The Standing Ovation
It was to a standing ovation that the recent comments of outgoing NSW Young Lawyers Association President, Puoyan Afsharn, were read out at a Firm Spy board meeting over the weekend. In a manner best witnessed in cult American teen flicks like Bring it On, members of the FS inner sanctum punched the air, whacked seats and uniformly chanted “ashfar AFSHAR!!”.
Afshar’s comments, you see, are something of a flashpoint between a judiciary which is now calling for an end to unethical billing practices by major commercial law firms, and the corporate firms themselves who, until now, have largely sought to preserve the billable unit because it is so lucrative. He commented to Lawyers Weekly:
“From my position, I get a good sense, every once in a while, of what’s not right,” he said. “In commercial law and litigation, I think the pressures on young lawyers come from the billable hour. There hasn’t been much of a discussion in the past – not in any sort of depth that you would want – about the billable hour and the effect it has on staff … It is not the only thing, but that has an effect on peoples’ mental health.”
But Mr Afshar, despite speaking with his “presidential” hat on, has changed all that. Mr Afshar is the first junior lawyer working at a major commercial firm that we’re aware of who has openly protested against the billing practices of corporate firms (including his own former firm – Allens Arthur Robinson). He is also the first such lawyer that we’re aware of to argue that the billing practices of corporate firms (including his own former firm – AAR) contribute to the rife depression that pervades the legal industry. His courage in doing so deserves our applause. Hat tip, comrade.
Afshar also observed that some of the mental issues facing young lawyers are the result of insufficient developmental opportunities within their firms:
“The advent of large-scale litigation is … really causing some problems for young lawyers, where their development is hampered by working on large teams where they are only dealing with really small aspects of that case, where they do not develop as lawyers,” he said. “We go through five or six years of university, we go through College of Law, we go through all of the things we need to do to become a lawyer, and yet after that, all we are [is] document reviewers. There needs to be some thought given to the potential of young lawyers and the fact that we are lawyers, we’re not just clerical staff. We have been trained to do a particular job, and once we step back and see that in perspective, then I think the lives of young lawyers will improve…It’s about giving people who are, by nature, driven, the opportunity to learn and develop. If they’re not, their sense of self and satisfaction with their work will drop … and that’s what leads to problems.”
The Judiciary on Billable Units
Firm Spy agrees wholeheartedly with Mr Afshar. The Judiciary agrees too. Recently retired Victorian Supreme Court Justice David Byrne also agrees that AAR’s billing practices in particular should be debated. The Age interviewed Justice Byrne in May, and noted:
In a case that still makes Byrne seethe, he lambasted Allens Arthur Robinson’s $3.7 million bill for costs in a case that ran for six years before it went to trial. The final bill was expected to hit $8 million, but this sum could not be recovered anyway because the opposing party sank into receivership. At the time, Byrne described AAR’s bill as “a great reproach on the legal system” and said “some restraint, some proportionality and perhaps less greed should be shown”.
But his Honour didn’t stop at rebuking AAR for the greed involved in the case; he went onto highlight how lawyers like those involved in this case are able to exploit an ethical conundrum that emerges in a billable-unit fee structure:
“The cost [of commissioning lawyers and litigating] is just appalling, and we have made considerable efforts to reduce it…there’s no incentive in our cost structure for lawyers to be more efficient. You depend so much on their own integrity that they will not just make a meal of it.”
Just a few weeks ago, the Chief Justice French of the High Court also chimed in on the issue:
“I am old enough to remember a time when lawyers did not fill out timesheets,” he said. He said it is seen in some quarters as “an encumbrance on professionalism, placing a premium on inefficiency” and welcomed debate to look at alternatives.
Meanwhile, another eminent Australian jurist, Chief Justice of the Supreme Court of Western Australia, Wayne Martin, recently said:
“It’s time to have another look at alternatives to time billing. There are some serious problems with time billing. It rewards inefficiency, it encourages lawyers to spend more time, it doesn’t focus on value and outcomes and so I think there are more efficient ways of lawyers charging for their services.”
Which gets us back to AAR, the comments of Afshar, and whether, as queried by Justice Byrne, clients can rely on the integrity of corporate law firm partners to conduct litigation expeditiously so that they won’t “just make a meal” of it at the expense of clients and junior lawyers — in particular, their work-life balance, personal and professional development, and mental welfare.
