Smaller Law: Money Can Be a Bad Reason to Change Law Firms

As promised, some unsolicited career advice.

I became a lawyer for the money.

Others may talk about the prestige, a “love of the law,” and changing the world (all things I also care about). But, it’s the money that helps me slog through the piles of paperwork, arguing with other lawyers, and the nights I wake up at 2am and worry myself back to sleep.

If I won the billion dollar Powerball, I’d live a life free of interrogatories and argumentative lawyers. As a billionaire, I’d only employ lawyers who tell me “yes.”

On the topic of money, the Nashville legal job market is going through a golden age, with lawyers jumping from firm to firm like never seen before. In their rush to build a presence in Nashville, some of these law firms are offering quick cash to associates, partners, and, for a really big bag, entire law firms.

If you’re considering a move, I’ll offer some counter-intuitive advice: Never base your decision on money alone.

Some industries don’t have mathematical ways to measure the impact of superstar talent. If Bruce Willis wants $5M an episode for Moonlighting, then who’s to say that’s not what he’s worth?

The legal industry is different. Most law firms–big, medium, small, and tiny–follow the same general business model: billable hours. A lawyer’s salary usually comes down to: (1) How many hours are you billing? and (2) How much are you charging for that hour?

There’s a little bit of discretion this way or that way, but, in the end, a lawyer’s salary is a matter of math.

When a new firm offers a raise, a lawyer will probably be expected to “earn it back” (by multiples) by billing more hours and charging higher rates. Law firms don’t give money away.

I don’t trust legal recruiters for career advice, but BCG Attorney Search has an ok article, There are Only Three Reasons an Attorney Should Ever Switch Law Firms. They are: (1) You haven’t cultivated the right office relationships; (2) You aren’t getting enough work; and (3) You can upgrade to a better firm.

It’s not a terrible list. The “big picture” concepts are fine, but there are about 5 items of specific advice that make me cringe.

My own list would add: (4) Are you growing as an attorney, either via general learning (Are they mentoring you?) or developing a niche practice (Are they exposing you to a practice area or client base that you can grow into and develop?) (5) Do you like the people there and their working style (i.e. the vibe)? (6) Does your law firm value your contributions to the firm? (7) What are the future prospects for growth (i.e is the firm managed by old white guys on their way out, without any transition plan) and how could you fit into that future (i.e. is the leadership team inclusive, a small clique, or, worse, located 2-3 states away)? (8) What level of autonomy do (or would) they allow for you to grow your practice?

As you consider all of these questions, always ask yourself: Ignoring the potential raise, would things be better if I just stayed put?

Before I left my old law firm in 2020, I had spent about 2 years seriously listening to recruiters’ and law firms’ offers, and I realized that every law firm was basically the same. A little bit more money, but more hours and my rate would increase to a level that would chase off most of my clients. I’d be a stranger, though, who didn’t know how the document management system worked or where the snacks were hidden. The money wasn’t worth the hassle and couldn’t overcome my other concerns.

I declined all offers, mainly because I cherished my “F You Capital,” hard earned after nearly 13 years of high performance at the same firm. Even though I didn’t agree with the firm on many administrative things, my past success and client base had earned me a level of autonomy that was valuable to me. I had very little interest in being the “new lawyer.”

I understand that some lawyers are drastically underpaid, and many people don’t have the luxury of turning down a raise. What I’m recommending, though, is that money shouldn’t serve as a wildcard, to solve the red flag answers to the other questions.

You’ll have lots of jobs and will make good money as a lawyer, but you only have one career. Be deliberate when making the jump.

Tennessee’s Post-Judgment Interest Rate Hits Record High

Effective July 1, 2023, the statutory rate of post-judgment interest in Tennessee is 10.25%, the highest that it’s been in my 20 plus years of practice.

Long-time readers know that, in 2012, the Tennessee Legislature amended the Tennessee post-judgment interest statute, Tenn. Code Ann. § 47-14-121.

