Uber Sues City of New York- Again

The New York City Department of Consumer and Worker Protection (“DCWP”)- formerly the Department of Consumer Affairs (DCA)— was created to protect and enhance the daily economic lives of New Yorkers to create thriving communities. DCWP licenses more than 45,000 businesses in more than 40 industries and enforces key consumer protection, licensing, and workplace laws that apply to countless more.

In September 2021, the New York City Council (the “City Council”) signed into law a package of legislation directed at food delivery platforms. Among the relevant measures was Local Law 115, which required DCWP to study the pay and working conditions of food delivery workers and, based on the results of its study, to establish a method for determining the minimum payments that third-party food delivery services and third-party courier services (together, “apps”) must pay to food delivery workers. The rule is complicated, and the basis for the rule relies upon limited studies and data. Suffice it to say that the pay basis is somewhat similar to the rules that the High Volume For-Hire Services (“HVFHS”).

On June 12, 2023, DCWP issued a Final Rule setting a minimum pay rate for app-based restaurant delivery workers. The rule was scheduled to go into effect on July 12, 2023. On June 7, 2023, Uber Technologies, Inc. (“Uber”) filed an order to show cause in the New York County Supreme Court seeking a temporary restraining order (“TRO”) to enjoin the DCWP from enforcing the new pay rule. Of course, the City of New York opposed Uber’s application for a TRO. On July 7, 2023, New York County Supreme Court Justice Nicholas W. Moyne issued the TRO enjoining the CDWP from enforcing the new rule pending a hearing on Uber’s application for a preliminary injunction that is now set for oral arguments on July 31, 2023.

• A copy of the Temporary Restraining Order can be found HERE.

• A copy of the Affirmation of Urgency can e found HERE.

• A copy of the Article 78 Petition initiating the lawsuit can be found HERE.

• A copy of the Memo of Law in Support can be found HERE.

• A copy of the City’s Opposition can be found HERE.

Transportation Litigation, Mitigation and Defense & Rapid Response

What does Transportation defense mean? It means The Shanker Law firm, P.C. has extensive experience representing a wide variety of matters concerning, transportation network companies, trucking companies, car rental companies, commercial lines, ride sharing and technology companies, fleets, and other transportation organizations. We represent commercial transport companies and possess an in-depth understanding of the transportation industry. We use this knowledge to provide clients with a comprehensive defense to reduce or eliminate liability on their behalf, including elements such as safety measures, training programs, vehicle inspections, and government compliance protocols. We appreciate the effect claims, accidents, and litigation may have on our client’s businesses. We have years of experience investigating, evaluating, and trying transportation litigation cases. We understand the importance of performing a thorough investigation and providing our clients with a strategy for representation as quickly as possible while keeping them informed throughout each stage of their defense. We have collectively tried and arbitrated hundreds of claims arising from transportation accidents. We utilize aggressive defense with creative and forward-thinking strategies help clients resolve disputes in a cost-effective manner.

What is Rapid Response? Rapid response and full-service representation are the hallmarks of our transportation defense practice. When a commercial motor vehicle accident occurs, we must begin our own investigation as quickly as possible. This helps us maximize our client’s advantage as we begin to build evidence to mitigate damage and limit liability. Because we have extensive knowledge of Federal Motor Carrier Safety Administration (FMCSA) and Department of Transportation (DOT) regulations, and experience in defense negotiation and litigation, we are able to provide full-service representation through every phase of our client’s case. Recognizing the importance of immediate action, we provide a prompt response when you call. Working with experts, accident investigators and re-constructionists who will be on the scene right away, we ensure that all evidence remains intact, witness information is gathered and the cause of an accident is accurately assessed.

The next time you need defense counsel to represent your interests, consider whether they have extensive experience in the transportation industry in addition to simple insurance defense cases. There is a vast difference.

TECHNOLOGY AND FHV INSURANCE

Dashcams and other telematics devices are often used to enable for-hire vehicle fleets to improve their safety operations and obtain better insurance coverage and prices. These technological and integrations are not new, but insurance companies tend to look to insurance companies that have safety as the pillar of their fleet. 

Small and midsize fleets often lack the resources necessary to impact safety in the same ways as some of the more successful fleets. A for-hire vehicle and/or transportation entity need safety and risk-management tools as well as end-to-end solutions. These can be obtained, but one thing that is lacking in New York City is the ability to obtain a one-on-one relationship with a dedicated fleet services representative with an insurer.

Fleets desire to improve safety and want to work with insurance companies to form a relationship with their loss control representative but underwriters still seem to care more about how safe you have been over the past three years and less about how much you’re willing to invest in safety going forward. Insurance companies can deliver more tailored and effective products and services by leveraging real-time data. Data also is what powers services and tools fleets can use to achieve insurance cost savings.

