Terra Extraneus

A new study reported today in On Wall Street confirms what the data on the NASD website has always indicated, that the whole process is tilted toward the brokerages, especially the largest ones. The study reports:

Investors who take on the largest brokerages for big claims — $250,000 or more — recover just 10% to 12% of the amounts for which they ask. For claims of less than $10,000, however, they recovered 30% on average. Against the industry as a whole, the recovery percentage was 34%. For all firms receiving claims greater than $250,000, investors’ recovery percentage was 20%.

According to reporter Tony Chapelle, the study also indicated that in customer claims against the major wirehouses, the customer only wins 38% of the time. That is not surprising given the quality of counsel the major wirehouses can afford, their ongoing influence with panelists they see often, and the sophisitication of inhouse counsel.

What does this mean for registered representatives? It means that things are NOT much better in employment disputes regarding commissions, forfeitures, and similar disputes. It means that arbitration does what it is supposed to do, which is to control the liabilities of the houses, and it means that arbitrators are statistically predictable in their decision making, even if not in every single case.

While I have been able to beat these numbers in my cases, I have often considered that to be more because of the integrity of arbitrators in individual cases rather than trial skills. Nevertheless, any decisional system that favors one side or the other so predictably over time is most assuredly skewed. It should be noted that the numbers shoot up against the smaller houses compared to the major wirehouses.

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LawVibe serves up “The Stupidest Things Lawyers and Witnesses Say In a Court of Law.” (Hat Tip: Law Blawg #109). Absolutely hilarious. Here a few of my favorites:

* * * * *
Lawyer: “Now sir, I’m sure you are an intelligent and honest man –”
Witness: “Thank you. If I weren’t under oath, I’d return the compliment.”
* * * * *
Lawyer: “Mrs. Jones, is your appearance this morning pursuant to a deposition notice which I sent to your attorney?”
Witness: “No. This is how I dress when I go to work.”
* * * * *
Lawyer: “Do you know how far pregnant you are now?”
Witness: “I’ll be three months on November 8.”
Lawyer: “Apparently, then, the date of conception was August 8?”
Witness: “Yes.”
Lawyer: “What were you doing at that time?”
* * * * *
Lawyer: (realizing he was on the verge of asking a stupid question) “Your Honor, I’d like to strike the next question.”
* * * * *
Lawyer: “When he went, had you gone and had she, if she wanted to and were able, for the time being excluding all the restraints on her not to go, gone also, would he have brought you, meaning you and she, with him to the station?”
Other Lawyer: “Objection. That question should be taken out and shot.”
* * * * *
Lawyer: “Doctor, before you performed the autopsy, did you check for a pulse?”
Witness: “No.”
Lawyer: “Did you check for blood pressure?”
Witness: “No.”
Lawyer: “Did you check for breathing?”
Witness: “No.”
Lawyer: “So, then it is possible that the patient was alive when you began the autopsy?”
Witness: “No.”
Lawyer: “How can you be so sure, Doctor?”
Witness: “Because his brain was sitting on my desk in a jar.”
Lawyer: “But could the patient have still been alive nevertheless?”
Witness: “Yes, it is possible that he could have been alive and practicing law somewhere.”

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Edward F. Sherman provides an interesting (and lengthy) ABA Journal article on class actions: their history, the ways in which they have helped and hurt society, and their future. Sherman is a law prof at Tulane University School of Law, New Orleans, and chaired the ABA Task Force on Class Action Legislation. His article begins: “As the golden age of consumer class actions ends, the question now is whether they have any future.”

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Massachusetts is cracking down on brokers and other financial advisors who falsely claim to have special expertise in advising senior citizens on their investments. The new regulations, which take effect June 1, will require that such claims of special credentials must be approved by the Secretary of State. You can learn more about the Massachusetts regulations on the website of Secretary of the Commonwealth William Galvin.

