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Why is Minneapolis Home to So Many Franchise Law Firms?
Perhaps it has something to do with the rates. Look at the attorney’s fees. For example, the US District Court for Minnesota was recently held in an attorney fee dispute as follows:
A reasonable hourly rate is the prevailing market rate in the relevant legal community for similar services provided by lawyers of comparable skill, experience, and reputation. Blum v. Stenson, 465 U.S. 886, 895 & n. 11 (1984). "Generally, when determining a reasonable hourly rate, the relevant legal community is the forum in which the district court sits." Camacho v. Bridgeport Fin., Inc., 523 F.3d 973, 979 (9th Cir. 2008); accord Fish v. St. Cloud State Univ., 295 F.3d 849, 851 (8th Cir. 2002). Here, Dominos seeks reimbursement for work performed, inter alia, by lawyers from the Washington, D.C. office of the law firm Latham & Watkins, many of whom charge rates substantially out of line with rates charged in the Twin Cities area. For example, an associate at Latham & Watkins with 5 years' experience, Alexander Maltas, charged $480 per hour, while Dominos' lead local counsel --Quentin Wittrock, a partner with the law firm Gray, Plant, Mooty, Mooty & Bennett who has over 20 years' experience, specializing in franchise disputes --billed no more than $425 per hour over the course of this case. In some instances Dominos seeks reimbursement for Latham & Watkins lawyers charging over $800 per hour, nearly double that charged by local counsel. ( See Graziani Decl. at 12-13.) Dominos also seeks reimbursement for work performed by lawyers in the Chicago office of DLA Piper and the Dallas office of Haynes and Boone, often at well over $500 per hour. ( See id. at 5, 10.)
Although parties may be reimbursed for work performed by out-of-town lawyers charging out-of-town rates, generally this is permitted only when in-town counsel with expertise in a particular area cannot be located. See, e.g., Avalon Cinema Corp. v. Thompson, 689 F.2d 137, 140-41 (8th Cir. 1982); Howard Johnson Int'l, Inc. v. Inn Dev., Inc., Civ. No. 07-1024, 2008 WL 2563463, at *1 (D.S.D. June 23, 2008). Dominos has made no attempt to justify the use of out-of-town counsel (with very high rates) to assist it in this matter. See Avalon, 689 F.2d at 140-41 (burden rests with party seeking fees to show why out-of-town counsel was necessary). Nor does the Court believe that these hourly rates are in line with those charged by lawyers of similar skill and experience in the Twin Cities area.
Bores v. Domino's Pizza, (October 27, 2008), BUSINESS FRANCHISE GUIDE ¶14,011
Economics of Lawyering
Here are the top 12 places that have the most lawyers per capita. Here is the rank and how many lawyers there are per 10,000 residents.
1 District of Columbia 276.7
2 New York 20.4
3 Delaware 18.0
4 Massachusetts 14.5
5 Connecticut 14.3
6 Illinois 14.0
7 Colorado 13.0
8 Georgia 12.0
9 Pennsylvania 11.9
10 Florida 11.7
10 New Jersey 11.7
12 Minnesota 11.2
Attorney fees come out rather counterintuitively. One would think that where there is greatest competition, the attorney rates would be lower. But MN cheaper attorney fees are found where competition is lower.
DC and NY have the greatest demand for legal services. So maybe supply cannot keep up with demand as well as it can in MN. That's why fees in MN are cheaper. So using that logic, NJ and MN lawyers would be cheaper than the top of the list, say DC and NY.
Where are the cheapest franchise lawyers, even cheaper than Minneapolis? I would venture to guess it is the two states of our 50 that have the lowest density of lawyers - Arkansas and North Dakota.
The real economics of lawyering
When it comes to litigation, the real economics of lawyering is that the franchisor side will almost always - with big franchisors absolutely always - be lawyered up with at least squad strength, and using the big expensive firms to boot.
In many instances the goal is simply to buy the pot by making the franchisee side work beyond their resources. Very few franchisee lawyers can survive this. What comes at you is at least good enough to avoid the frachisor's lawyers being exposed to sanctions.
Franchisors don't worry about the large hourly rates or the duplications of effort. The real economy to any franchisor is to emerge the victor. Note well that this article is only possible because the big expensive lawyers prevailed. Only by winning do you get to petition for legal fees.
Whatever the court awards will be a substantial discount for the franchisor. When you do the math, after reimbursement the franchisor will be paying about the "local" rate for the non "big city" lawyers.
I personally love these high priced guys. Much of my business - other than franchise litigation - comes from medium sized companies, especially the Brits, that initially retained a big expensive firm and are dissatisfied with the expense and lack of meaningful productivity. The term I hear most is that with the big firms a handshake costs $ 25,000.
Firms like Dady & Garner, myself and Bobby Zarco's firm in Miami have no trouble dealing with the big firm people. In fact it is more often the case that we are ahead of them, because we know at least what they know and we have to work more effectively in order to get to the end on a more modest budget - or sometimes on contingent fee cases. With us money is an object, so we usually know better how to get things done on less. It still aint cheap, but I think we are all more efficient in use of resources than the fat cats.
Also, smaller franchisors would much rather use us because we know how to make money stretch - except for those who limit ther practice to only representing franchisees. I know we try more cases than your "normal" big firm lawyer. They crosss examine so few people and have such limited frequency in the chemistry of trial that most of them actually have in house "mock trial" practice sessions. Mock trial is like jerking off - no actual other person involved (to put it nicely).
Seen in this light, the big fees - which are usually paid by the big franchisors - are not that outrageous. Also, these large firms have so much overhead that they are much like General Motors. I have to laugh when I am at a meeting at a big firm. They have coffee and food service in house. In one situation the junior associate on their team ran out of staples in his stapler and had to summon someone to put more staplers in it. In my shop we get our own coffee and know how to put staples into the contraption.
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Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Attorney Heaven
I have a relative who is a DC lawyer, and he told me that DC is attorney heaven.
Presumably one reason for that is lawyers there are able to work in government in a legal capacity, gain much insider knowledge and great contacts, then parlay that into even more lucrative attorney positions with big businesses in the DC area.
Besides, most politicians are lawyers, so they have that in common with the other attorneys in Washington from the start.
Hog Heaven
From the list above, DC is roughly 23 times more the attorney heaven than NY and some 26 times more than Nevada or California. That's incredible!!! It looks to me like DC was built for lawyers. Minneapolis? Not so much.
Franchisor defense practice
I'm almost always representing the franchisee plaintiff. Despite the fact that plaintiffs are supposedly given more leeway in fee petitions because they presumably have most of the burdens, I don't think I've ever had a franchise case that went very far where my fees were higher than my opponents' fees.
(Based on the excerpt from the case, I'd guess Twin Cities rates probably aren't much different than Seattle rates.)