Risk management typically begins with high-quality telematics—including interior and road-facing dashcams. However, great telematics are not enough to protect fleets from all risks they face. The data generated by the telematics devices has to be incorporated into a well-managed risk management program for fleets to see safety results. Fleets often are overwhelmed with data and don’t have the time or resources to fully evaluate and learn from it.

Also, being able to coach drivers on their specific patterns of behavior can go a long way toward improving safety. Additionally, fleets need to demonstrate they have done everything the right way to avoid nuclear verdicts. The data obtained also can and should be used to coach, manage, and reward drivers which tends to significantly improve their safety and engagement. 

In many cases, insurance companies are not keeping up with the evolution of technology within the for-hire transportation industry. The reality is that today, many insurers don’t offer price breaks to a fleet that has ADAS systems in their vehicles. Even if a fleet fits its vehicles with the latest and greatest technology, they will not realize immediate, upfront savings. The best way for a fleet to ensure that they get an excellent insurance policy is to constantly think of safety, not just in the short period when they are actively shopping for insurance.

Implementing safety technologies, such as road-facing dashcams, can be costly upfront. However, they will provide both immediate and long-term benefits that will far outweigh the temporary challenges. Integrating baseline technology will quickly help improve a fleet’s safety performance and efficiency of their operation and help reduce the probability of losses. 

Expansion of New york State Paid Family Leave Law

New York State’s Paid Family Leave Program (PFL) is an insurance program administered by the state that enables workers in New York to take up to 12 weeks of paid time off in order to care for a seriously ill family member, bond with a new child or to address certain issues related to family members’ military service. The program is entirely funded by employees; employers do not have to pay employees’ salaries while they are on leave. Under PFL, employees who take leave will be guaranteed job protection. Employers must hold the employee’s position until he or she returns to work, or must offer a comparable position with equivalent seniority, status, employment benefits, pay and other terms and conditions.

Under the original law, workers were able to take paid time off in order to care for a seriously ill family member. Originally, the legal definition of “family member” included children, grandchildren, spouses, domestic partners, parents, parents of spouses or partners, siblings or grandparents. Now, the legal definition of “family member” has recently been expanded to include siblings. On November 1, 2021, Governor Kathy Hochul signed a bill (S.2928-A/A.06098-A) that expands New York State's Paid Family Leave legislation to allow caring for siblings (biological or adopted). The bill will go into effect on January 1, 2023.

This bill builds upon the Paid Family Leave legislation that was enacted in 2016, which created one of the most comprehensive paid family leave programs in the nation. In effect since 2018, New York's Paid Family Leave program is employee-paid insurance that provides workers with job-protected, paid time off to bond with a newly born, adopted or fostered child; care for a family member with a serious health condition (which may include severe cases of COVID-19), or assist loved ones when a member of the family is deployed abroad on active military service. Paid Family Leave may also be available in some situations when an employee or their minor, dependent child is under an order of quarantine or isolation due to COVID-19. Eligible workers may take up to 12 weeks off at 67% of their pay (up to a cap) to care for family members in times of need.

The strong bond siblings share is undeniable. For many individuals siblings may be the only family member available to assist and provide health care in their time of need and it has happened so often during the COVID pandemic.

The Importance of Finding the Right Attorney and Preventing Problems Before They Occur

I think more and more in any business you need to find the right expert and specialist for your needs.. When you are negotiating a lease in this city I would want a real estate attorney who understands this city, real estate, landlords and the life-cycle of a restaurant. The same with respect to my liquor license. I would look for someone who understands community boards, the SLA and the issues you face in your geographic region.  If you don’t get that license, you don’t have a business.  The same with a labor lawyer—cutting corners now won’t help.  Start your payroll properly now and understand the tip laws and immigration issues. There are a number of lawyers certainly in New York that understand the restaurant business. You should not be opening a restaurant if you don’t have the right accountant who understands the restaurant business, cash flow and operational expenses. Getting the right advice at the beginning is infinitely cheaper than paying on the backend. 

I generally tell people coming to be at the beginning of a project that for five – ten thousand dollars worth of advice at the start from me or someone similar, and setting up handbooks, making sure your employment documents are right, training and making sure you have the right payroll set up and the right payroll company in place, you  can literally avoid a million dollar settlement three years later. The difference is that much—or more—assuming you follow the advice at the beginning.  I know how tight margins are, but if you don’t spend that money prospectively I guarantee some disgruntled ex-employee will find his way to the department of labor or a plaintiff’s attorney and will find some way to hurt you and your business.

