Law Firms & Practice Management
Law Firms Merge or Die
Wall Street Journal
The gap between the “wealthiest and lesser players” among law firms continues to grow, and despite complicated personnel and information integration processes, conflicts between clients, and potential partner attrition, law firm mergers are increasing, as smaller firms seek to compete with their larger global counterparts. Mergers are under consideration by as many as a quarter of American Lawyer’s top 200 grossing firms, according to Ed Wiseman, chairman of Edge International, a law firm management consulting firm. K&L Gates chair and global managing partner Peter J. Kalis tells the Wall Street Journal, “leading partners are tired of referring their hard-earned clients to law firms in other parts of the world, or to regulatory law firms in D.C., or to the Brussels office of another firm.”
High Confidence in Law Firm Growth
Legal Week’s latest confidence polls show that UK-based law firms are confident that firm growth will continue, with 82% of partners responding that they expect growth within a year. Business confidence showed that predicted revenues are expected to rise by at least 5%. This confidence represents a stark contrast to the start of 2009 where only 45% of partners predicted growth. However, this may be related to specific law firms rather than the legal market as a whole; only 70% of respondents expected growth across the top UK firms as a unit. Of all the markets, 60% of respondents suggested that Asia would have the “best prospect for growth.”
Firms See Profits Returning as Associates’ Prospects Remain Unchanged
Wall Street Journal
Though work levels are on the rise and law firm profits are returning, young associates are finding that salaries have remained flat since 2007 from before the beginning of the economic downturn. There are fewer positions for law school graduates, with the number of entry-level positions cut nearly in half at large law firms. As a result, work is being outsourced and farmed out to contract attorneys, and young associates are working approximately 50 hours a year more this year than in 2007. According to Akin Gump chair Bruce McLean, the attrition rate for the firm is now 15%, down from 25% to 30% before the downturn.
Law Firms Beefing up Insurance Coverage after Suits by Clients and Ex-Partners
Wall Street Journal
Since the economic downturn in 2008, law firms are being sued by clients for malpractice and by former partners for employment discrimination; as a result, firms are spending more to increase their liability insurance. As part of their strategy to recover assets and repay creditors, bankruptcy trustees have sued lawyers and firms that represented failed companies. According to insurance brokerage Ames & Gough, four out of six insurers polled reported that malpractice claims by law firms increased 6% to 20% last year.
Law Firms’ Business Management Amidst Potential Decline of Demand
The ABA Journal
The Hildebrandt Institute’s Peer Monitor Index was used to monitor the health of 116 of the nation’s major law firms, and the numbers have reportedly fallen to their lowest level in more than two years. In the fourth quarter of 2011 the index dipped 16 points lower than the recommended 65 points on the index, which indicates a healthy environment conducive to higher demands for legal services. Lawyer headcount rose 2.8% in the fourth quarter and 1.4% for the year. Trends suggest that a “sagging demand and accelerating attorney headcount are hampering profitability” and should be seriously considered when planning expenditures for the upcoming year.
What Gets Measured Gets Managed
The National Law Journal
Although law firms have traditionally focused on measuring non-billable hours, they may need to focus on other metrics such as business development, follow-up frequency with clients, and quality of services. According to Steve Bell, chief client development officer at Womble Carlyle Sandridge & Rice, the amount of hours spent on client development is one of the most overlooked metrics at law firms. Follow-up with clients is another commonly overlooked metric. “Clients want to be pursued. Many, if not most, attorneys confuse the relationship and try to turn it to the reverse—their ego gets in the way and they want the clients to pursue them,” according to James Stapleton, chief marketing officer at San Francisco’s Littler Mendelson. Stapleton further reports that results could be substantial if lawyers would complete at least 2/3 of their follow-up activities.
Resurgence in Lateral Partner Moves
The American Lawyer
The American Lawyer has released its most recent issue of The Lateral Report that covers partner moves across Am Law 200 firms between October 2010 and September 2011. The report tracked up to 2,460 moves. The emergence of smaller international legal markets and an increase of international work in larger markets is said to be the contributing factor for an increase from the previous year’s results. The moves are attributed to law firms who poach top performers from their competitors. As the merging of markets would suggest, those most widely sought after were cross-border transaction lawyers.
