Small Law Firms

Law Firm Wins Suit Against Associates For Not Billing Enough And All It Cost Them Was Any Semblance Of Professional Dignity

Apparently, a few thousand bucks is worth destroying your reputation.

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Portrait of disappointed young woman standing with thumbs down[UPDATE: Oh… there’s more too!]

In the early days of the pandemic, when courts closed and billable work temporarily dried up, firms had hard decisions to make. A lot of law firms weighed staying loyal to their attorneys vs. cost-cutting layoffs. Mercifully, most firms chose the former. Meanwhile, North Dakota law firm Larson Latham Huettl weighed a few thousand dollars and showing its whole ass. It chose the latter.

Now the state supreme court has affirmed its business model.

The firm had sued two former associates for “overpayment.” While billable targets usually implicate an attorney’s bonus or, at worst, ongoing employment, the agreement that Larson Latham Huettl devised contemplates associates paying the firm an hourly rate for any hours below the threshold. Which, of course, means that when the rest of the industry weighed whether or not to keep its workforce, the firm was actually best off keeping people on the payroll, knowing that the partners get paid either way.

Just kick back knowing that the longer associates fail to make hours — which they would as long as the partners weren’t bringing in business — the more money the firm could get back later. Under this model, if the economy bounced back quickly, associates would already be in place and might not even realize they were facing a sizable debt until squeezing the rest of the year out of them.

The court determined that this agreement was not unconscionable and waved away compelling arguments about the firm awarding bonuses despite prior hourly shortfalls undermining the terms of the agreement as improperly raised on appeal.

But the boundaries of legal conscionablity and good business decisions are not co-terminus. Discretion is the better part of valor and — putting aside whether it deserved to recover any salary — the firm opted to buy itself searing criticism from just about every angle except the courts.

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We flagged them. Recruiters roasted them. Law.com threw a spotlight on them. This is the only thing the legal industry as a whole will remember about this place.

Alas, Huettl remains unswayed. In comments to Law.com:

“It’s a good system for people that want to work hard, and want to put in the time,” he said. “Let me put it this way: I left the office last night at 10:30; I arrived yesterday morning at 8:30. We don’t hire people unless we have the work to do.”

No one is really questioning that the firm hires people when it has work. The crucial element here is how it treats people when it doesn’t have work. For the associates involved in these cases, they came on when the firm had work and then had to pay the firm when the partners didn’t have any work.

And the next person they try to hire is going to think hard about what happens when that other shoe drops.

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Earlier: Law Firm Sues Associates For Not Billing Enough

HeadshotJoe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.

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