So how does the AAR partnership ensure that the development/work-life balance/mental welfare of junior lawyers (not to mention the costs incurred by the client) aren’t compromised by its ability to “make a meal” of major work through the billable unit? Let’s take a look.
AAR & Integrity
AAR made a recent announcement that it would be implementing a “performance pay” regime. At the time of this announcement, Mr Ashfan took another wholly courageous stand in his presidential capacity. In the article profiling AAR’s looming performance-pay structure, Afshar was quoted by the AFR in the following way:
Performance pay solely based on KPIs would result in lawyers working many more hours … This would leave the door open for the billable unit to increase its domination over lawyers’ lives. Work life balance is a key issue for junior members of the profession, with many jumping ship after two to five years, citing burn out and depression as reasons.
A performance pay regime doesn’t categorically shed light on the level of AAR’s integrity, but rewarding lawyers for billing clients more will only exacerbate the issue cited by Justice Byrne that “there is no incentive in our cost structure for lawyers to be more efficient.”
More compelling on the issue of AAR’s integrity, however, is the allegation directed at AAR that during the GFC, young lawyers were surreptitiously taken into interview rooms, presented with resignation letters, and invited to leave the firm for a payout on the spot, or to be pushed out later without a payout. The AFR reported:
Allens has previously said that performance reviews are not being used as redundancy by stealth, but lawyers at the firm say that is not the case. One lawyer says staff were told the firm was locked into its lease and the only factor that could be adjusted was people. Many Allens lawyers were called into a meeting with their partner only to be presented with a resignation letter and told to go now with a payout, or be pushed later with no payout, the lawyer says. He cannot reveal his identity because in order to receive the payout, he had to sign a deed of release promising he would not leak any information about the firm, “and if we did, they would hunt us out and sue us”, he says. The difference of 70 lawyers between the 108 lost by the firm last calendar year and the 38 or so that are accounted for under the voluntary redundancy program, was done by “stealth”, the lawyer says.
Whatever happened to integrity?
Allens Arthur Robinson’s management are aware that legal salaries across all levels are below market rate (although this has not been acknowledged or communicated to staff). At some levels, the discrepancy is as much as 20% below market rate. Salary compression at junior levels is also critical. “Thawing the salary freeze” offers the opportunity for the firm to consider a revision of its approach to remuneration. This may result in changes to the calibrated lock-step system currently in place. After the introduction of a forced-rank distribution sytem for performance reviews in 2009, the firm “successfully achieved its distribution curve”. (ie the firm reduced the number of staff achieving an “exceptional” or “very strong” rating and increased the number of staff who received a “strong” or “underperforming” grade). Some partners complained that they felt compelled to impose a grade on staff they did not agree with. Lawyers complained about flaws within the calibration system itself, including the fact that lawyers might be disadvantaged if they did not have someone to “champion” them during the calibration process (ie if they do not work directly with a high-ranking partner).
If these allegations are truthful, then, when profit is at stake, AAR partners are variously prepared to give harsh ultimatums to staff and to manipulate performance reviews. So when profit can similarly be increased by lowering efficiency through the billable unit, notwithstanding that it might seriously affect the development/work-life balance/mental welfare of junior lawyers (not to mention the costs incurred by the client!), do you think the AAR partnership has the integrity not to just … “make a meal of it”?
The High Cost Paid by Junior Lawyers
It is easy to see why Mr Afshar has taken his presidential stand. Junior lawyers in major corporate firms across Australia are forced to suffer through mind-bending hours of non-professionally developmental work. At AAR, as this post alleges, they might do so with a pall hanging over them that “they could be the next person dragged into a meeting room and invited to sign a letter of resignation”. Even if they are regarded as exceptional lawyers, then, if our anonymous spy is to be believed, there is a chance that they will still be given a lower-than-warranted pay review so that the partnership can justify giving them lower pay.
Does this strike you as the sort of toxic cocktail that might induce a high-achieving graduate, who has already suffered through 5 years of competitive university studies, to develop a mental issue?
We think so. We think it is time for the industry to change. Not just at AAR (we could easily have used another major firm to make a similar article) but all firms.
But would corporate partners prefer to see the preservation of this diabolical billable-unit matrix that ensures high profitability, high junior lawyer turnover, and the perpetuation of the mentality that “because I suffered through it, so must all those behind me”? Or is there a change-agent? If so, who?