At the time, Tennessee creditor rights attorneys complained both about the decrease in the interest rate (at the time, it dropped from 10% to 5.25%) and also the confusion related to tracking a variable rate (it changes every 6 months). Back then, none of us envisioned a world where the rate would exceed Tennessee’s old rate.

Well, welcome to the future.

What’s next? A review of the historical list of Tenn. Code Ann. § 47-14-121 interest rates shows that rates have been steadily climbing since 2016, with the greatest spike in the past year.

When the Legislature made these changes during the Great Recession, it was designed to provide relief to judgment debtors. That the rate has reached an all-time high is good for creditors, of course, but also indicative that interest rates are pushing the economy toward a tipping point.

Tennessee Legislature Unites Both Tenant and Landlord Lawyers with Imprudent Changes to Tenn. Code Ann. § 27-5-108 (d)

In an apparent rush to be as unfriendly to tenants as possible, the Tennessee Legislature has upset lawyers for both tenants and landlords.

I’m talking about the new Tenn. Code Ann. § 27-5-108 (d), which became effective July 1, 2023.

The prior version said:

(d) If no appeal is taken within the time provided, then execution may issue.

The new version says:

(d)(1) Except as provided in subdivision (d)(2), if no appeal is taken within the time provided, then execution may issue.

(2) For a writ of possession, if no appeal is taken within the time provided, then execution shall issue by operation of law.

Do you see the difference? Under the new (d)(2), a writ of restitution “shall” automatically issue after an eviction judgment.

Some quick background: A “detainer /eviction judgment” is the court order that says a landlord is entitled to possession of the property, usually due to lack of payment of rent or some other breach under a lease. A “writ of restitution” is the subsequent legal paperwork that directs the Sheriff to physically remove a person (and all their stuff) from the property.

To be clear, the entry of the former one does not necessarily require the issuance of the latter.

In most cases, no Writ is ever needed. Most tenants act fast in response to the mere threat of having the Sheriff show up, unannounced, with hired labor to physically remove them and move all their possessions to the street.

Most landlords reach out to the tenant and do everything in their power to accommodate a reasonable and peaceable move-out, to avoid the cost and mess of having the Sheriff throw out all of a tenant’s stuff.

And, sure, not all evictions are the same, and there will always be a few–the “worst of the worst”–where the Sheriff’s help is needed. But those are a rare exception.

As a landlord-tenant lawyer, of the 500 eviction judgments I’ve won, I’d guess that I’ve issued less than 10 writs of restitution.

Why on earth did the 2023 Tennessee Legislature decide that each and every eviction judgment needs this immediate and atomic action? This makes no sense, as a matter of policy or practical application.

Tenant lawyers hate it. Landlord lawyers hate it. I’m guessing the Sheriff’s Office hates it (or will hate it).

And, worse, there’s no way around the law. The Davidson County Circuit Court has already provided notice that this will happen on all eviction judgments.

Just today, I filed an eviction judgment with the Court and, as part of the filing process, I was forced to also to pay the $67.00 Writ of Restitution fee. Neither I nor my client want that process to issue.

The only people who think this is a good idea is the Tennessee Legislature.

Smaller Law 101: Advice on Growing your next Law Firm

Exactly three years ago, I was struggling with two decisions. One, whether to buy a boat. Two, whether to leave my long-time law firm.

As to the boat, the world is full of advice about that. Ask anybody you know, and you’ll instantly hear the joke about the “two best days of a boat-owner’s life.” There’s so much information online (generally negative) that a prospective boat buyer has to actively ignore it all.

As to the second (far more important) decision, I was surprised by how little information was out there. Bar associations tend to avoid the topic like the plague. Their business model is to keep big law firms happy, or, at the very least, to not encourage mutinies. Other lawyers aren’t much help either–you’ll rarely get an honest response. They’ll either embellish (for good or bad) or, worse, let slip to somebody that you’re thinking of leaving.

As a result, most lawyers keep quiet and rely on legal recruiters or their own ego, two very unreliable and heavily biased voices.

In this wild Nashville legal market where lawyers are constantly switching firms (and, in a surprise twist, switching back to the original firm), there’s value in real talk. Sometimes the billable hours aren’t greener at the other firm.

