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Trends Report

By Robert W. Denney

So what's buzzing in the legal services marketplace as it moves into the new year? Once again, Bob Denney and his firm have got the annual lowdown and, lucky for us, are sharing it with Law Practice readers. Here's a look at the highs, the slumps and the shifting in-betweens of the market you'll want to watch.

This is our 18th annual report on what's going on in the legal profession, not only in the United States but also in other parts of the world. It is based on information we compile throughout the year from many sources. As always, some of our findings are obvious, while others are not. And some are surprising. But taken altogether, they comprise the picture at the beginning of 2007. —Bob Denney

PRACTICE AREAS

Red Hot

  • Intellectual Property. Enjoying continued growth. (See "Other Trends & Issues.")
  • Complex Litigation. Not just in large firms, either. (See "Other Trends& Issues.")
  • Antitrust. Sizzling owing to increases in (1) international cartel conspiracy cases involving price-fixing that affects importing of goods into the U.S., (2) mergers and acquisitions, and (3) joint ventures and strategic alliances with competitors and potential competitors.
  • M&A. Continues to be red hot over the past six months.
  • Criminal. And not only for white-collar crime. Criminal matters just seem to multiply at all levels.
  • Immigration. A few full-service firms are now entering this area too.

Hot

  • Real Estate. Although condo conversions have slowed in parts of the U.S.
  • Elder Law. Mostly for small firms. Custody battles over adult guardianships are also getting hot.
  • Estate Planning & Administration.
  • Libel. With a growing number of suits against bloggers and message board postings. (Also see "Other Trends & Issues.")
  • Divorce & Family Law.
  • Securities Fraud. Because of stock options backdating as well as inflated earnings.
  • IPOs. Continue to be hot over the past six months.
  • Private Equity. Firms continue to have a lot of cash they want to put to work.
  • Nursing Home Litigation. Was getting hot at midyear.
  • Employment Law. Could become red hot if employment costs continue to rise.

Getting Hot

  • Asbestos Litigation. Again. There are mixed reports on this, but despite tort reform and judges dismissing cases in the U.S., secondary exposure and international cases are growing.
  • Structured Finance/Securitization.
  • Stem Cell. Kirkpatrick & Lockhart Nicholson Graham, Fenwick & West and Pillsbury Winthrop are some of the forward-thinking firms entering this emerging area.

Cool or Cold

  • Medical Malpractice. Restating the obvious.
  • Consumer Bankruptcy. Was already getting cold six months ago.
  • Insurance Coverage. Even though it was red hot a year ago owing to Katrina, et al.
  • Environmental. Although it could get hot again because of continuing concerns about global warming.

GEOGRAPHIC MARKETS

United States. Las Vegas is red hot. And Chicago is still hot, as shown by Drinker Biddle & Reath (Philadelphia) merging in Gardner Carton & Douglas. Also, some large firms, such as Squire Sanders and DLA Piper, as well as a few smaller ones, have been opening branches through mergers in cities such as Los Angeles, Tallahassee, West Palm Beach, Houston, Minneapolis, Raleigh and Washington, D.C. Not all of these are for purposes of penetrating those geographic markets, but instead to add depth in important practice areas.

Latin America. It's red hot. Squire Sanders has even opened an office in Caracas.

Western Europe. London continues to be hot, as does Madrid. Also, Germany is heating up again.

Central Europe. Poland is getting hot again.

China. Still hot. At least 23 U.S. firms have offices there.

MARKETING & BUSINESS DEVELOPMENT

Web Sites. Search engine optimization is now more important than ever. The reason: The number of Web pages indexed by search engines has more than quadrupled in recent years.

Litigation PR. There's much more integration of public and media relations and the Internet into case strategies.

Blogs. This electronic version of talk radio continues to proliferate. Some lawyers even use them to build their practices. However, in addition to libel suits, ethics issues are now arising.

Marketing Ethics. The New York State Bar Association has proposed amendments to the Code of Professional Responsibility regarding blogs, Web sites and e-mail communications. (The Legal Marketing Association has submitted comments expressing its concern about these amendments.) The Arizona State Bar Committee on the Rules of Professional Conduct has issued opinions regarding lawyers participating in forbidden referral services online. And the Washington State Bar's committee has issued similar opinions.

Branding. After Foley & Lardner (Milwaukee) opened a Boston office, Foley Hoag (Boston) sued over F&L's use of the single name "Foley." The case was settled, but it raises an important issue about first-name branding when other firms have the same first name. Just think, in the Of Counsel 700 there are five "Bakers" and seven "Millers."

Value-Added Services. One legal pundit recently said, "It is the most overworked and vacuous term. Instead firms should state specifically how a client team can mean more to the client than just being another provider of legal services."

Business Development Activity Reporting. Marketing directors are still trying to develop forms or systems to track lawyers' BD activities. It's a never-ending challenge. But one system that seems to work is requiring all lawyers (partners, too) to fill out a business development plan at the start of the year and then having the practice group heads periodically review each lawyers' progress. In some firms this becomes part of the compensation review—which, of course, tends to get the lawyers' attention.

Business Development Coaches. Instead of using BD directors as salespeople, more firms are hiring coaches to train their lawyers to sell.

Video-Podcasts. While a few solos and small firms have ventured into audio podcasting, Torys (Toronto) may be the first major firm to launch a series of videocasts, available from Apple's iTunes store and on the firm's Web site.