Australian Firms Predict Growth by Sectors
Australian firms are optimistic that growth will continue in 2012 for areas of resources, construction and major projects, litigation, and government services. Wayne Spanner, managing partner of Norton Rose Australia, states that because they are a “full-service firm which deals with the cyclical natures of business, we’ll continue to see growth in mining and energy.” Mallesons chief executive partner Stuart Fuller further states, “growth and therefore business activity will be driven more than ever before by sectors, rather than general economic growth driving demand for legal services.”
Who Has the Strongest US Law Firm Brand?
The Am Law Daily
According to a recent report by Acritas, law firms who lead the pack for the strongest US brand include Skadden, Jones Day, Kirkland & Ellis, Sidley Austin, and Wachtell. The report was based on telephone interviews with 902 clients, of which 667 are headquartered in the US and 58% reported revenues of at least $1 billion. Clients were asked questions including: What are the first five law firms that come to mind? Which firms are you most likely to consider for major M&A work? Which firms do you use most for “high-value” work? Which firms do you feel the most favorable toward? According to Liisa Hart Shepherd, chief executive at Acritas, “Strong brands have the power to help firms win business, build client loyalty, and generate client referrals.”
Law Firms with Klout
A growing number of in-house counsel monitor law firm blogs and websites of lawyers’ bios to keep current with legal developments. Klout.com measures organizations’ influence in the social media world through social networks such as “re-tweets,” “mentions,” “likes,” or “comments.” A Klout scale ranges from 1-100 and a score of 50 places one in the 95th percentile. The size of law firms in the US and Canada does not appear to correlate with higher Klout in the online world. For example, Skadden Arps has a Klout score of 33, with 86 tweets, 1,657 Twitter followers, and 3,929 LinkedIn followers, whereas Clifford Chance LLP, also a legal giant, has a Klout score of 13. Other smaller law firms have higher Klout scores.
One of China’s Largest Law Firms Opens in Paris
Grandall, one of China’s largest law firms with 142 partners and 570 other fee-earners among 14 offices, opened its first office in Europe. The Paris office will focus on Chinese investment into Europe and Africa, M&A, and dispute resolution. Sun Tao, former head of legal affairs for Huawei Technologies Western European Operations and Paris-based Cabinet d’avocats Tao Sun, will oversee the new office.
Few US Law Firms in Growing Arbitration Market in Asia
The Asian Lawyer
Asian arbitration has been growing steadily. International arbitration centers in Hong Kong and Singapore increased their caseload from 281 to 624 disputes between 2005 and 2010 and from 99 to 198 between 2008 and 2010, respectively. Yet, there are few American arbitration lawyers on the ground in Asia. According to the American Lawyer’s 2011 Arbitration Scorecard, of the 10 law firms that handled the largest arbitrations in 2009-10, four of them have no arbitration lawyers based in Asian-Pacific countries and the rest have only three or fewer.
Australian Firms Merge Internationally
As emerging economies are becoming the focus of discussion for the global legal profession, Australia is no exception. Over the past year, some Australian firms have redirected their attention to the international legal market and more specifically to the UK due to its “size and its jurisdictional similarities to Australia,” stated Slater & Gordon’s managing partner Andrew Grech. The firm has been working over the last year toward the $80 million takeover of British law firm Russell Jones & Walker. The move appears to be aligned with recent regulatory changes in Britain, which have provided greater freedom to international firms interested in entering their market.
The Second Tier City Approach: Dacheng Leads as Largest Asian Law Firm
The Lawyer reports on a law firm with growing importance in the international legal sphere from China—Dacheng Law Offices. Established in 1992, Dacheng has focused on large name international clients and built their following by establishing multiple offices throughout China and not just in the largest cities. As managing partner Wang Zhongde describes, “the importance of second-tier cities is often overlooked, but in fact they are the future engine of China’s growth.” With immense growth in recent years, Dacheng has become the largest law firm in Asia.
M&A Deals in Brazil
Brazil was recently named the sixth largest economy in the world. Of all M&A deals in Latin America, approximately one third took place in Brazil according to data from Thomson Reuters. Success in the Brazilian market, however, does not necessarily require a presence on the ground according to the Lawyer. Firms such as Cleary Gottlieb did not establish a local presence until 2011 and nevertheless advised on at least seven M&A deals in 2010. Other firms have developed an association with local firms to capture more business. For example, Baker & McKenzie operated in Brazil with the firm Trench Rossi e Watanabe Advogados and together handled at least 38 M&A deals over a five-year period.