Outside General Counsel and Alternative Fee Arrangements

Practical Legal Counsel for New York companies and startups

Many of our clients are entrepreneurs or growing and mid-sized business that are large enough to require advice on sophisticated legal issues but not yet ready to employ a full time in-house lawyer.  We satisffy the legal needs of our clients by acting as their outside general counsel.  Our familiarity with the legal issues that growing businesses face, and our relationship as trusted advisors, allows us to anticipate the legal risks our clients are likely to face. We then develop strategies to address those risks before they reach a critical stage such as one that may or will involve litigation.  In addition, by acquiring an intimate knowledge of our client’s businesses, we are able to provide legal support consistent with our clients’ needs and budgets.  the Shanker Law Firm works proactively with our clients as an integrated part of their C-Suite and business team to effectively and efficiently manage the legal issues they face.  Examples of the type of outside general counsel services we frequently provide to our clients include:

• Maintaining Corporate Governance Documentation

• Corporate restructuring

• Counseling officers and directors

• Filing and monitoring trademark applications

• Drafting employment agreements, NDAs and non-competition agreements

• Drafting and negotiating commercial contracts

• Employee termination advice and support

• Advice regarding regulatory compliance

• Risk management

• Insurance

• Selecting, retaining and serving as liaison with local counsel, on an as needed basis

We offer clients real fixed-fee billing for our outside general counsel services, which gives clients financial predictability and creates a true virtual law department.  We determine the fixed fee based on a client’s individual needs and our experience. This is not a “retainer” relationship in which a client pays in advance for a given number of attorney hours – which only benefits the law firm, not the client.  We provide the same cost-effective rates that are a fraction of those commonly seen elsewhere in the marketplace under the more traditional hourly services model.

Our law firm has a proven track record for success inside and outside of the courtroom. We represent companies to protect their interests and assets and to guide and them when counseling is what they need the most. We deliver assertive representation that can supplement an existing legal department or we can serve as your outsourced in-house counsel. Whether you are a start-up company still building your team or an established corporation, we provide general counsel services designed with your needs in mind. Our mutually beneficial fee structure will help you stay within budget while managing your legal needs.