For me, I got the law firm decision right. Having said that, even though I’ve had three very successful years, it’s all been built on a foundation of small mistakes, miscalculations, and lessons learned the hard way.

I could write a book about all the things I’ve learned about entrepreneurship, law firm management, marketing, and psychology but, instead, I’ll write some blog posts here over the next few months as the 3 year firm-iversary approaches.

As for the boat? I totally screwed up that one, a mistake so notable that it was documented on the front page of USA Today.

If you’re considering leaving your existing firm, I hope that these blog posts over the coming weeks will be useful –or maybe just keep you out of the national news.

Plaintiff Beware: General Sessions Nonsuits aren’t “Decisions” that can be appealed

If a creditor client has a claim that is close to $25,000, I’ll reccomend that the lawsuit be filed in General Sessions Court. To do that, a creditor owed $33,000 must shave its claim to fit the $25,000 limit, as a trade off for the fast pace and reduced costs.

No matter the outcome, you can always appeal the decision for “de novo” review in Circuit Court. In fact, under Tenn. Code Ann. § 27-5-108(a)(1), “[a]ny party may appeal from a decision of the general sessions court…”

If you lose? Appeal. If you win, but thought you should have won more? You can also appeal. “Any party ” means any party.

This broad right has resulted in some plaintiffs not even bringing witnesses to court. In the event that a defendant shows up with exhibits and wants a trial, the plaintiff will voluntarily dismiss the case and, then, just appeal the order of dismissal.

A new Tennessee Court of Appeals case casts this strategy in serious doubt. The Court noted that a nonsuit is a voluntary dismissal by right, at the request of the plaintiff. Walker v. Shelby Cnty. Sheriff Dep’t, No. W202200466COAR3CV, 2023 WL 3000875, at *7 (Tenn. Ct. App. Apr. 19, 2023). As a result, the trial court exercises no discretion and the nonsuit order is not a “decision,” as used in Tenn. Code Ann. § 27-5-108(a)(1), and is not appealable. Id.

Lawyers who represent creditors in general sessions need to take note of this. If faced with this difficult situation, voluntary dismissal remains an option, but the plaintiff must refile a new action after that voluntary dismissal.

That may not be a good option, though, for a few reasons.

Under Tenn. R. Civ. P. 41(2) limits who many times a plaintiff can voluntarily dismiss claims before losing them. Also, a plaintiff may be dealing with potentially time-barred claims, meaning that the filing date of new case would not satisfy the Tennessee statute of limitations. Finally, as a practical matter, the plaintiff may be concerned that it will never get service of process on the defendant in a later case, and plaintiff may want to get the current action pending.

In any of those situations, the creditor’s lawyer has only once good choice under Tennessee law: Try the case and force the judge to issue a ruling on the merits, which can be appealed.

Welcome to the Future: Starting on July 1, Rule 5.02 allows service of pleadings by e-mail.

Effective July 1, 2023, Tenn. R. Civ. P. 5.02(2)(a) will be modernized, so that lawyers can serve pleadings by e-mail.

I wrote about the proposed changes last year, and, in response, a number of you pointed out that Rule 5.02 already allowed service by e-mail.

Sure, you could, but the current version created a process that was three times more complicated than just printing it and mailing the pleading. Long story short, the existing Rule 5.02 wasn’t quite as simple as “service by email is allowed.”

The new Rule 5.02(a) makes it that simple: “Service on any attorney or on a party may also be made by emailing the person the document in Adobe PDF to the recipient’s email address, which shall be promptly furnished on request. The sender shall include language in the subject line designed to alert the recipient that a document is being served under this rule.”

civ_pro_amendments_approved_041423Download

Old habits are hard to break, and there’s not much that lawyers love more than old habits. To that end, all you non-e-mailers will be happy to know that Rule 5.02 still provides three acceptable means of service of process, with service by mail remaining an option. See Tenn. R. Civ. P. 5.02(1).

I tend to assume that lawyers who send me pleadings the mail are either being sneaky (why not waste 3 days or so of the other party’s review and response time) or trying to avoid confrontation (worrying that an emailed pleading will open the door to a snarky response).