Testimonials. A tried-and-true tactic, as Chuck Polin, president of Training Resource Group, has been teaching lawyers for years. Now Duane Morris (Philadelphia) integrates client testimonials into the "Client Successes" section of its annual report on its Web site.

"Best Lawyers" Lists. There are more and more. However, while they appeal to lawyers' egos, many lawyers and marketers doubt their value for attracting new clients.

OTHER TRENDS & ISSUES

Mergers. The pace continues throughout the U.S. and across borders. A few are truly a "merger of equals," but most are really acquisitions.

Midsize Firms. Legal pundits have continued to predict their demise—however, the pundits' "conventional wisdom" continues to be wrong.  As reported by Steve Taylor in his lead-in to the 2006-2007 Of Counsel 700 Survey of the Nation's Largest Law Firms, many midsize firms have had above-average growth this year and continue to reject merger approaches. The lesson: Focused and well-managed midsize firms can compete with the giant firms, be successful and remain independent.

IP Boutiques. Several years ago, when certain long-established IP firms vanished from the scene, many so-called experts began predicting that IP boutiques could not survive the incursion of the general practice megafirms into this area. While it may come as somewhat of a surprise, the conventional wisdom is also wrong here. IP boutiques, such as RatnerPrestia (Valley Forge), continue to do very well.

Litigation Boutiques. Small and not-so-small litigation firms are enjoying unexpected and continued growth because the legal departments of even the largest corporations are sending them more cases. The reasons: These firms are less expensive than the large, general practice firms; they often have more trial experience; and they're more flexible in how they work with their clients.

Plaintiffs' Firms. The effects of tort reform, as well as other factors, have been making life less than ideal for trial lawyers. However, certain plaintiffs' firms are doing well because they have gone into business-to-business litigation, some of it the result of referrals from "white shoe" firms.

Electronic Discovery. Newly effective revisions to the Federal Rules of Civil Procedure specifically address electronic data. Sharon Nelson and John Simek gave a primer on these amendments in their December 2006 "Hot Buttons" column in Law Practice. Plus, must-reading for litigators is the excellent article in the October issue of Of Counsel by Ramana Venkata.

Diversity. Pepper Hamilton (Philadelphia) expands its commitment by entering into an agreement with the Villanova University School of Law to award two full scholarships each year to students of color. The firm is also committing to hiring two law clerks of color from the school each year.

Dual Management. Based on the premise that managing a large law firm has become an impossible task for one person, more firms have adopted a dual-management structure. Schwabe, Williamson & Wyatt (Portland) has had both a president and a managing partner for five years. In the September/ October Legal Management, MP Mark Long reports that it has worked well. Now Mayer, Brown, Rowe & Maw (Chicago) has elected a chairman and two vice-chairs.

Administration. From office manager to chief operating officer, firms are raising the stature and adding to the responsibilities of their business professionals—and also increasing their compensation. (See the sidebar on page 12.) In many firms the COO, executive director or director of administration is now earning as much as a midlevel partner.

Succession Planning. For both client responsibility and firm management. As baby boomers continue to retire, more firms are recognizing the need. Benesch, Friedlander, Coplan & Arnoff (Cleveland) recently announced its succession plan for the senior management positions in the firm.

Associate Salaries. On the rise again. Most firms continue to pay in lock-step by class rather than, after the first two years, based on experience and ability.

Leverage. Fewer associates per partner in many firms as a result of (1) associate turnover, (2) increased use of technology, and (3) continued hoarding of work by some partners.

Summer Associates. Several firms are developing new types of training programs. Dickstein Shapiro (Washington, D.C.) now offers writing training with an assigned coach.

Associate Development. Cahill Gordon & Reindel (New York), Gibson, Dunn & Crutcher and Latham & Watkins (both L.A.) are among the firms now rotating associates through practice groups for as long as two years before assigning them to one group permanently.

Generational Issues. They are increasing but can be addressed if older partners will try. More firms are addressing work-life balance with telecommuting, fitness centers, onsite yoga classes and child-care programs. Flexible work schedules are also getting more attention, but some lawyers decline them for fear they will affect their future with their firms.

Libel Suits in the U.K. The Law Lords, Britain's top court, strengthened protections for media firms against libel suits if they can show their stories serve the public interest.

Contract Lawyers. While many U.S. law firms won't hire them, U.S. and U.K. companies are.

The IRS. Recent graduates of Yale, NYU and USC are the first lawyers from those schools to join the IRS in years. It's one result of a new recruiting approach that has produced over 1,500 applicants for 50 vacancies.

Law School Courses in Practice Management. Gary Munneke has been teaching one at Pace University (New York), and Mary Beth Pratt will be teaching a third-year course in the spring at Temple University (Philadelphia). Will other law schools follow?

Harvard Business School Case Study. Duane Morris (Philadelphia) is the first U.S. law firm in more than 10 years to be named as a case study subject. The firm's chairman, Sheldon Bonovitz, will co-teach the lesson.

What's in a Name? In this case, maybe a lot: Hillier, the international architectural design firm based in Princeton, now calls its legal department "Legal Resources."

Leadership Training. Benesch, Friedlander has established Benesch Leadership University to provide associates with training in leadership styles and communication skills.

Note: Further discussions of some items in this report are posted in the Writings and Legal Communiques sections at www.robertdenney.com.

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