FAA and its Applicability to Rideshare Drivers

With the growth of Uber and Lyft and the emergency of the gig economy, courts have struggled to fit workers in such businesses into the traditional framework of either being an employment of independent contractor. Uber and Lyft both have agreements with its drivers that mandtes Arbitration under the Federal Arbitration Act (FAA). The issue is whether the FAA applies to drivers who work for Uber and Lyft. If the FAA applies, predispute arbitration agreements will be enforced; if the FAA does not apply, enforcement will be a matter of state law. Section 1 of the FAA provides that the FAA does not apply to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1. The Supreme Court has interpreted this clause in two significant decisions. First, in Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001), the Court held that the exception only applies to transportation workers “engaged in foreign or interstate commerce.” Second, and more recently, the Supreme Court in New Prime Inc. v. Oliveira, 139 S. Ct. 532 (2019), held that “contracts of employment” included independent contractor agreements with interstate truckers.Since New Prime, federal courts have decided several cases involving rideshare drivers for Uber and Lyft that have considered the scope of § 1. Their decisions have largely addressed two questions left open by New Prime that are necessary to decide if rideshare drivers are “transportation” worker “engaged in . . . interstate commerce” and, thus, not subject to the FAA.The first question is whether the § 1 exception is limited to transportation workers who transport goods, or if it extends to rideshare drivers who transport people. This question stems from language in Circuit City that “Congress’ demonstrated concern with transportation workers and their necessary role in the free flow of goods” justified extending the § 1 exception to truckers. 532 U.S. at 121 (emphasis added). Relying on this language. Uber and Lyft have argued their drivers are not covered by the exception because they transport passengers, not goods.The majority of courts have rejected this argument. The Third Circuit examined the history of the FAA and the understanding of the terms “seamen” and “railroad employees” at the time the FAA was enacted. The court looked to two statutes passed contemporaneously with the FAA that the Supreme Court cited in Circuit City to explain why Congress may have excluded seaman and railroad employees in § 1. Those statutes—the Transportation Act of 1920 and the Railway Labor Act of 1926—regulated railroad carriers that contained sleeping cars, which meant they transported passengers. Because railroad employees at the time would have included those who worked on passenger trains, the Third Circuit reasoned that “§ 1 is not limited to transportation workers who transport goods, but may also apply to those who transport passengers. . . .” Singh v. Uber Techs. Inc., 939 F.3d 210, 223 (3d Cir. 2019). Further, the court noted that Circuit City’s use of “goods” was “convenient shorthand to discuss interstate commerce.” Other courts have agreed. See, e.g., In re Grice, 974 F.3d 950 (9th Cir. 2020); Cunningham v. Lyft, Inc., 450 F.Supp.3d 37, 44-45 (D. Mass. 2020).Despite Singh’s reasoning, the authority on the goods/passengers issue is not uniform. In Tyler v. Uber Technologies, Inc., a district court relied on pre-Circuit City law in the D.C. Circuit, and, constrained by that law, held § 1 “ 'only excludes from the provisions of the Act the employment contracts of workers engaged in the transportation of goods in commerce.’ ” (quoting Cole v. Burns Int’l Sec. Servs., 105 F.3d 1465, 1471 (D.C. Cir. 1997)). In Osvatics v. Lyft, Inc., a different district court in the District of Columbia reached the opposite conclusion. This creates an intra-circuit split that the D.C. Circuit may need to resolve. If that court agrees with Tyler, or another circuit holds § 1 only applies to workers who transport goods, the Supreme Court would need to resolve a circuit split.The second significant question left undecided by New Prime is what constitutes “engaged in . . . interstate commerce” and whether it applies to rideshare drivers. To qualify for the FAA exception, must a driver transport passengers across state lines? Must that be a regular activity? Or is it sufficient that they transport passengers from other states or countries—as drivers taking passengers to and from airports commonly do? On this issue, the courts are more divided.As a general rule, courts do not decide the scope of the § 1 exception based on the tasks performed by the individual plaintiff, but on “whether the class of workers to which the complaining worker belonged engaged in interstate commerce.” See, e.g.,Wallace v. Grubhub Holdings, Inc., 970 F.3d 798, 800 (7th Cir. 2020). This largely depends on the role drivers play in relation to the employer’s business and does not depend on the workers actually crossing state lines. For instance, the Ninth Circuit has held that drivers who complete “last mile” deliveries for Amazon products that routinely originate from another state “form a part of the channels of interstate commerce” even though they rarely crossed state lines. Rittmann v. Amazon.com, Inc., 971 F.3d 904, 917 (9th Cir. 2020), cert. denied, 141 S. Ct. 1374 (2021). Conversely, the Wallace court noted that drivers who deliver food from local restaurants are not engaged in interstate commerce.Applying this test to Uber and Lyft, a good number of courts have held that rideshare drivers are not engaged in interstate commerce. In re Grice reasoned that rideshare drivers are much like cab companies, serve only a local area, and, thus, “have an 'only casual and incidental’ relationship to interstate transit.” Other cases acknowledge that drivers may regularly transport interstate travelers, particularly to and from airports, but nonetheless find that the class of drivers do not “perform an integral role in a chain of interstate transportation.” Capriole v. Uber Techs., Inc., 460 F. Supp. 3d 919, 932 (N.D. Cal. 2020) (citing statistics that only 2.5% of Uber trips crossed state lines and only 10% of all trips began or ended at airports); Hinson v. Lyft, Inc., 2021 WL 838411, at *7 (N.D. Ga. Feb. 206, 2021) (while Lyft drivers may affect interstate commerce, they “as a whole are not in 'the particular business of offering interstate transportation to passengers’ ”).Other courts have reached the opposite conclusion. In Haider v. Lyft, Inc., the court focused on the particular nature of Lyft operations in the New York Tri-State Area. It cited evidence that 25% of Lyft trips begin or end at air, train, or bus terminals and that Lyft has marketing partnerships with airlines and hotels. The “quantity and nature of Lyft’s connections to hubs of interstate travel lead the Court to conclude that its drivers engage in interstate commerce even when they do not personally cross state lines.” It distinguished the cases finding that rideshare drivers did not fall within the scope of the § 1 exemption as turning “on an apparent instinct that their trips across state lines must be vanishingly rare.” “That instinct may resemble reality in San Francisco, some two hundred miles from the closest land border with another state. Not so much in New York, New Jersey, Connecticut, and many other parts of the country.”Most circuits have yet to render decisions on whether rideshare drivers fall within the scope of § 1. In re Grice appears to have resolved the question in the Ninth Circuit, but the issue remains unsettled in other circuits. Even the Third Circuit, which decided Singh, merely held that rideshare drivers may fall within the exception if they are in a class of employees engaged in interstate commerce. However, it remanded the case to the district court to decide that question. The case is likely to return to the Third Circuit which, along with the Second and Eleventh Circuits are likely to soon be faced with deciding whether Uber and Lyft drivers fall within the scope of the exception in § 1. Depending on the outcome of those cases, we may see a circuit split that will require the Supreme Court to revisit § 1 and decide whether rideshare drivers fall within the scope of the FAA. Personally, I think the FAA was meant to apply to those who transport goods or persons. There is no rationale for a distinction. Also, the reach of the commerce clause in the 20th century became so vast that it is almost impossible to not engage in an activity that invovles interstate commerce. Whether a Uber or Lyft driver crosses state lines is of no consquence. If Uber and Lyft regularly facilitate the transportation of persons to the airport, then the vast majority of those persons are surely flying to another state and thus, they have a hand in the facilitation of interstate commerce. Time will tell how the court swill rule, but I dont see how this case does not end up before SCOTUS.

