From Left: Cochran, O'Connor, Clark

LOS ANGELES-Veteran real estate attorneys Maura O'Connor and Jim Cochran have formed a new law firm called O'Connor Cochran LLP to provide top-level legal services at lower rates for the real estate industry. Although O'Connor Cochran offers other selling points―such as a standardized approach to some types of deals and status as a woman-owned firm―the bottom line for the new firm is the bottom line.

O'Connor, who writes the Practical Counsel blog for GlobeSt.com and is the managing partner of O'Connor Cochran, says that the new firm's starting standard fee is $375 per hour, compared with rates at big law firms that generally range from $550 to $750 per hour for partners at the level of seniority of O'Connor and Cochran. In addition to partners O'Connor and Cochran, the new firm includes another veteran of big law firms, Jamie Clark, who is of counsel.

O'Connor and Cochran both have extensive experience in all facets of real estate law. O'Connor is the outgoing chairman and first woman chair of the Los Angeles County Economic Development Corp. She has built and chaired the Los Angeles real estate departments for two major national law firms, and was named one of the top 10 real estate lawyers in Southern California by Real Estate Southern California, a magazine published by ALM, the parent company of GlobeSt.com. Cochran served as co-chair of the Uniform Commercial Code Committee of the Business Law Section, State Bar of California, and is a member of the Board of Governors of the Financial Lawyers Conference.

O'Connor says that she and Cochran decided to establish O'Connor Cochran because they see "a market for more modestly priced legal services" that is part of a larger discussion involving the reassessment and re-evaluation of the entire legal industry. In short, she and Cochran say―and they are not the only ones saying it―legal fees have been getting out of hand for some time. In her latest Pratical Counsel blog, O'Connor points out that the California Bar Journal reported that a survey by the Corporate Executive Board found that non-law firm costs increased by 20% over the past 10 years, but large law firm prices jumped almost 75% in the same period.

O'Connor and Cochran say that they have been wrestling for some time with how to create the kind of change in big law firms that lets lawyers deliver "really good legal services for more mundane, ordinary, regular-course-of-business deals at a price that's affordable and makes sense." As she explains, "People will pay anything when a big corporate merger is pending and you have to do it in three days. Or when you have a bet-the-company litigation. That's where $500 and more per hour makes sense."

But for ordinary work that involves the same type of real estate deals every day, such prices are not justified, she says. O'Connor and Cochran have already been heavily involved in standardizing―or partly standardizing―transactions and implementing practices such as fixed fees as opposed to the traditional practice of billable hours. For example, O'Connor created and implemented several large-scale systematized acquisitions programs for retailers, most recently for one multinational retailer that acquired more than 150 sites for over $1.2 Billion in 18 months, done on a fixed-fee basis rather than billable hours. Since the downturn, "We've also designed a similar approach, given the change in the market, for downsizing deals like workouts and foreclosures," O'Connor notes.

Fixed-fee billing is feasible in situations where much of the work of every deal is similar if not identical, according to O'Connor and Cochran. "You can't standardize transactions entirely because every one is different, but 80% to 85% of any given type of transaction is pretty similar to 80% to 85% of every other similar type of transaction," O'Connor says. "So, if you have a purchase-and-sale agreement in California on an industrial property, 80% or so is going to port over."

O'Connor points out that legal training does not incorporate any understanding of how to design business processes, which pretty much every business does now except for law firms, she notes. "Jim and I, developed, two law firms earlier for me, a way of doing business that efficiently re-used as much information as possible so that we standardized transactions to the extent possible." She and Cochran developed and implemented a systematic business process-driven approach to enforce commercial real estate loans, drawing on their experience in complex real estate financing transactions (including myriad senior and mezzanine loans, lease financings, securitized transactions, ground leases and equity investments), workouts and foreclosures.

A number of factors contribute to the skyrocketing cost of legal services, according to O'Connor and Cochran. They point out that many large law firms are supporting very heavy overhead in expensive downtown high-rise buildings with lawyers earning starting salaries of $150,000 or more for even the most junior associates, generating billing rates of $500 or more per hour for all work "and reinventing the wheel with each deal," O'Connor says. "We have intentionally structured our firm to have low overhead, and to pass those savings on to our clients in lower rates and overall fees," she says.

Cochran says one reason that law firm billing is coming to the fore is that, "As long as there was an up economy and everything was going well, a lot of legal counsel were not reconsidering how to do business." But from 2008 on, when a lot of companies began really looking hard at how to control costs, it has become a more urgent priority, he explains. "A lot of people we talk to, and a lot of other companies that are large users of legal services, are interested in exploring ways to control legal costs in a way that they just weren't interested maybe five or 10 years ago," he says. Clients need, and are starting to demand agile response, access to expert talent, lawyers with business sense, and rational pricing and billing, through initiatives like the ACC Value Challenge, he points out.

O'Connor notes that structuring the new firm as woman-owned and managed was Cochran's idea. Says Cochran, "Maura is well known and accomplished, so there is no need to sell her on that basis, but there are corporations with programs that encourage the hiring of women-owned and minority-owned businesses. It's not our main selling point, but if a firm has such a program in place and we can help them check the box for women-owned, that's a win-win."

O'Connor describes the new firm that she and Cochran have founded as "an attempt to practice law in a different way, with a real eye toward what we are hearing from our clients and the ACC." In her most recent blog, she explains in detail how legal services are being re-engineered in response to client demand and the efforts of lawyers who feel that billing is getting out of hand. O'Connor Cochran aims to be in the forefront of that re-engineering.