We invite corporate partners to cook up a new receipe, instead of just making a meal out of all the old ingredients.
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It’s worth noting that Ashfan has since left AAR and now at Bakers. I wonder why?
The un-said requirement of most law firms that time charge is that all lawyers can only achieve their billable target by lying. Next time you are hauled up by a partner about your poor time charge billing performance and you say you work long hours but just can’t manage to reach target, look for the wink in their eye. That means they are asking you to lie.
I’m not sure why you think that Wayne Martin has retired. He is still Chief Justice.
How is it news to anyone that billable hours make people unhappy or that lawyers at any level other than partner are underpaid? Or that top tiers pay less than mid tier? The focus on AAR here is a little unfair when these are industry wide problems. Especially as it’s clearly just another poor performer having a cry and moving into the mid-tier where I’m sure he belongs.
employer of the decade my ass
Ahhh, “poor performer”. Along with “under performer”, a favourite catchcry of those still foolish enough to swallow the propaganda dished up by Milliner, Rose and co used to belittle those smart enough to get out.
With the odd borderline-psychotic exception, everyone who survives the top tier recruitment process is highly intelligent, well presented and can hold their own in a social situation. “Performance” at a top tier, as you well know, relates only to one thing. How many hours have you billed, how many social events have you missed out on, how many relationships have you sacrificed, how much weight have you put on, how many of the best years of your life have you thrown away to line the pockets of a bunch of old men? Of course you’ll find a way to justify it, because no matter how many of your colleagues have been managed out, no matter how many SA’s have had their dreams dashed before you, things will be different for YOU. YOU’LL make partner. And once you get there, YOU’LL realise partnership is absolutely everything you ever dreamed of and those (admittedly) big bucks are well worth everything you sacrificed…
In the meantime, I’ll sit smugly in the mid-tier with my fellow “underperformers”, taking home more money for considerably less work, and enjoying the mental health benefits that come with working in a non-toxic workplace and having time to exercise and spend time with my friends and family. And when I’m old and decrepit I’ll look back and be glad I didn’t throw away my twenties for nothing.
It’s you, my friend, who should be “having a cry”
This is your finest hour Firm Spy. Bring shame on the partners who care more about a few un-needed bucks than the mental welfare of junior lawyers
Congratulations to Puoyan and FS for bringing attention on the unmitigated greed of corporate partners. Hopefully once Judges become aware that the corrupt billing methods that partners force juniors to adopt are causing juniors to suffer mental health issues and leave the profession, they will simply throw out costs awards
The unspoken energy that passes from a partner to a lawyer that ‘i want you to bill this client more because I know they will pay’, is something I have personally apprehended many times. What juniors (including me) sadly do in these circumstances is hang around the office, undertake meaningless but possibly relevant work, and miss out on family and friends and socialising. Or they can run the gauntlet and bill the client ethically, at the risk of falling out with their supervising partner.
Yes, something must change. No one left university thinking they would have to compromise their moral fibre in this way. And it happens at ALL firms, not just Allens.
Hat tip to you FS!
It’s not just the big firms who should be looked at, smaller firms with less administrative infrastructure expect their lawyers to perform similar billable hours but also expect article writing, cle presentations and chasing of debtors and don’t take that work into account. All I know is that I did not go to law school to have my success and self worth defined by 6 minute billable units.
Down with time-based charging, and all that. Still, I’ve yet to see an alternative that won’t still involve screwing over lawyers and clients to wring out every dollar – possibly even more – it’s the nature of the business. No principal is going to accept a scheme that involves getting less out of employees and clients.
I burnt my twenties and most of my thirties in a top tier firm and have found my own alternative, but the emphasis on billing is still soaring – the benefit is a lower daily target, the downside is earning less than half the money I could have been earning (yes, I had someone look me in the eye shortly after I gave notice and say: “You could have been a partner”, so it must be true).
If you want the big money, you will probably have to sacrifice a lot of yourself – unless you find a position like @ NA above (any jobs going?). It’s the nature of the business, together with hypocrisy and double standards, and I can’t see that changing.