Not me. I’ll be saving some trees and sending e-mails.

As a matter of practice, I plan to continue to send full copies of pleadings via US Mail to pro se parties, even though the rule conspicuously doesn’t require different service for pro se parties.

It’s a smart amendment, which reflects how lawyers practice law in 2023.

Tennessee Supreme Court opinion on UCC-1 filings by “paper terrorists” offers a reminder that current TN law offers no effective civil protections for bogus liens

One of the greatest current failures of Tennessee law is the lack of a penalty for fraudulent lien filings. In December, I wrote: “if somebody records a piece of paper with ‘Notice of Lien’ written somewhere on it (and includes the owner name and property address), they’ve got a totally un-lawful, but also practically-effective, lien.”

Last year, a hand-written, three sentence recorded “lien” brought a pending commercial property sale to a halt. When I politely explained to the lien claimant that there was no basis under Tennessee law to assert lien rights, she said “If that were true, then, why are you even calling me?“

What she was really saying was: Yeah, but what are you going to do about it?

In an opinion issued yesterday, the Tennessee Supreme Court was asked a similar question. In State of Tennessee v. Ronald Loyns, James Michael Usiger, Lee Harold Crowell, Austin Gary Coper, and Christopher Alan Haser, No. M201901946SCR11CD, 2023 WL 3446554 (Tenn. May 15, 2023), the Court was faced with a group who figured out how easy it is to create and record a UCC-1 personal property lien using the Tennessee Secretary of State’s online filing wizard.

So easy, in fact, that the group filed more than a hundred UCC-1s without legal or factual basis against a variety of folks who they had grievances with. The police officer who gave one a speeding ticket. An ex-wife. The local Chancery Court Clerk and Master. In all there were about 30 victims.

After one took his complaints to a lawyer, and was rebuffed, he attended the local meetings of this group, who taught him how to assert liens under the Uniform Commercial Code. By the UCC-1 filers’ logic, those “debtors” had done something that resulted in inconvenience to them and the UCC-1 filing was designed to obtain compensation (ranging, in this case, from 4 and 12 million dollars). The victims testified about the resulting failed home closings, the denied credit applications, and dings on credit reports.

The defendants were ultimately convicted of fraud and forgery, per Tenn. Code Ann. §§ 39-14-105(a)(6), 39-14-114, 39-17-117. This type of scheme is often referred to as “paper terrorism.”

The Supreme Court then analyzed the various actions against the requirements of Tennessee’s criminal statutes, and the Court upheld all criminal convictions.

In a footnote, the Court alluded to civil penalties, including at Tenn. Code Ann. § 47-9-625, and the ways that private citizens can protect themselves against these schemes.

Spoiler-alert: It’s far easier to file these bogus liens than it is to remove them.

Tenn. Code Ann. § 47-9-625 isn’t much help. It requires a party to seek court intervention (i.e. file a lawsuit), but the damages don’t include attorney fees. Per § 47-9-625(b), the party can only recover damages resulting from “the debtor’s inability to obtain, or increased costs of, alternate financing” (all very difficult to prove in court). There’s nothing in the statute setting a minimum penalty or, more importantly, allowing for the recovery of attorney fees.

Sure, these defendants made the headlines because of the breadth and shamelessness of their scheme, but the opinion and authorities cited in it do nothing to help the individual homeowner, who has a meritless lien recorded against her house and has a closing being held hostage. File a lawsuit and, then, simply recover the increased cost of her more expensive loan?

In short, there are no effective and efficient remedies under Tennessee law for this.

There are no internal fail-safes to protect against the schemes perpetrated by the defendants in this case. The Secretary of State isn’t watching these. Instead, the purported remedies (under Tenn. Code Ann. §§ 47-9-518 and 47-9-625) put the burden on the consumer to discover and challenge invalid liens, but with no effective remedy or deterrent for fraudulent liens.

The facts of this opinion should scare you, but I’d say that that the law in this opinion is the most terrifying aspect.