When it comes to investments, senior citizens are where the action is. There are 37 million senior citizens (age 65 and older) in the U.S. today. It is estimated that they control 70% of our nation’s assets. Their median household net worth is $108,885. When you consider that that figure includes home equity, most senior citizens are not wealthy people who can afford to lose lots of money due to poor financial advice. What do you do when you are in your 60s or 70s or 80s and lose your life savings? Few things are more reprehensible than an unscrupulous broker or advisor who recklessly plows through a senior adult’s assets.

To say I am skeptical, is probably an under statement. Massachusetts already licenses insurance agents, registered representatives (securities brokers) and registered investment advisors (as do the NASD/NYSE and the SEC). False or fraudulent representations are already illegal. Investment recommendations that are unsuitable for the elderly or exceed their fragile risk tolerance is already illegal. How will a second license or second level of credentialing help?

Massachusetts would be better off protecting the elderly by restricting surrender charges to two years on products sold to persons after their 70th birthday, prohibiting sales of products to married persons over 70 that do not automatically include a right of survivorship, and doing more to educate licensed persons about and set standards for risk tolerance for persons above the age of 70. For example, people over 70 do not belong in over concentrated portfolios. I often see instances where older and elderly people have been over sold growth and aggressive growth products, sometimes overlapping products, and then the issuer, the broker – dealer or the sales person forget the client exists and does not review positions annually or rebalance the portfolio. Down side risk only seems to matter after a major market correction.

There are too few enforcement actions by states and Massachusetts is hardly leading the way. Most state regulators do not have to commence a forfeiture proceeding against a licensee; the regulator can simply look at a situation, and call the issuer’s general counsel, and advise them they have thirty days to solve the problem. Most issuers will leap at the opportunity to avoid a public announcement of an enforcement action based on sales practice violations practiced on the elderly.

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Interesting article on thumb drives – and software designed for thumb drives – in the May ABA Journal. Attorneys David Beckham and David Hirsch, who work in what they say is a paperless office in Burlington, Iowa, provide a good review of some flash drive applications.

I love my thumb drive. Like many business people, I sit in front of two computers, at work and at home, almost every day. After using numerous other methods over the years to transfer data smoothly from computer to computer, the thumb drive solved that problem for me.

However, I use my thumb drive primarily as a next generation floppy disk or CD – just a means to store and transfer data. Software designed to be resident on and run from thumb drives takes their utility to the next level.

It doesn’t take a crystal ball to foresee a day soon when computers will be just another office appliance, like telephones and printers and fax machines. People will think less in terms of “my computer” and be less concerned with the bells and whistles on their computer, because all of the important stuff – not just files, but many of the applications that run them — will be on one’s portable drive, ready to plug into whatever computer we happen to have access to.

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LexisOne reports: “Why Most Business Web Sites Miss the Mark: The Top 10 Mistakes Businesses Make Online.” This article contains nothing new, but it is a decent review of the basics of website marketing.

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FOLLOW THROUGH IS THE HARD SECOND MILE

What are the tools of successful law practice marketing? A sleek website. An informative blog. Cultivating referrals. Lots of networking and community involvement. Outstanding client relations. All of these are important factors.

However, I challenge any marketing guru to identify a more important rule of law marketing than this one:

Follow through with the prospective clients who have already come through the door.

This is an aspect of law marketing that is too little mentioned, perhaps because it is too often neglected. However, obviously, follow through is absolutely make-or-break for the success of any law marketing campaign. What good is an elegant, flash-animated, SEO-primed website, or a provocative blog that is conquering the ecosystem, or dozens of qualified contacts from seminars and social events, if the attorney doesn’t follow through with the prospective clients who come his or her way?

I’m not talking about “follow up” (with contacts), I’m talking about “follow through” (with prospective clients). Marketing efforts generate contacts, and of course it is important to “follow up” with contacts. But when a contact approaches you about his own legal need, your “follow through” with that prospective client is the single most crucial step in your marketing strategy.