An interesting article by the Legal Services Commissioner (NSW) is here: http://snipurl.com/1h1cal
A somewhat more cynical article from the Australasian Law Management Journal is here: http://snipurl.com/1h1ep1
I am a firm believer that norms generally reflect what works, even if not necessarily what works best. When it comes to time charging, that fact that all megafirms throughout the world generally time charge suggests that though it is not the best way for keeping clients and staff happy, it is the most tried and true way for generating revenue and profits for this type of industry. If the industry was not profitable, it would not be viable. If it was not HIGHLY profitable, it would not be as glamorous. Partners in law firms would then be like School Principals; respected, well regarded, considered intelligent, even brilliant, but not with the seductive yet fearsome mixture of awe, envy and pity that Big Swinging Dicks of legal practice enjoy (and whether desirably, or otherwise, I will leave for another discussion, for that is not the point here).
Lets break it down to the bleeding obvious then: time charging = charging for time. If you work for a law firm, you are a unit of production, and the more of your time (and by “time”, I mean here, having regard to the comments above, actual, constructive, or otherwise) that is sold, the more that can be charged. As a unit of production, if you make more chargeable time, you are a better unit.
Put it another way: the firm resells time. YOUR time. That is the deal.
If you don’t like it, or accept this, then you have two options:
1. revolutionise the legal world by creating and implementing an alternative model (and the entire professional, consulting, and accounting as well, while you’re at it) that achieves the same level of profitably that the current satanic iteration does, which keeps EVERYONE happy; or
2. take a leaf from the conclusion of W.O.P.R. at the end of War Games (google it: I’m not going to make it that easy).
Given Puoyan is so happy to speak out against the billing practices of Allens, a firm he worked at for more than 3 years, perhaps FS should get hold of some of his comments regarding Iran, where Puoyan is from? He has consistently said, as a representative in student forums, that Iran is misrepresented on the international stage and does not mistreat its people.
I find it a bit rich for someone like Puoyan to speak out against the practices of a firm he can easily leave at anytime, but condone the crimes committed by a fundamentalist regime! And this is from the perspective of someone who has recently left the top tier for a better life!
Drawing a long and irrelevant bow there Scooby but never mind – I digress.
The billable unit is the acid that rots both the profession and the person – there can be no doubt about that. Additionally, “performance based remuneration” is nothing more than a metaphor for commission only based remuneration – you know – like real estate pond life agents.
The only way is to go fixed price as a base with, maybe, a very modified version of time and materials over and above that.
The more noise lawyers make over this the better. The billable hour culture makes countless people leave law firms – the firm that can find the way to deal with this the better.
Sadly, I think the real problem is us. If we were prepared to stick up for our rights, do more than just complain but insist on time in lieu and even threaten to put pens down, we’d be fine. But we all know that if we did that, there’d be another 5 people willing to step up to take our place. So, ego and fear drive us all.
Also, in a stagnant market the only way to increase margins is to make more from the same or less. Which means lawyers will be even more stretched. Eventually, enough people will commit suicide or otherwise expose law firms and similar cultures that the legislature will insist on a maximum number of hours in the working week. Until then, law firms will pretend through their marketing materials that they give a sh*t, and graduates will go on believing that just because partners talk about work/life balance in interviews, they mean it.
Alas, I was one of the people who took “the job” at a law firm thinking that it would be different for me. I bought the whole “our firm offers real work life balance” spiel. After only a year here, I have realised that it won’t be different for me. It seems, like it or not, explotation of young professionals is part and parcel of this industry. Particulary if you work at a top tier.
I have accepted a job with the government, where I will be using the skills that I have gained with my law degree, but won’t be a lawyer in the strict sense of the word. What I am struggling with at the moment is people looking at me as though I’m mad for leaving such a “luctrative” position. I fail to see how that’s the case – sure, I won’t have the earning potential in this new job, but does that really matter in the end??
The depression rates in this industry are amazing. The industry as a whole should be making moves to address this issue – starting with billable units!
All this, and yet they still line up to work at the Big Firms, and wouldn’t dream of working in a place that doesn’t have a big banner at the law school marketing day.
When you know it’s a lie, and you swallow it anyway, you’re the fool.
As an SA in a small firm who bumps into to Big Boys pretty often, I gladly smile when they give me the “Who are [Firm Name], Never Heard of Them ho ho ho”
Cyril, you piss in the stall don’t you?
“Squeeze the last drops out of every lemon” is one AAR partner’s mantra.