Court of Appeals: If attorney discounts their fees, prevailing party may not be entitled to recover full amount

Much to my former law partners and book-keepers’ chagrin, I often apply courtesy discounts to my clients’ legal invoices.

It’s counter-productive to my business model. But, as a kid raised by a mom who worked at the local Piggly Wiggly and a dad who worked on an assembly line, sometimes I look at a bill, am reminded of how expensive lawyers are, and apply a small discount.

Don’t get me wrong: All my billable entries are wonderful and worth every penny. In fact, I tend to win many of my cases, including an award of attorney fees, and, when I do, I sometimes wonder whether the defendant have to pay the full amount (and not the discounted amount)?

A recent Tennessee Court of Appeals says that a court can only award what the prevailing party actually pays (or is obligated to pay). It’s at St. Paul Cmty. Ltd. P’ship v. St. Paul Cmty. Church, No. M202101548COAR3CV, 2023 WL 1860692(Tenn. Ct. App. Feb. 9, 2023).

In the case, the trial court originally awarded the Church $343,535.07 in attorney fees and expenses, which were computed at the rate of $295.00 per hour. In later proceedings (after an earlier remand), the Church attorneys asked for $515,655 in attorney fees, which appeared to retroactively calculate all entries at $450 per hour.

Why? The attorney and client had a unique “side” agreement to the engagement letter, that, even though the hourly rate was $295, if they won, the attorney would ask the Court to reimburse the fees “at a higher rate than the $295/hour I’m billing the church.” There was no agreement that the Church would ever actually have to pay that higher rate.

In light of the Tennessee’s application of the “American Rule” on attorney fees, the Court of Appeals focused on the text of the underlying agreement, which required the reimbursement of attorneys fees “incurred” by the Church. “Incur,” the Court noted, means “to become liable for” or “to be legally obligated to pay.”

Here, the lawyer’s engagement letter clearly said that the Church would never be expected to actually pay that higher rate. The trial court, then, was correct in awarding the attorney fees at the $295 rate, “which were charged and paid at the $295 rate pursuant to the written engagement letter” and denying any requests that the higher rate. Id. *6.

It’s an interesting opinion, with some fairly unique facts that would never come up in most cases.

But, in the context of long-standing litigation, a few $300 or $500 “courtesy discounts” here and there over the course of a case could add up to a few thousand (or more) dollars. After a long fought legal battle, it’d be natural to have your billing software show your cumulative legal fees for your Affidavit (which would naturally output only logged time entries and not paid bills) and forget to give your adversary the benefit of those discounts.

Under this new opinion, you may be legally obliged to. So, maybe my book-keeper is right.

Are the Nashville Construction Defaults a Leading Indicator that the Nashville Market has finally turned?

I saw something at a Nashville foreclosure yesterday that I hadn’t seen in years.

A luxury, high end house in a great neighborhood was auctioned, and nobody showed up to bid. The Lender bought it back at a credit bid. (In the spirit of disclosure, it was a $2MM+ credit bid. They weren’t quite giving it away, but this is Nashville).

It reminded me of foreclosures in the Great Recession, when you’d stand on the courthouse steps, reading a foreclosure sale notice to nobody and, invariably, your bank would become the new owner of the property.

Back in 2008, lenders were dealing with the after-effects of an easy-money market. Builders with good credit built too many houses, too fast, and the market had a glut of inventory, with no buyers in sight.

The lack of buyer-credit meant that new sales couldn’t keep up with the builder’s debt obligations. It was sort of a ponzi scheme, as sales of today’s houses were necessary to pay for yesterday’s construction costs. When the money level dipped, lots of partially built spec homes got foreclosed, after the builder’s new money ran out and they were defaulted or simply gave up.

I thought about 2008 yesterday.

As much free-flowing money as there’s been in the Nashville retail-buyer and foreclosure market over the last 4-5 years, it was a surprise to see that sale fall flat yesterday. In the last year, I’ve done foreclosures in Nashville with 20-30 bidders present. But, on a sunny Thursday, with a Belmont-Hillsboro Village house on the block, and there are no bidders, buyers, or bankers willing to refinance?