A referring attorney has shot you an email and shipped over a box of documents and is awaiting your evaluation. Someone who previously requested “more information” online has now called your office, asking you to take a look at her legal matter and tell her what you think. During a break at a seminar at which you were a panel member, a casual acquaintance approaches you, describes his legal problem and asks if you can help.

But that was three weeks ago. Or maybe three months ago. Between juggling your current caseload and running your business and keeping all of your marketing efforts up to speed, you have not managed to advance your relationship with that prospective client one iota. No follow through.

For an attorney in a small or solo practice, it can be easier and more pleasant to devote time to sprucing up the website, posting to your blog, or making the rounds at a business function, than to walking the hard second mile of follow through with the prospective clients who have already come through the door. In the initial phase of law marketing the goal is exposure, and success is measured by the number of hits, clicks, contact cards, business cards, etc. But when a contact becomes a prospective client, the romance begins to fade and the hard work begins.

After all, what are the odds that that prospect actually has a legitimate case worth pursuing? These considerations have greater application in some practice areas than in others, but especially in civil litigation, experience has taught you that:
• Prospective clients often get it wrong in evaluating the merits of their own cases.
• The more you dig into a matter, the more you are likely to uncover the “fatal flaw” that the prospect “forgot” to tell you about upfront.
• There is a good chance that even if some harm has been done to someone, there may be no legal basis for recovery, or any wrongdoer with sufficient assets to pay a recovery.
• There is a danger of investing real time and effort to work up a case that will end up going nowhere.

Ever had such thoughts? Are such thoughts, perhaps at the subconscious level, impeding your follow through and thus crippling your marketing? The smarter an attorney is, the more experienced he is, the more times he has been around the block, the better he gets at recognizing the flaws and weaknesses in each prospective case that comes his way — until, eventually, every new piece of prospective business looks like a pig in a poke.

Yes, working up prospective cases can be unappealing, disappointing work, but it is vital to a lawyer’s marketing strategy to have mechanisms in place to make sure he does not drop the ball on follow through. Here are some suggestions:

(1) Keep a log of prospective clients. Whether stored in the database of top-of-the-line legal software, a pedestrian contact program or an even simpler Microsoft Word chart, the log should include each prospective client’s name, date and nature of the first contact, brief summary of the matter, last step taken, and next action required.

(2) Make sure you are capturing the information about your prospective clients. When a prospect calls your office, will the person fielding the call obtain and record the necessary information? If the prospect sends an email, will it get buried in your inbox and forgotten? How are you making sure that information about prospective clients is being captured and logged?

(3) Review your prospects log periodically. Once a month is not enough. In a month’s time, your prospective client may have moved on to another attorney who actually seems to care. Once a week is better. This is an appointment with yourself that you must keep, regardless of how busy it gets. Let’s face it, if being busy is an excuse to let your prospective clients slide, you will never get around to them.

(4) Keep your prospective clients appraised of your progress. Make phone calls and send letters. Don’t leave them hanging. They understand that working up the case may take some time, but they also understand that you are busy, and they don’t want to be forgotten. Besides, a commitment to make progress reports is a good way to keep you on target to actually make some progress.

(5) If the case just isn’t any good – make a decision, advise the prospect accordingly, and move on. Once again, don’t leave the prospect hanging unnecessarily.

(6) Cultivate a culture in your office in which it is understood that prospective clients get red-carpet treatment. From your associates down to your receptionist, make sure everybody understands that in your office, prospective clients are not nuisances or nuts, they are the ones who are going to pay next month’s and next year’s rent.

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Many bloggers labor to write an intelligent, well-crafted article, only to top it off with an awful headline. If you wrote a book, would you spend only a few seconds developing the title? Likewise, if you have spent several minutes or more writing a good blog post, take a little extra time to give it a decent headline.

A headline that says something. A headline that draws the reader in. A headline that tells your prospective visitor what your article is about and why he should take the time to read it.