Does Bahamas Need Foreign Lawyers to Enhance Financial Competitiveness?
Leading Bahamian attorney Bryan Glinton argued in his address to the Bahamas Institute of Chartered Accountants that law firms in the Bahamas should hire foreign lawyers to expand the number of practitioners in the financial services sector. Cayman and Bermuda, who are considered Bahamas’ rivals in this sector, have gained an advantage from doing so. There are now approximately 20 Bahamian attorneys who could be described as financial services specialists and have knowledge of compliance and anti-money laundering issues.
Harvard Law School Hosts International Panel of Law Deans to Discuss Globalization of Legal Education
Law school deans from Brazil, Canada, China, and France met recently at Harvard Law School to discuss globalization and curriculum reform at law schools around the world. The panelists included Martha Minow of Harvard Law School, Joaquim Falcão of FGV Law School in Brazil, Daniel Jutras of McGill University, and Christophe Jamin of Sciences Po Law School in France. The deans discussed the balance between internal and global positioning of law schools, and how curricular evolution has been influenced by issues such as the integration of common and civil law, the expansion of American law firms into countries such as Brazil, and pressure from in-house counsel for lawyers to be able to practice in a globalized business environment.
Pros and Cons of an LLM in India
In a small survey sample of 25 overseas LLM students from India who graduated between 2009 and 2011, 40% reported that they believed their legal education would be incomplete without an LLM. Another survey reveals that of 118 top LLM graduates, only 5 individuals received a job with a law firm or corporation, with one recruiter of a national Indian law firm stating, “We really do not recruit LLMs from national law schools.” Among the respondents, however, 68% stated that they completed an LLM “for the exposure, multicultural diversity and the once-in-a-lifetime opportunity to meet and network with people from all over the world.”
Courts Transform Law College into Law University
In an unusual intervention by a court, an existing law college in Peshawar, Pakistan has been upgraded to the status of a university, allowing it to better monitor and achieve greater uniformity in its output, incorporate better research, and produce more qualified law students. Khwaja Mohammad Gara and Ameenur Rehman of the Peshawar High Court Bar Association filed the case in the Peshawar High Court, and obtained a direction from a two-member bench comprising Chief Justice Dost Mohammed Khan and Justice Mian Fasihul Mulk, compelling the government to transform the law college into a law university.
More Law Schools Sued Over Misleading Jobs Data
Bloomberg.com & Wall Street Journal & Wall Street Journal Law Blog & Inside Counsel
A group of recent law school graduates has sued more than a dozen law schools alleging the schools reported misleading employment data. “We believe that some in the legal academy have done a disservice to the profession and the nation by saddling tens of thousands of young lawyers with massive debt for a degree worth far less than advertised,” said plaintiffs’ attorney David Anziska. According to a 2011 NALP survey, 68% of 2010 law school graduates were employed in jobs that required bar passage, with 7% of those jobs being part time. Brooklyn Law School reported in 2007 that 94% of its graduates were employed nine months after graduating, but plaintiff and Brooklyn Law graduate Adam Bevelacqua states, “I don’t know anybody in my graduating class, at least in my circle, who has actually become a lawyer and found employment.” Anziska states the group intends to sue 20 to 25 more schools every few months.
Legal Education Reform: One Undergraduate at a Time
Wall Street Journal & Wall Street Journal Law Blog
The ever-rising cost of a law degree is driving up legal fees making it difficult to reduce one’s debt load. As the price of legal services rises, middle and lower class American families face more challenges obtaining adequate legal representation. The solution, according to two lawyers, may be to allow undergraduates to major in law as an undergraduate degree. Students would then take the bar exam to become practicing lawyers and therefore deal with a lower debt load. Chicago lawyers John McGinnis and Russell Mangas further write about the model that “If they want to add a practical requirement, states could also ask graduates to serve one-year apprenticeships before becoming eligible for admission to the bar.”
