Texas Takeaways is a weekly newsletter that focuses on the challenges and opportunities arising in the Texas legal community and how you can capitalize on them to attract business, win cases and grow your practice. We're sharing this week's column with the larger ALM community because it offers guidance that may be relevant to readers across the country who are navigating the economic downturn related to the COVID-19 epidemic. It also demonstrates ALM's regional reach and the depth of our analysis. 

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Missed Out on the Paycheck Protection Program? Here's What to Do

Small businesses, including law firms, must work quickly to get in line for payroll assistance. (OneStockPhoto/Shutterstock.com)

What's Happening: 

The Paycheck Protection Program (PPP), a $349 billion federal relief program for U.S. small businesses that launched April 3, ran out of money April 15, just 13 days after it started. Many who applied are now left waiting for a lifeline to fund their payroll and avoid layoffs until the economy returns to normal.

At least three midsize Texas firms that acted quickly had their PPP applications approved, according to a recent story by Brenda Sapino Jeffreys. The government-backed loans, which are forgivable in full or in part if employers use the money to keep employees on the payroll for eight weeks.

The government-guaranteed loans were available on a first-come first-served basis, but without further funding, these small businesses that have flooded banks with applications won't get any help.

What It Means for You: 

Kent Zimmermann, a consultant with the Zeughauser Group, said that if a firm was counting on PPP money as a way to cover employee paychecks and can't get the money for whatever reason, it likely means the firm will now need to consider other options to manage cash flow and expenses.

What You Can Do:

Per Zimmermann:

• Reduce partner draws.
• Delay 2019 distributions to equity partners if they have not yet been fully paid.
• Reduce/defer/eliminate bonuses and merit increases for certain attorneys and staff.
• Institute mandatory reduced workweeks and reduced compensation for certain people.
• Reduce other overhead.
• Negotiate with landlords to defer a portion of rent payments.
• Possibly furlough select staff and maybe attorneys or reducing headcount. For firms that consider headcount reductions, many weigh the possibility of starting with the most chronically underperforming staff and attorneys, people the firm sometimes considered counseling out of the firm even before the crisis.

As Texas Lawyer's sister publication The American Lawyer has reported, many larger firms across the country (including several in Texas) have already taken a number of these measures.

Questions You Should Be Asking:

Per Zimmermann:

• What is the duration of the downturn likely to be based on best available data inside and outside the firm?  The Congressional Budget Office says U.S. employment will be at 9% at the end of 2021 and Morgan Stanley sees full recovery not before late 2021.
• What is the likely impact on revenue in 2020 and possibly beyond depending on the firm's mix of work (practices and how they are impacted), clients (industries and degree they are impacted), and geographic focus (and how it is impacted)? Different firms will be impacted differently depending on drivers such as those. Many firms are prudently developing forecasts for revenue based on the best available information and act promptly to develop expense reduction options and scenarios depending on their revenue assumptions, considering the kinds of levers mentioned above.
• Does the firm have plans in place for the reasonable worst case revenue scenario and corresponding expense reduction strategy, as well as for the reasonable best case and most likely case scenarios? Zimmerman said that process should start with developing a revenue assumption and plan for how the firm would remain resilient even if revenue decreases far more than expected.

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The Value of Wrongful Death Claims

The infographics below, prepared by ALM's VerdictSearch, track trends in wrongful death cases nationwide. The chart in the lower right corner shows the year-by-year trend of median recoveries in wrongful death verdicts (the green line), and wrongful death settlements (the red line). While settlement amounts have increased slightly since 2014, the verdicts have skyrocketed, mirroring the rise in "megaverdicts" across personal injury litigation in general. The largest of the three charts reflects median verdict amounts overall (the green bar), median verdict amounts for different ages and genders (the yellow, pink and blue bars), and median settlement amounts (the red bar). Note that adolescents top the recovery curve, and by a huge amount. The pie chart shows, however, that plaintiffs are still at a disadvantage in these cases.

To dig deeper into the data on litigation across Texas and nationwide, visit ALM's VerdictSearch.

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