Much has been written about headline writing. Google returns 100,000 hits for the phrase “headline writing.” In writing this post, I took the time to review several other articles on the topic. How to write headlines that sing. Headlines that are clever, ironic, humorous, alliterative, even poetic. Headlines that pique a person’s curiosity.

Great headlines are a worthy goal, but I think those articles expect too much from the typical law blogger. A truly outstanding headline is worth every syllable, but most law bloggers can’t devote more than a minute or two to each headline they write. Therefore, my goal with this post is not to elevate any headlines from good to great, but simply to minimize the number of law blog headlines out there that are just plain awful.

Law bloggers are especially guilty of putting bad headlines on good blog posts. Maybe it’s because most of the other things a lawyer writes, from emails to correspondence to contracts to pleadings, don’t require creative titles. However, unlike the legal documents you write, nobody has to read your blog post — unless your headline convinces them to do so. The good news: although great headlines may be a work of art, a good, solid, effective headline only takes a little extra effort.

The First Commandment of Good Headline Writing is so obvious that it is amazing how seldom it is heeded: Your headline should tell the reader what you have to say. The test is a simple one: If I can’t tell from your headline what your topic is and the basic point you want to make about that topic, your headline has failed, and it has probably turned me away.

OK, sure, there are exceptions to that rule. There are marvelous headlines that are inscrutable and yet so exquisite – so creative, intriguing or provocative – that one glance and the reader cannot turn away. And there are some bloggers who are so popular, whose devoted followers hang on to every pixel they post, that the headlines just don’t matter. But if you are among the 99.8% of us who are neither celebrity bloggers nor headline-writing wizards, then at least give us a headline that signposts what you have written.

Some headlines don’t offer a clue. In the current issue of Blawg Review (No. 107), I came across these headlines: “A Rare Non-lawsuit,” “Regulation is the Key,” and “Why Aren’t We There Yet?” Do those headlines grab you and pull you in? Not me. What in the heck are they even about? Respectively, they are about a claim related to a high school football injury, regulation of the legal process outsourcing industry, and the status of women in the legal profession. Interesting topics, so why not use the headline to arouse the interest of prospective readers?

However, the headline should do more than merely identify the topic. Repeating that First Commandment of Headlines: Your headline should tell the reader what you have to say. Not just the topic, but what you have to say about it. In straightforward, specific language, tell me what is in store if I take the time to read your article.

In a search on the phrase “tort reform,” here are three headlines I pulled up from law blogs across the country: “Tort Reform,” “Tort Reform: A Suggestion or Two,” and “Real Tort Reform.” Now remember, these are showing up in search engine results among scores of other entries through which readers are skimming in search of some good reading. Which of those headlines would get your click? Pretty hard to pick?

However, on the same results pages I found these headlines: “How Tort Reform Can Hurt You,” “Tort Reform Does Not Reduce Insurance Premiums,” “Tort Reform is Misguided and Tyrannical,” and “Pfizer Proves That Tort Reform Was a Fraud.” Those headlines may not be works of art, but at least they are interesting, creating a clear and specific pathway into the pieces they head.

Think about it. There is just one reason for a person to run the phrase “tort reform” on a search engine: he wants information on that subject. You don’t have to convince him to be interested in the topic; he already is. What you do have to do is convince him to select your post from among the sea of choices that the search engine splashes up on his screen. I think you will agree, the second group of headlines above are much more likely to achieve that, because they actually say something. The first group of heads really don’t say anything at all. If the writer has nothing to say in his headline, what chance is there that he has something to say in his post?

Great headlines may be asking for too much, but it is easy to go from awful to pretty good. It just takes a little extra effort, and it is as basic as crafting a headline that tells me what you have to say.

* * * * *
OK, I’m on a hobby horse. I have a lot more notes on this topic of law blog headline writing, so look for a few more posts on this topic in the coming days.

