the surface, Houston Rockets forward Shane Battier is an unspectacular player with lackluster statistics in the conventional categories: scoring, rebounding, assists, steals, and blocked shots. But the Rockets have figured out that these conventional categories do not measure a player's true worth; the right tools would show that Battier makes an enormous contribution to his team.
Unlike baseball, basketball is a true team sport, in which any individual player's contribution is difficult to separate from those of his teammates. Nonetheless, the Rockets have been able to disentangle individual players' worth, and that fact in turn suggests that applying similar techniques to the performance of lawyers--who also operate in a highly complex environment--should be possible.
To be sure, there is one very substantial difference between lawyering and sports: Professional sports leagues play their games in public and keep detailed records, while much of what lawyers do occurs behind closed doors, shielded by attorney-client confidentiality.
Nevertheless, a great deal of lawyers' work, including end products such as regulatory and court filings, is public. Moreover, a client has access to the confidential work-product of its own lawyers in its own matters. Given this wealth of data, clients could develop much better outcome measures than they currently use.
That would be good news for clients and potentially good news for the best lawyers, whose work would be rewarded. In the short run, however, I suspect that most lawyers would regard statistical analysis of the value of their work as an unwelcome interference with their professional role. But at least this sort of performance review by clients would be less painful than the public humiliation of being called out for incompetence by a federal appeals court.
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