Puoyan Afsharn worked with the nicest, kindest most intelligent partner at AAR… did he propose that the said partner (of immense integrity) should be doing the document review on Onetel… just a thought. Im sure Bakers will involve no discovery…
Whether he worked for a partner of integrity or not is immaterial. The fundamentals of a partnership, as you know, is that the actions/knowledge of one partner are imputed to all other partners. So if you’re a partner earning $1.5m annually, or worse, you’re in management, and you mistreat junior staff in the ways set out in this post, tthen all your fellow partners share in the dereliction of your integrity. Without exception.
I am thankful I will never be a partner at Allens or any major firm. They’re some of the most ethically troubled people in society, which is farcical because they’re lawyers who are expected to have the highest moral grain.
Our industry has fallen so far in such a small period of time and we should all do something about it. We should not be the next generation of AAR partners “squeezing every last drop out of the lemon”
What’s interesting is that even given the comparatively low rates of pay/poor working conditions, and alleged discrimination towards female staff, lawyers are still attracted to AAR. What does this say about the industry? Or perhaps more particularly, AAR lawyers? Masochist is a word that immediately springs to mind. No wonder that those that prosper in that environment inflict the same level of pain on those underneath them.
Speaking as one who knows Pouyan (not Puoyan as above!) I think the comments about his Iranian heritage are both wrong and irrelevant. It’s not for me to speak about his family’s reasons for leaving Iran, or his political views, but I don’t think any of his statements support oppression. I strongly defend Pouyan’s humanitarian agenda.
“I am thankful I will never be a partner at Allens or any major firm. They’re some of the most ethically troubled people in society, which is farcical because they’re lawyers who are expected to have the highest moral grain.”
Anon above, you make partners in a law firm sound like criminals! I do NOT understand why partners are ethically challenged because they bill by the hour (as do plumbers, carpenters etc etc)- the fact they work their lawyers hard is a reflection of the client’s needs- could you please explain in more detail why they are “ethically troubled”?
I have been an Allens lawyer for a number of years, and not once has it been hinted to me that I should bill anything that I haven’t actually done, or that I should spend longer on something than required. Rather, efficient and intelligent responses are what I have been encouraged to provide.
Allens is not responsible for the state of discovery processes in the court and the huge amounts of time junior lawyers spend doing discovery instead of learning litigation skills. This happens at each of the big three firms, if not the top 6.
It has become the nature of the big litigation beast, and instead of blaming a single law firm for this, surely the way to deal with the problem is a court instigated limit on the extent of discovery and what is ‘reasonably’ required in such proceedings?
That’s a bit circular, Ronaldbaker. It certainly kept me busy for a while.
Allens Lawyer (or is that Allens PR spokesman?), not everyone is a litigator. Not to say that partner-sanctioned overcharging does not take place in litigation, but you’re less likely to gild the lily if there’s a possibility your bloated bill will be subject to scrutiny by the court, no?
I’m very pessimistic about whether alternatives to time-based billing will be any better for junior lawyers than present practices.
If it’s a fixed price system, partners will go out and pump up prices for the big clients who are seen as being able to afford it. Lower prices will be given to new or smaller clients to compete for the work – even if they result in a loss by internal accounting measures – in the hope of securing a profitable stream of work in the future.
I’m fairly sure the lawyers who do the work will still be required to record time for “management and statistical purposes”. A nominal value may be attached to their time – it may be a fixed fee for the client, but internally partners will still say “… so this should take about x hours”.
The lawyers will still be under pressure to work many hours to get the work done and finish off as many fixed fee jobs as possible, but at the same time, for each individual fixed fee job, they’ll be under pressure to under-record, because their success and ability will also be measured by getting the “cream” by finishing the job with a margin between that amount of time and the fixed fee. Exceeding the time allocated internally for the job will be seen as a failure.
Pressure to work hard and get more done may increase, while recognition for actual time worked may decrease.
Anyway, just some ideas – would be very happy to hear alternative opinions.
Time billing is fantastic. In my 3 years of practice I have never had any problems hitting my billing budget (7 hours a day).
On the whole, billable units and targets are useful for:
- negotiating your pay (by pointing out your meeting and going beyond your required targets);
- less pressure to hang around the office for face-time (can always point to your billables as justification for your hard work and utility rates if anyone asks why you are leaving early); and
- makes promotions less subjective (quantifable benchmarks as opposed having made a “good impression” on certain partners).