Reprinted in large part from the New York Law Journal. 2021 ALM Media Properties, LLC. on May 14, 2021

Alternate Fee Arrangements Preferable to the Broken Billable Hours Model

The profession and practice of law is demanding. Our jobs are chronically demanding and involve long hours. A lot rides on our success and behavior, and this pressure only increases as lawyers rise in their profession in both law firms and in-house legal departments. I think it is fair to say, regardless of income or the type of law practiced, most lawyers work long stressful hours. Working as a lawyer is a great way to impact the world, to learn, to grow, to feel accomplished, and sometimes even to find happiness, but it can become a problem when lawyers do so at the expense of themselves and the people closest to them. Too many of us find ourselves spending so much of our lives on the proverbial treadmill of work that we do not have enough energy to sustain both work and a home life. There has a be a way to balance the two.

Most lawyers intrinsically intertwine their value with the number of hours that they spend on any particular matter. This is the primary reason lawyers have typically charged based upon the number of hours they work. Lawyers love to hate the billable hour where days are sadly measured in terms of our yearly, monthly, weekly, and daily targets. Most lawyers know how much time is needed to bill on a weekly if not daily basis to meet pre-determined targets. These targets may be imposed by our firms (with weekly reminders) or by ourselves (with constant reminders).

The billable hour is a form of economic tyranny that has controlled most lawyers’ working and personal lives. Recording our time; getting our time in; billing out our time; collecting for time billed — these are our preoccupations. Many lawyers hate reducing the relationship with the client to billable units but are nervous about changing the billing model. Most lawyers cannot fathom the possibility of alternate fee arrangements (i.e., charging the client on some basis other than the billable hour).

I am keenly aware of the fact that there is a purpose to billable hours. For the lawyer and law firm, it is a way in which to provide predictability. You work 5 hours, and you get paid for 5 hours, at least in theory. For the client, it is a way to ensure, theoretically, that you are not overcharged and only pay for time actually worked. I say theoretically because they client does not know if the lawyer spent 1.2 hours on the case or actually spent .8 hours but billed for 1.2 hours. It involves a certain level of trust. Unfortunately, when a large portion of the public still does not trust lawyers, the same public is not going to trust their lawyer to bill them for the exact amount of time they actually spent on a matter. The billable hour has created a crisis of confidence. It is our job to restore confidence to the legal profession.

The billable hour may be the most reviled payment structure in history. Clients hate it because they think it encourages busywork and padding. The biggest problem is that while clients want high- quality legal services and we have a professional obligation to provide them with such, the billable hour method does not reward efficiency or quick resolutions Even more insidious, there is nothing in the billable hour system that encourages innovation, but there is plenty that discourages it. The lack of reward for efficiency pits the lawyers interests against that of the client.

1

Billable hours not only have a negative impact on the psyche of the client, but it surely has an adverse impact on the physical, emotional and psychological well-being of the attorney. When you have a job that requires billing by the hour, your life revolves around every 6 minutes. I have heard horror stories of people that have to rush through going to the bathroom because it is time wasted when the lawyer could have been working on a client matter and recording their billable time. This is no way for an attorney to live a life. The treadmill of work and inability to sustain both a work and a home life leads to burnout as well as physical and mental health issues. It is no wonder lawyers experience a higher risk of mental illness and addiction than the general population. One in four lawyers suffer elevated feelings of psychological distress, including depression, anxiety, and burnout. These feelings can and often do cause anger, fear, regret, remorse, grief and sometimes can even lead to suicide.

The law firm culture of billable hours encourages workaholic behaviors that lead to stress-related illnesses and dependencies, as confirmed by research showing that lawyers suffer from alcoholism and use at rates far higher than non-lawyers. Divorce rates among lawyers also appear to be higher than divorce rates among other professionals. Although lawyers represent some of the best-paid professionals, they are disproportionately unhappy and unhealthy. The result is a profession full of burnouts and resentment. Without something more, today’s lawyers will continue to struggle. Fortunately, there is another way.

On the other hand, the billable hour model also engenders distrust of the legal profession. Let's face it. Anytime a client receives a bill from a lawyer where billable hours is involved, one of a number of things happens. Either the client looks at the bill and delays paying it, or they look at the bill and question whether or not the lawyer actually spent three hours working on a motion (as opposed to weather another lawyer could have done the same task in 2 hours) or the client eventually calls up and seeks a reduction of the amount of the bill for whatever reason. This means that the lawyer will either reduce their bill and accept less than was bargained for or the lawyer will raise their fees in the future and build into the cost the likelihood that the client is going to seek a reduction. This is not a good way to start or maintain the attorney-client relationship. When the legal industry is already reeling from a crisis of confidence, the last thing that we need is clients who simply do not trust their lawyer. Clients want high-quality legal service and we have a professional obligation to provide them with such a service.