CUNY Offers Students an Extra Free Semester to Pass Bar Exam
Wall Street Journal Law Blog
CUNY is offering students in their final year of law school with a low GPA, and who may be at-risk of not passing the bar exam on their first time, a free extra semester of law school to improve their odds. CUNY’s pass rate for first-time takers in 2011 was 67% compared to the statewide average of 86%. According to the Wall Street Journal Law Blog, the ABA can impose sanctions if a law school falls below a 75% pass rate over several consecutive years.
Need for Canadian Law Schools to Adapt
The National Post
Canadian law schools are facing new challenges that require an overhaul to their legal education system. Some of the emerging trends include a focus on experiential learning, clinical programs, ethical dimensions of lawyering, and offering an interdisciplinary approach to legal education. In 2012 Canada’s newest law school, Thompson Rivers University Faculty of Law in Kamloops British Columbia, was the first to open in almost 35 years. The Faculty has decided to differentiate itself from others by specializing in niche areas such as natural resources or environmental law. Another trend in legal education is the need for lawyers who can lead, according to Professor Ed Waitzer of Osgoode Hall Law School who adds, “We have drifted towards turning out good followers rather than great leaders.”
Will Legal Education Reforms Reduce Legal Service Costs?
The Am Law Daily
There have been several proposals to reform the US legal education system lately. The Am Law Daily reports on ten such reforms, some more radical than others, including: unilaterally shutting down the bottom half of ABA schools; requiring law schools to gather and provide accurate graduate employment data to applicants; deregulating legal services; providing a partial tuition refund to students; turning the third year of law school into an apprenticeship program; and reducing legal education into an undergraduate major. According to the article, several of these proposals are based falsely on the premise that there is a shortage of attorneys in the US and that the costs of legal education raises the cost of legal services.
Loaning of Lawyers
As is the case for many industries, the economic recession has had a strong impact on law firms forcing them to be creative in avoiding layoffs and utilizing their employees fully. The long-standing practice of secondments—firms loaning out lawyers to work in-house for their clients on short-term intervals—was much more heavily used during the recession, a trend that continues today. According to American Lawyer’s Law Firm Leaders Survey, the use of such an arrangement has increased among respondents from 60% in 2009 to 78% in 2011.
Innovation & New Models
Staffing Companies Provide Specialized Legal Services without Practicing Law
Wall Street Journal Law Blog
Law firms not only face greater competition both domestically and abroad, but also by non-law firm legal staffing companies who provide commoditized legal services but are not authorized to practice law. This is causing a host of regulatory concerns. Most of these companies used to assist only at various points of the document review process, but have now broadened their services to the point that a regulatory committee of the D.C. Court of Appeals has drafted an opinion to provide clearer guidance on the boundaries of such services. The opinion states, for example, “Discovery services companies should avoid making such broad statements or at a minimum must include a prominent disclaimer stating that the company is not authorized to practice law or provide legal services in the District of Columbia.”
Tightening the Belt on Electronic Data Discovery
Law Technology News
Four models involving the right combination of people, processes, and technology are being used by law firms to address the high costs of culling out evidence from electronically stored information. The process, also known as electronic data discovery (EDD), poses risks by way of “court ordered sanctions, lost data, cases, clients, profits and reputation.” Many law firms use a model that involves the creation of dedicated e-discovery practice groups that are in-house to keep EDD operations captive inside the walls of their firms. The method used by WilmerHale includes locating captive document review processes in “secondary” markets, where qualified lawyers may be hired at lower annual salaries. Firms such as Drinker, Biddle & Reath have created “stand-alone” entities that perform EDD and the entities are spun off as independent companies. Finally, other law firms use outsourcing to third-party suppliers of EDD services.
Continued Professional Development under Review in Canada
Concerns regarding continued professional development (CPD) requirements among some Canadian jurisdictions have spurred a working group of the Law Society of Upper Canada to examine the process. In 2011, CPD for lawyers and paralegals became mandatory. Now, a committee will examine complaints that the courses are limiting in subject areas, offer repetitive content, and have become overly expensive for knowledge obtained. Adam Dodek, associate professor of law at the University of Ottawa states, “lawyers encounter legal and ethical issues every day of their career, and this [CPD] has a preventative effect in helping lawyers stay out of trouble by educating them about what to look out for.”