The real problems are clients who request unrealistic deadlines, partners who come up with artificial deadlines, or just generally unpleasant people who you have to work with, none of this will be resolved by moving from billable units to e.g. fixed quotes or any other form of billing.
Julia R- I am not a pr spokesperson, if i was, I would have no reason to advocate change to the way discovery is carried out- it is a money spinner. This just isn’t one of the aar bashing exercises that I completely agree with (start talking about compulsory Christmas leave and I’m with you all the way).
I made comments in relation to litigation because that is the context in which the article is presented. But I have worked in litigious and non-litigious groups and through the effects of the GFC on work flow andbilling and again- faking it has never been part of the equation.
I have worked in litigious and non-litigious groups at the firm, and through the GFC and it’s effects on workflow and billing- and again, no hint to bill inappropriately or judgment on hours billed.
Random observations.
It is increasingly unusual to bill time AS RECORDED. Increasingly clients are insisting on alternative arrangements. Recorded time serves as the starting point for a discussion – inevitably downwards – about what the final bill will look like. Recorded time is, however, used as an HR metric.
Alternative billing arrangements will not improve the lot of the associate. If the client is paying time – and if the firm is, as it should be, keeping client appraised of time incurred – then client will shut off unnecessary work. Thus requirement for associate to perform unnecessary tasks evaporates. Fixed price deal = client couldn’t care less what you spend all night doing. If firm is not keeping client appraised of time incurred then you have bigger issues (and – at least in a transactional practice – a bigger write off).
No firm is going to move away from time based billing on their lonesome. That will just result in them being gamed by clients.
No firm of any size is going to move away from time based billing because it would make life easier for associates. I would hope this doesn’t come as a shock to any sentient human being.
If filling out timesheets/billing by the hour causes you a moral dilemma you should leave your place of employ. Once you’ve left you can protest from the moral high ground you have moved to. Until then, STFU.
Firms – at least the big ones – really aren’t interested in work life balance, whatever they say. That’s OK, nor are the associates who go on to become partners. The associates who are not willing to sign that particular Faustian pact, or who are surprised at the consideration they have to provide as part of that deal, are found out along the way and are jettisoned after having had the life ground out of them. Is this a lamentable loss of talent? Possibly, but it’s “talent” that the machine can’t use – the firms are configured to operate a particular way, they don’t want to reconfigure and their clients aren’t requiring that they reconfigure. On the other hand, maybe its no loss at all. If you hang around in a law firm waiting for your work life balance to move back to equilibrium then you are stupid.
From the firm’s perspective, the best kind of associate marches toward the sound of the guns. S/he wants work and responsibility and doesn’t flinch when the documents arrive on a Friday night and the client needs a mark up by Monday morning. And s/he isn’t doing the job solely for the money but for a (unique to that individual) mix of (among other things) prestige, challenge, intellectual stimulation and cash.
If you work at a big firm you are paid a lot of money. You may not be paid as much as the partners of your firm, but that’s not the right measure. You are paid way more than a whole bunch of professions that do more practically useful things in a single day than most lawyers manage in their career. You are paid more than nurses, teachers and firemen because you are a scarce resource. But you are not paid more than your peers – and you ar enot paid as much as you think you are worth – because you just aren’t quite scarce enough. The Australian legal market is one of the most competitive in the world. There are not that many big deals and waaaaaaaay too many lawyers. If you don’t want to do the job someone else will (probably better).
Allens employed some exceptional lawyers (when judged against lawyers in any common law country) and some genuinely nice people (not always the same individual). It also employed some less pleasant individuals. People want to work at AAR because of its reputation for employing the best lawyers intellectually and because they pay no worse than their peers. Two years at AAR gives you more options – and probably more money – in the job market than two years at Him, Her and Whatsisname, even leaving aside the quality of the training (formal and informal).
Finally, I find it amusing that the judiciary is up in arms about billing by the hour. Most of them come from the bar where they usually bill by that even more blunt intrument, the day.
Very well put, Phil Ateley. Good reading for anyone who’s thinking of staying the distance in a big firm.
I’ve spent the last 12 months working on a mega-litigation matter and am entirely sick of it. Wah.