Personally, I have never been a fan of the billable hour. Early on in my career, over 20 years ago, it seemed extremely tedious to have to keep track of every 6 minutes of every workday. It also seemed that utilizing the billable hours method was a disincentive for clients to contact a lawyer when an issue arose. Think about it. If somebody has a problem, whether it be an existing client or prospective client, there is no doubt about it that, due to billable hours, they are going to think twice about whether to contact a lawyer when there is a legal question. Why pay for a lawyer when the prospective problem may never come to pass. It is often a simple legal question that can be answered in short order by counsel that can prevent full-scale litigation. Some lawyers they like this mentality because it generates litigation which generates billable hours which generates money. I do not like the billable hour model not only because it discourages efficiency and perpetuates distrust of the profession, but because there is another alternative that I believe works to restore client confidence in the legal profession, strengthens the attorney-client relationship, encourages efficiency and at the same time provide provides predictability to both the attorney and the client.

2

I have said it before, and I will say it again. Law Firms that fail to innovate do so at their own peril. If we learned anything from the 2020 COVID pandemic is that you have to be prepared for all contingencies. Law firms that relied upon billable hours from companies that were hard hit by the COVID pandemic saw themselves in crisis mode. The courts shut down for a while and any person or company who did not have an emergent legal matter simply told their lawyers to hold off on the case, hold off on the matter or to hold everything in abeyance until further notice. Many law firms immediately lost their stream of income because the billable hour became useless. No work equals no billable hours which equals no money. No money means cut- backs, layoffs, and sheer hard times. Sometimes you cannot fully prevent this but sometimes you can. By now, law firms should see the importance of pushing outside the mold, doing something different and coming up with a new model. So, what is the alternative?

The answer, in part, is that law firms must start shifting toward Alternative Fee Arrangements “ALAs” including flat-fee models. Flat rates cure most of the inefficiencies of billable hours and shift the risk of uncertainty from clients back onto their attorneys, who are better equipped to anticipate and price those uncertainties. Flat fee models give attorneys the incentive to work efficiently and innovatively, since they make the same money whether they take 2 or 20 hours to complete a flat-fee task. While there will certainly be cases where an attorney spends more time than they anticipated on a task, smart attorneys will find ways to drive efficiencies and improve their effective hourly rate.

Clients love flat rates, too, because they know exactly what they are going to pay for the service they ask for and receive. Many attorneys love flat rate fees because they know what to expect from each matter/case that they handle in terms of the work required. The attorney can also accurately predict what they will be paid. No more late payment of invoices, no more reduction in payment of bills. The parties come together from the outset, agree upon a flat rate and the full amount or the balance is paid within 30 days of completion. Some attorneys say they cannot use the flat fee- based model it because how can you accurately predict how much time it will take to handle a case as there are always variables that cannot be fully predicted. My answer to that is easy.

If you have been practicing long enough you can predict with pretty decent precision how much time it will take to handle a matter. If you cannot make an accurate prediction, then just look at your past history of how long it took on average to handle similar matters. Some say that this may work for transactional matters such as drafting a contract, preparing a will, a real estate closing, etc., but not for litigation. My answer to this is to say that the ability to predict is there. Even with litigation, with sufficient experience, we know on the vast majority of cases how long it takes to prepare an answer, prepare discovery demands, take a deposition, draft a motion, etc. Look at the worst and best-case scenario. If you underestimate and you spend way more time on a matter than anticipated, then either you have not been efficient enough and need to figure out how to be more efficient or use that experience to be able to more accurately predict it for the future. You may also want to consider the utilization of up-to-date technology to not only be more efficient, but to arrive at the right pricing structures.

3

If you overestimate and received a very fair amount of money for the work performed, you will be happy. If you way overestimated to the point of being obscene, then you can even consider refunding some of the money to the client or reducing the final bill. A client will surely not object to a refund or voluntary discount. In fact, it would tend to engender trust and even a sense of loyalty. Either way, there is more predictability for both the attorney and the client and no need for the pressure of billable hours. Spend your time working on the case rather than billing and worrying about billing. Less worrying leads to less stress. Less stress leads to a happier lifestyle. Happier lifestyle leads to a happier person in general.

I start with AFA’s about 15 years ago. It was so successful in terms of the financial and other benefits that I took it one step further. About 10 years ago I took it to the next level. The business model that I created helped stabilize my law firm, my work life and my finances. It also made me happier, gave me more time to spend with my wife and family and took away a massive amount of stress and anxiety. Surprisingly and happily, it helped strengthen the relationships I had with my clients. In fact, the relationships were so good that they became my biggest source of referrals to new business and new clients. My clients were so happy with my work and the pricing structure that they frequently referred me to everyone they knew who needed a lawyer. Finally, this business model helped me get through the COVID crisis without being financially harmed. Let me explain a bit.