* * * * *
Thanks to Charles Hill at Oklahoma’s favorite blog, Dustbury, for linking to this post. Charles lists some of his own favorite headlines from the past year.

Thanks to Click Abuse & Fraud for linking to this post.

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Blogs are a great law marketing tool. The Yellow Pages are out. Firms must move beyond marketing to sales. Law marketing guru Larry Bodine made these and other interesting comments in a recent interview. Here are some excerpts:

• “Law firms are just beginning to use blogs … A blog is a fantastic marketing vehicle because it establishes the author as an expert, an authority. Smart lawyers will pick one narrow, particular topic to focus on their blogs.”

• “There’s no longer a need for the Yellow Pages. I tell my clients to cancel their ads and start a blog instead.”

• “I’ll give you an example. Dennis Crouch … has a blog called Patently-o and the site gets 50,000 visitors a week. He told me that his blog has brought in Fortune 500 companies and more importantly, referrals from lawyers he has never met. He writes about patents that were granted and has now made himself the national expert. And he’s been in practice only four years!”

• “How much should a law firm spend on marketing? The rule of thumb is to spend 2% of gross revenues, not counting marketing staff salaries, on marketing and business development.”

• Bodine predicts the next law marketing trend will be to move beyond marketing to sales: “Marketing will raise your profile in the market and make you well known, but it is sales that bring in new business. In law, you don’t say ‘sales,’ you say ‘business development.’ That entails picking a target … and a long-term plan to acquire the target. … Most law practices are composed of clients who sought them out. The lawyers didn’t pick the clients so many lawyers hate what they are doing. The new trend is to pick your clients and go after them.”

• “Another trend is remote law practice. Most law practice comprises transactions, and that entails documents. A lawyer can be anywhere to write the document and the client can get the document on the web - there is no need to be anywhere specifically. … All you need is the Internet and a phone connection.”

• “I ask [lawyers receiving consultation] what they like to do in their practice. Then I ask what kind of people they like to work with. Next I’ll ask what activities are fun for them, such as boating or golf. Then we are going to mix in business development with what the lawyer does for fun. Finally, we turn to finding people whom the lawyer can help. This is how lawyers should market: find someone you like, someone whom you can help in your particular field and get out there and have fun with them.”

Here’s the whole interview: “The Most Effective Forms of Legal Marketing”

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American public companies and the broker dealers that make markets in their stock needed more protection so the United States Court of Appeals for the 7th Circuit, in Ray v Citigroup Global Markets, Inc., reinterpreted the federal securities laws to include a requirement that disappointed investors must prove not only fraud, but that the fraud caused the transaction and fraud caused the loss.

Loss causation, that the fraud caused the loss and not just the transaction, to be proven must be distinguished from broad market declines or other causes. While that conclusion facially makes sense, the allegation was that the broker dealer misrepresented the stock even to its retail registered representatives such that they misinformed the investors that the stock should be bought in ever increasing amounts, that the stock was a “great deal,” and that the stock should be purchased to the exclusion of all others. The investors claimed they were told the stock issuer had millions of dollars in contracts with other major companies and even Citigroup itself. The 7th Circuit conceded this might be “poor portfolio design” but questioned whether it was fraud.

Historically, sales practice violations by broker dealers, once proven, resulted in a recovery for the investor if the sales practice violation caused the loss by leading the investor into a purchase that should never have been made. The 7th Circuit abandoned this approach for the federal securities laws, and imposed further on the securities laws that the alleged fraud had to be actual cause of the diminution in value of the stock, rather than just the faulty purchase decision.

The 7th Circuit claimed that this theory was of long standing law but if that was the case, the federal securities laws would have been abandoned as a failed experiment long ago. Interestingly, the 7th Circuit did not summarize the fate of any state law claims, like negligence, common law fraud, violation of state securities laws or breach of contract (the customer contract with the broker dealer). Thus, the investor’s case might not be gone, however, the 7th Circuit recites that judgment was granted and thus affirmed.

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