Public Interest Lawyering
Legal Aid Groups Bracing for Layoffs in 2012
Wall Street Journal Law Blog
Due to a bill that is earmarked for less funding for civil legal assistance to the poor, 2012 may become a challenging year financially for individuals relying on or working for legal aid groups. With funding cuts from $404.2 to $348 million—the lowest amount since 2007—many civil legal aid programs will be forced to lay off staff and reduce services, the effects of which will be especially devastating in rural areas where access to legal services is already hard to come by for many people. Jim Sandman, the president of congressionally appointed Legal Services Corp, who is responsible for dispersing money to legal aid programs, plans to ask for $470 million in federal funding for 2013 noting, “access to justice is not a discretionary issue in America.”
Debunking Myths Surrounding Pro Bono Work
The National Law Journal
There is a growing body of “conventional wisdom” about pro bono work. One such thought is that law firms only want to take on the highest profile pro bono work. The reality is, however, that a majority of large law firm pro bono work comes from individual legal aid cases; this subset of pro bono work increased despite the recession that reduced pro bono work generally. A second myth is that pro bono work is dropping precipitously at large law firms especially due to the recession. According to the National Law Journal article, although pro bono work declined in 2010 the number of hours logged on pro bono work was the third highest total of the last fifteen years.
Free Legal Advice When Class Lets Out
New York Times
From modest beginnings, high school history teacher Dennis Kass provides free legal advice to students and their families after class. The project has become the Chicago Law and Education Foundation, which is now a free clinic in eight city schools. Most of the Foundation’s work is described by Kass as “legal triage,” dealing with landlord/tenant disputes, immigration issues, orders of protection, and matters pertaining to homelessness.
Women’s Positions in Leadership Roles
The National Law Journal
According to a recent report by the Commission on Women in the Profession, the Women occupy between 28 to 36% of leadership positions. Even though there has been a rise in women’s representation since 1991, the growth has “remained relatively static or slightly decreased in recent years.” The report further adds that efforts should be made to “renew efforts, break down barriers” in order to maintain the inflow of women in different areas of the legal profession.
Reports at ABA Midyear Meeting Show Diversity in Legal Profession Still a Hot Topic
The ABA Journal
The legal landscape is becoming more diverse with women professionals of color moving into leadership roles. During this year’s ABA Midyear Meeting in New Orleans, the ABA Commission on Women in the Profession sponsored a program to address findings from the Commission’s Women of Color Research Initiative report. The report examines career experiences of women of color in Fortune 500 legal departments and reveals that there is still much to be down to open the door to equality for women in leadership roles.
Attorney Regulation and Ethics
New York Bar Considers Non-Lawyer Ownership
The New York State Bar Association is investigating the practice of allowing non-lawyers to own equity in law firms. A task force on the issue was formed in light of the increasing contestation about the issue, particularly following Jacoby & Meyers’ lawsuit claiming that the current ban violates New York’s Judiciary Law and due process as well as First Amendment rights. While the practice of non-lawyer ownership is permitted in England and allowed under certain circumstances in Washington DC, concerns exist that removing the ban will lead to losing the core values of the legal profession. On the upside, law firms’ ability to raise funds would increase and small law firms would find it easier to recruit practice-relevant experts.
Rethinking Law Firms
Two major issues occupied the minds of lawyers at a public hearing by the ABA Commission on Ethics 20/20. First, how should law practice structures such as non-lawyer ownership of US law firms be handled? Second, how is technology influencing legal practice? The field of professional ethics must adapt in order to harness the innovative possibilities of technology while paying attention to issues including confidentiality, client development, and competence.
Educating the Digital Lawyer
A new eBook, Educating the Digital Lawyer, edited by Professors Oliver Goodenough and Marc Lauritsen, is now available free of charge through LexisNexis. This innovative compilation of more than a dozen topical contributions describing best practices and proposals for innovation evolved out of a working group at the Future Ed conference series co-sponsored by the Harvard Law School Program on the Legal Profession. We recommend it for readers interested in the intersection of legal education and technological innovation.
Editor: Daniel L. Ambrosini
Managing Editor: Nicola Seaholm
Contributing Editors: Amanda Barry, Nathan Cleveland, Hakim Lakhdar, Pavan Mamidi, Mihaela Papa, Erik Ramanathan
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