Approximately 10 years ago, a client of mine, who is the CEO of a NYC company and someone who I have great respect for, was unhappy with the billable hour model. I did perform regular work for him, and he wanted to keep my firm as his counsel, but he simply did not like the uncertainty of how much it would cost each month. I asked him how can I be able to come up with some new arrangement without knowing what the future would bring. He said he did not know, but if we don’t come to a new arrangement, he may have to consider his other options. I did not want to lose him as a client and was backed into a corner. It was at that moment that I had the proverbial “Ah- Ha” moment. I said what if we agree upon a certain scope of work for a certain amount of money each month for one full year. I would perform all work within an agreed upon scope and he would pay me the yearly fee in 12 equal installments by the 1st of each month. At the end of the year, we will review the amount and nature of the work performed, the work that is anticipated to be performed in the future, see how satisfied he is with my work and we both see how satisfied we are with the finances of it all. I threw out a number and he agreed. We shook on it. Never had a contract with him and never had to. I know I am good for the work and I know his word for payment is good as gold.

This was a huge risk for me. I could have been stuck performing work the entire year for this one company and not have time to work on anything else, much less run my law firm and have time to spend with my wife and kids. On the other hand, I would have a guaranteed payment each and every month for 12 months and would not have to worry about how much would be paid, when it would be paid or whether it would be paid at all. Most of all, I didn’t have to worry about billable hours.

Fast forward one year. Not only was the arrangement beneficial for both of us, but we each agreed that we mutually wanted to continue on the same terms for another year. Now, after a year of experience with this one company, I knew with pretty good precision how many transactional matters I would have to handle for them and how many litigation matters I would be responsible

4

for. In other words, I was able to figure out how many hours of the week I would be dedicated to this company. It also enabled me to pretty accurately determine how many hours per week I would have to dedicate to other companies and other cases. What happened thereafter was amazing. First, our attorney-client relationship grew closer and stronger. My client got me involved in more and more legal and business matters. He loved the fact that he could pick up the phone and call me without worrying about being billed for a 12-minute call or a 6-minute email. By my client not having to worry about picking up the phone to call me for fear of the cost, I was able to be more proactive with his company. I also took the initiative to get involved in certain things that I thought my client would benefit from me helping with. My client loved it because he was paying my firm the same no matter what I chose to take on. Over time, the things I chose to take on became so important to my client for me to handle that my client soon began to rely upon me to take these things on. Do you see what is going on here? The additional work I took on inadvertently generated more work and a better relationship with my client.

Soon thereafter, I was doing such a good job for this one company that the CEO referred me to the CEO of another NYC company. I offered the same flat fee yearly arrangement, but they wanted to start with hourly billing. I said OK. After about one year or so they wanted to know if the yearly flat fee arrangement was still available. I said sure. I did the same thing with this client as I did with the first client. I would perform all work within an agreed upon scope and he would pay me the yearly fee in 12 equal installments by the 1st of each month. At the end of the year, we would review and see how happy we were. Over time, with this client, I became the right-hand man of the CEO. I became the go to guy. He got me involved in so much work that I had to increase his fees after 2 year and he gladly agreed. He also loved the fact that he could pick up the phone and call me without worrying about being billed and he enabled me to be more proactive with the company. So much so that in certain instances, in his absence, I was designated to run the company for him.

Word soon got out. Steven J. Shanker, Esq. was a fair and honest lawyer who does a great job, is responsive to his clients, is reasonable with fees and is a man of his word....and he knows how to get the job done. Hence, that’s why I started to call myself their “trusted advisor”. I liked this better than simply the lawyer. I liked it because I was more than their lawyer. I soon had this arrangement with multiple companies in NYC. So much so that I was unable to take on new clients.

As a result of the succes I personally saw with this model, I then took it to the next level. I created what I call the “Outside General Counsel”. What this means is and what I offer to clients and prospective clients is that I acts as in-house counsel for a select number of companies, but they pay me as an independent contractor. Again, just as stated above, I perform all work within an agreed upon scope and get paid a yearly fee in 12 equal installments due by the 1st of each month. At the end of the year, we review and see how happy we each are. I essentially act as an in-house counsel would, by being the go-to person not just for all legal matters but any matter that the C- suite needs me for, and I get paid to do so on a regular basis. Essentially it is guaranteed pay like an employee but with the freedom of an independent contractor. My obligation is to ensure my clients needs are well attended to, that I make myself available when my clients need me and that I handle each case and matter entrusted to me with excellence. I do this and have been doing it all to the satisfaction of my clients.