Could this be a leading indicator of a larger problem in Middle Tennessee?

The signs are there. This exuberant builder refurbished a modest 1920s bungalow, to construct a 8,712 square foot, 2 car garage, 5 bedroom, 8 bath outlier, originally offered for $3,675,000 (estimated monthly payment of $20,012). The house isn’t entirely finished–it looks like contractor work on the new backyard pool and outdoor area has stopped.

The builder has more than a dozen projects throughout Nashville, in similar stages of “in progress” construction. The builder also has a number of pending foreclosures and twice as many pending lawsuits. The construction on a number of the sites seems to have simply stopped.

Just a few years ago, just one high-end property selling for top-dollar would have bought an over-extended builder a few months, finished another project, and lead to another sale, but it seems like the buyer market has waned as well. When both buyers and banks get cautious, risky bets come due.

There are a number of peculiarities here that may make a broad-takeaway unreliable. But, with that caveat, I’m seeing lots of the same issues and patterns that we saw in 2008.

Plus, by mid-morning, I’d learned that the developer filed a Bankruptcy. Just like they did in 2008.

Tennessee Court of Appeals Makes Clear: Foreclosing Party Must Prove It “Sent” Foreclosure Sale Notice, Not that it was Actually “Received”

I’ve said that the Tennessee foreclosure process can be intimidating because it’s, largely, non-judicial. Because there’s no judge involved, it comes down to the foreclosure lawyer strictly following the intricate labyrinth of statutory requirements.

One of the fundamental steps, of course, is to “send” the homeowner a copy of the Notice of Foreclosure Sale. Under Tenn. Code. Ann. § 35-5-101(e), that sale notice “shall be sent on or before the first date of publication provided in subsection (b) by registered or certified mail, return receipt requested.”

When I’m conducting a foreclosure, it’s a great relief to get that signed, certified mail green card back, because I know that my borrower received the Sale Notice and knows about the sale.

But, what about the situations in which the green card doesn’t come back signed?

This has always been an issue, because a borrower in default on his loans likely sees a certified mail green card as bad news and doesn’t rush to the post office to sign for it, especially when a copy is also sent by first class mail.

It became an even bigger issue during the COVID pandemic, when mail delivery was disrupted and people weren’t leaving their house to go to the post office. One of my 2021 foreclosures was challenged because, instead of getting a signature (presumably to avoid human contact), the postman marked it delivered and wrote his badge number on the signature line.

Do I have to prove that the owner received the Notice of Sale?

A new opinion from the Tennessee Court of Appeals reminds us that proof of “delivery” is not necessary.

The case is Jennifer Scharsch v. Cornerstone Financial Credit Union, No. M2020-01621-COA-R3-CV (Tenn. Ct. App. Feb. 28, 2023). There, the borrower disputed “receipt” of the foreclosure sale notice. The Court made short work of this argument.

The Court wrote that Tenn. Code Ann. § 35-5-101(e) “only provides that the trustee shall ‘send’ the notice.” Id. (citing Smith v. Hughes, 639 S.W.3d 627, 640 (Tenn. Ct. App. 2021). Further, “[t]here is no statutory requirement that the notice be received by the debtor.” Davis v. Wells Fargo Home Mortg., No. W2016-02278-COA-R3-CV, 2018 WL 1560077, at *11 (Tenn. Ct. App. Mar. 29, 2018).

Because the foreclosing lender had submitted affidavit proof that it sent the notice, the lender satisfied its obligation under § 35-5-101(e).

“Even if [the borrower] never received the letter, [the foreclosing parties] satisfied the requirements of the deed of trust and Tennessee Code Annotated § 35-5-101. So whether [the borrower] received the notice of the foreclosure sale was not material for purposes of summary judgment.” Id.

On my sales, to be clear, I always want there to be a “receipt.” I want the call that has a payment proposal, or threatens a bankruptcy, or anything that shows that they received what I sent. But, due to the total unpredictability of the green-card signature system (and a borrower’s ability to dodge a signature), I don’t want the responsibility of proving that in order to have a valid sale.