Big Law may not be dying, but its certainly not going to operate as it did before the economic downturn. That was the prevailing view among panelists this morning at the “Law Firm Evolution: Brave New World or Business as Usual?” conference, which is being hosted by the Georgetown Center for the Study of the Legal Profession.
The most dire prediction unsurprisingly came from Larry Ribstein, associate dean for research at the University of Illinois Law School and author of "The Death of Big Law," when he posited the most dire assessment of the future of large law firms. Ribstein said that if the economic crisis showed anything, it was that the large law firm business model is unworkable.
"The business model is inherently fragile and is crumbling under pressure. Unlike 20 years ago when I first started thinking about this, I no longer think that the tweaks we have been seeing are going to save anything," Ribstein said.
Ribstein said that large law firms trade on what he called “reputational capital.” That reputational capital, Ribstein said, was damaged during the economic downturn by the defensive strategies implemented by Big Law firms, including associate and staff layoffs.
Ribstein predicted that law firms, especially those that are based in the U.S., will devolve by hiring far fewer associates and pressing to change ethical rules that bar investment in law firms by outside financiers. That approach will soon go into effect in the United Kingdom under the Legal Services Act, which allows for non-lawyer investors, such as private equity firms, to invest in law firms.
Bernard Burk, who chairs the litigation department at Howard Rice Nemerovski Canady Falk & Rabkin, was not as grim in his assessment of Big Law. But he did agree that law firms need to increase their headcount much more efficiently than they have in past years. The approach of hiring large numbers of associates with the expectation that many will not make partner is no longer sustainable, Burk said, especially when being a partner comes with its own financial pressures.
Mark Chandler, senior vice president and general counsel at Cisco Systems Inc., said that as a client that often hires large law firms, there is a place for Big Law, if they are willing to work with clients to reach a middle ground on the cost of legal services. He pointed to the arrangement Cisco struck with Orrick, in which Orrick manages Cisco's global subsidiaries by way of a software package for a flat fee.
Arrangements such as those make us more efficient and the law firm more efficient by continually pushing costs down. That's the direction things will move in the future, Chandler said.
William Perlstein, co-managing partner of Wilmer Cutler Pickering Hale and Dorr, said the dire predictions for the future of Big Law are a bit overstated, especially given the extreme growth many law firms saw during the past decade.
"The past decade was a point in time that will never happen again. It is a mistake to view the period between 2000 and 2007 as normal," Perlstein said. He added that firms are rethinking their business model to stay competitive. Jeffrey Haidet, chairman of McKenna, Long & Aldridge, added that firms got "fat, dumb and happy" during the past decade, but the recession forced them to experiment more with their business models.
"The new model for law firms is coming, but its going to take a while because were out there experimenting," Haidet said.
Haidet said that there will continue to be a place for law firms because even though the largest corporations are increasingly hiring lawyers based on who they are and not which firm they work at, mid-market clients still tend to hire based on the brand name of a firm. "The problems they are facing are only getting more complex and so are the solutions. They no longer take lawyers from one discipline. The brand name of a full service firm is still important," Haidet said. "Big Law survives, though with significant changes."
Perlstein agreed, adding, "Cross selling is oversold. But it does have a place." The key to the future of Big Law,
Perlstein and Haidet said, is going to be working more closely with clients. Haidet said, "Clients are very sophisticated, often more so than we are. By working on a more collaborative basis with clients, we can all be more successful."
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