As a recession may be looming and Banks may be enforcing their mortgages, I thought that I would share this story from the recession in the early 1990’s.
There was a law firm that did volume mortgage remedy work for a Canadian Bank. A somewhat junior real estate lawyer who I will call Barbara managed the files. The work was somewhat routine but required precision and organizational skills, and Barbara did it well and earned a reasonable salary.
At the beginning of the recession, the Bank would sell the house, pay off the loan, pay the legal fees and turn the rest of the money over to the second mortgagee or the borrower. The Bank did not pay much attention to the amount of the legal fees. Hell, they were not paying them.
By the end of the recession as house prices plummeted, the sale price of the house would often not cover the debt and the legal fees. Suddenly the Bank started paying attention to the legal fees and found them to be too high. (Strange how Banks always think service fees are too low but legal fees are too high. I suppose that is a topic for another day.)
So, what did they do? They hired a few lawyers and a bunch of clerks and started doing the work themselves.
Suddenly the law firm had no work for Barbara or her clerks. They spoke to her nicely. They explained the situation. They discussed the possibility of lowering her salary while they searched for real estate work that she could do in the midst of a recession, or perhaps training her to work in another area of the practice.
Barbara reacted as many lawyers would. She said no. She said that her entire practice having suddenly disappeared due to no fault of the law firm was their problem. She mentioned constructive dismissal and other dirty words.
So, the law firm fired Barbara. She moved on. My best guess is that as a real estate lawyer primarily skilled in mortgage remedies and residential real estate, she may have earned less money at her new position than the reduced salary that the firm was proposing, but I really have no way of knowing whether that was the case or not.
I have observed Barbara’s career from afar over the many years that have passed since then. It always seemed to me that perhaps sticking with that firm through the hard times might have resulted in her doing better over the long-term, but again I am just speculating.
Somewhere in this story there are lessons for young lawyers. I would say that they are about long-term versus short-term thinking, giving and taking in the face of adversity, overplaying your hand in a negotiation, looking at an issue from both sides, and dealing with a problem as a business issue instead of a legal issue. For a change, I don’t think that the lessons are about law firms being evil.