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As consumers increasingly turn to prepaid legal plans that offer help with certain legal problems for a monthly or annual fee, solo practitioners and small-firm lawyers are finding the steady income a fair trade-off for the lower-margin work. Lawyers say they’re drawn to prepaid legal services work by the fairly predictable income, steady stream of clients and the chance to convert plan members and their friends and family into higher-margin clients. Lawrence Stahl, president of the Chicago-based American Prepaid Legal Services Institute trade group, said attracting clientele is always a major issue for general practitioners. Stahl, who is also the managing partner of the six-lawyer Stahl & Block of Owings Mills, Md., said that about half of his firm’s work comes from its affiliation with 13 national AND regional plans.. “A group legal plan makes it possible for clientele to choose your firm or be directed to your law firm,” Stahl said. The institute’s list of legal services providers who are members reflects an embrace by lawyers of the business model. Membership stood at 245 in March, up from 160 in August 2003. The client base is also growing at three of the nation’s top providers. At Hyatt Legal Plans Inc., plan members and dependents climbed to 3.8 million in January 2007, up from 1.3 million in January 2003, while Pre-Paid Legal Services Inc.’s memberships reached 1.5 million in December 2006, compared with 1.2 million in December 2001. Arag Insurance Co. Inc. of Des Moines, Iowa, characterized its expansion as “steady growth,” with current membership rolls at nearly a million. Regular flow of work Prepaid legal work provides stability for solo practitioner Jim Lyon of Oklahoma City, who specializes in serving the oil and gas industry and gets about 25% of his work from Cleveland-based Hyatt Legal. “I have the general practice work that will help cushion the boom-bust cycle in the oil industry,” Lyon said. James Merritt voted against working for a prepaid plan at his previous firm because he didn’t think it was financially viable. But a rewarding case against a health maintenance organization (HMO) changed his perspective. Merritt is now part of Merritt, Flebotte, Wilson, Webb & Carsuo, a Durham, N.C.-based firm formed by Ada, Okla.-based Pre-Paid Legal to serve its members in the Carolinas and Tennessee. “Most lawyers seem to be pricing themselves out of the middle-class market,” Merritt said. “Prepaid legal work is another way to obtain income in a more competitive environment.” Some lawyers have used prepaid legal work to build small, or even midsize, firms. At Glantz & Glantz in Plantation, Fla., 38 lawyers and 72 staff members field more than 500 calls every day and open up more than 200 new matters, said Ronald Glantz. Glantz is affiliated with Pre-Paid Legal and regional plans. “It’s a voluminous practice,” Glantz said. “We’ve grown significantly over the last decade, and all of that growth has been fueled by prepaid legal work.” Prepaid legal services work is a viable way for lawyers to work with individuals facing straightforward personal legal problems like divorce, bankruptcy, wills, foreclosure or problems with contracts, but most trial lawyers are probably not involved in prepaid legal work, said Mike Eidson, president of the Washington-based American Association for Justice, formerly the Association of Trial Lawyers of America, a group for plaintiffs’ lawyers. “It allows people to develop a relationship with an attorney before they get into a crisis situation involving commercial matters,” Eidson said. “It’s a reasonable way to approach it.” Prepaid work can lead to more profitable work if the clients hire the firm for problems outside the plan, such as a personal injury cases arising out of car accidents, Glantz said. Although lawyers acknowledge that the work is generally lower margin, they use technology to keep costs down and nonlawyer staff to do some of the organizational work. Unprofitable clients are also not unique to the prepaid legal world, said Merritt, who recalls situations in which medical malpractice clients cost his former firm more than $40,000 because the firm paid some expenses, but ultimately lost the case. “Whatever business you’re in, you’re going to have clients you don’t make a lot of money from,” Merritt said. “You have to build it into the business model.”

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