VERBAL QUESTION #4

VERBAL QUESTION FROM CONGRESSMAN WATT

VERBAL 4:

An explanation of why MWOLFS represent approximately 56 percent of legal matters referred in 1993 and only received approximately 13 percent of fees paid. Will fees paid for work assigned in 1993 reflect percentages of assignments? If not, why not?

ANSWER 4:

Minority and women-owned law firms (MWOLF) received 58 percent of the
referrals in 1993, and approximately 13 percent of fees paid in 1993. The 13
percent in fees paid, however, refers to fees paid on all referrals, including
referrals of several years ago prior to the Division of Legal Services initiating
its minority and women outreach program. A more accurate assessment of
the current status of referrals-to-fees ratio is to compare the referrals to
MWOLFS in 1993 (58 percent) with the fees paid to MWOLFs in 1993 (37
percent) on 1993 referrals.

There is no direct correlation between numbers of referrals and their dollar
value. A small number of major cases generate a disproportionately far
greater percentage of fees than is reflected by the percentage of cases. For
example, 8.7 percent (referrals with budgets over $50,000) of all referrals
represent 79.4 percent of the dollar value of all active matters.

Most recently, for matters with budgets under $50,000, 41 percent of those
matters, representing 34 percent of the budgeted dollar value, are being
handled by MWOLFs. For matters with budgets equal to or over $50,000,
23 percent of those matters, representing 15 percent of the budgeted dollar
value, are being handled by MWOLFs. Consequently, the percentage of
referrals never directly correlates to the percentage of dollars paid.

The large dollar referrals are generally handled by large firms due to such
factors as availability of sufficient attorneys and support staff. Most
MWOLFS with RTC Legal Service Agreements, however, are small firms.
While the RTC practice is that cases which require substantial attorneys and
support staff are assigned to large firms, the RTC generally encourages the
large firms to establish working relationships with MWOLFs, with a goal of

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the MWOLF performing at least 25 percent of the work and receiving payments commensurate with the work performed. Such relationships are advantageous to the MWOLFs because they are exposed to and gain experience in matters and issues they may not otherwise be able to handle, either by virtue of inexperience or the limited resources of a small firm.

For the reasons stated above, in 1994, MWOLFS will not receive fees in the same percentage as referrals, but will receive fees commensurate with the work they perform. As you may know, on May 20, 1992, the Division of Legal Services established a goal of MWOLFs receiving 20 percent of the fees generated by new referrals. From May 20, 1992, through April 7, 1994, the Division of Legal Services paid MWOLFs $57,999,683 (28 percent) out of $202,883,141 on all referrals made during that period. Also on May 20, 1992, the Division of Legal Services established a goal of minority and women attorneys in majority firms receiving at least 10 percent of fees paid to all firms. Since May 20, 1992, the Division of Legal Services has paid minority and women attorneys in majority firms $123,191,173 (24 percent) out of $518,479,578. Thus the Division of Legal Services has exceeded both its 20 percent and its 10 percent goals in its ongoing efforts to promote minority and women outreach.