5

More importantly, I have personally seen the effect I have had on being able to be pro-active for my clients. I used to and still say a lawyer such as myself and the services I provide can make me be akin to either a fireman or a doctor. If I act as a fireman, that means a client calls me when there is a problem and when there is a problem that usually means litigation. Hence, the house is on fire. I tell the client, there is going to be damage (heavy costs) and I will do my best to contain the fire (the damages) but there is no guarantee in terms of the outcome or the costs, due to billable hours. In the other hand, I can be a doctor who is on staff to give regular check-ups (be available to ensure compliance) provide diagnostic tools (proactive to mitigate risk) and if a problem arises (threat of litigation), it can likely be taken care of or neutralized with minimal costs. Hence, the choice is up to the client. If they go the route of me being a fireman, then they don’t have to pay me a penny to be their outside general counsel. But if a problem arises, we go the route of billable hours and it will get costly. If they go the route of me being a doctor, then they pay me perhaps sometimes when they wouldn't have to, but on the whole having me around causes them less headaches, prevents more problems and helps keep their businesses running smoothly. I am sure I don’t have to reiterate that me as the fireman is much more expensive than me at the doctor. All of my clients have seen the good and the bad. They choose for me to be their doctor. It works well for them.

Best of all, for me, I work 9:00 am to 5:00 pm. I only work Monday through Friday. I don’t deal with criminal law so there is rarely an “emergency” that has to be dealt with before 9:00 am, after 5:00 pm or on the weekends. My clients appreciate this unspoken rule and respect it. So now I know if they call me after hours or on a weekend, someone must be in some serious trouble. Financially, I can say that I make more money now than I ever did. I don’t really care a lot about money. I believe money is just a way to pay the bills. I do believe money is the root of all evil. All I really care about is my wife and family. So, if I am happy doing my job, my clients are happy with the service I provide to them and my bank account is flush, then so be it.

Finally, when COVID hit in March 2020, most lawyers went into a frenzy. Some were laid off, some were paid less, some lost their jobs, many saw their clients put a hold on all work and hence all income came to a sudden stop. I don’t want to say that I am immune to the economic effects of COVID, but because of the business model I have, my clients, so long as they still have a business, they cannot say to me to stop all work or we cannot pay you. They know that I work my ass off many months at a time when the pay for those months is lower than it would be under a billable hours’ model, but I also get the benefit of getting paid the higher amount when the work is less. Now that the ebb is low, meaning the work has decreased, I get the benefit of getting paid the same agreed upon monthly amount. It is an ebb and flow type of arrangement and that is how it works.

Despite my ability to tell my clients they must pay me the agreed upon amount of money as contracted before COVID hit, I did not do that. While they would have paid my bill if I had insisted, I am loyal to my clients and think for the long term. If I didn’t reduce my fees then they could say to me at the end of the yearly period, they don’t want me or can’t pay me. Also, they may have been disgruntled because everyone is taking bite of this big COVID shit sandwich and my failure to take a hit is a reflection upon my character. That is why I said to myself, since my clients’ businesses were hurt by the pandemic, I am going to take the hit with them. As such, I volunteered to reduce my monthly fees until this all blows over. I believe I am a decent human being and a loyal person. My generosity in reducing my fees for my clients was well received and well appreciated. Money can’t buy you love, and it can’t buy you happiness. Also, one can’t buy loyalty or trust or honor. Those have to be earned. I believe through my business model and my acts of

6

generosity towards my clients during this pandemic has gone a long way to strengthening my relationship with them long into the future as well as ensuring that my good name is preserved.

So, to wrap it all up. With all this in mind I can honestly say, not only are my clients happier, but I am happier. I don’t have to worry about billable hours, don’t have to worry about collection or involuntary fee reduction. I don’t have to even have to worry about new business because it keeps coming in. While NYC is a big city, I found out that it is a small business world, and if you have a good reputation, it will precede you. Most of all, I am less stressed, have more time to spend with my family and do the other things I love to do other than play lawyer, such as play guitar, paint, drive fast cars, shoot guns, ride my Harley motorcycle and enjoy the summer on the beach. Life is too short to be on the treadmill of the billable hour

I am in the best place I have ever been in my career and I love it. I was reluctant to even write about it for fear of superstition creating a hex on me for sounding confident. I don’t know what the future will bring, but I am doing all I can to be the best lawyer I can be today and planning my practice to be doing the best it can for all my clients tomorrow.

The bottom line is this. The billable hour model is broken, and lawyers need a new model to keep clients happy, keep themselves happy and to stay more relevant to the times. If you do not consider AFAs, you are leaving a HUGE marketing advantage on the table. If you are in an industry where everyone bills by the hour, it is a great opportunity to stand apart from the crowd.

By: Steven J. Shanker, Esq.