Ask Bill

Volume 37 Number 5

By

K. William Gibson (kwg@gibsonmediation.com) is a personal injury lawyer and arbitrator in Clackamas, OR. He is President of the College of Law Practice Management.

Dear Readers: It’s been a great pleasure writing this column, but now other endeavors call, so this will be my final installment. With that, it seems like a good time to reflect on some big happenings in the profession since this column’s launch.

To say that the last decade has been tumultuous might well be an understatement.

In 2003, when I wrote the first of these columns, the legal industry was flying high. BigLaw per-partner profits were soaring, and partners were bidding against hedge fund managers for prime vacation property and spots in prestigious private schools for their kids. Small firm lawyers and solos were also doing well, in no small part because of the housing boom and easy money for consumers. Developers and small builders had plenty of money to pay their lawyers, and homeowners could tap into their equity lines of credit if they needed extra money for things, including legal work.

Even well into the middle of the decade, things were going gangbusters—but warning signs began to appear on the horizon. Even as the banks and various market pundits assured us that the real estate market would continue going up, those same banks were hedging their bets against a collapse. When housing prices peaked in 2006-2007, though, no one thought that it would lead to the kind of economic breakdown that ensued. And nobody thought that it would affect the legal business all that much.

But once big firms began to feel the effects of the collapse, as we all know, they started to shed employees, including associates. According to one website that tracks these things (www.lawshucks.com), by the end of last year, almost 15,000 people had lost their jobs at the bigger firms, including nearly 6,000 lawyers. Associate salaries were reduced or frozen and new hiring was cut back or deferred.

During the same time, the use of legal services outsourcing providers was increasingly gaining a foothold among law firms and corporations as a way to drive down costs and reduce headcount. When I first wrote about it in a 2006 column, the trend was growing without a lot of fanfare, but it was prominent news in the profession when I wrote about it again in 2009, the year I also put on an outsourcing program at the ABA Annual Meeting to a large crowd of folks who were wondering what this all would mean for them. No one knew quite what the next couple of years would hold, but we’ve certainly learned a lot about that since then.

The Continuing Shaping of a “Sea Change”
By fall of last year, offshore outsourcing firms had gained such ground in the legal market that one of them, the Indian company Pangea3, was acquired by Thomson Reuters, the legal publishing giant, in a deal that shocked the industry (and raised the question of “Vendor or Competitor?” in a February ABA Journal article). Moreover, the irony, it seems, is that with labor costs in India and other outsourcing destinations having risen through the past decade, outsourcing providers looking for other strategic locations to do their work are shifting more of it stateside owing to the high unemployment rate here.

The big driver in all this, as I’ve noted in several columns and as most lawyers have realized by now, is increased pressure from clients to lower legal costs.

When the economy starting going downward, corporate counsel began pressuring law firms to rein in their fees. Some even bypassed their firms and cut their own deals with outsourcing providers. When BigLaw caught on to the magnitude of what was happening, it rattled the legal industry at its very foundation. I wrote a column in 2009 pondering the question of whether what we were seeing amounted to a sea change that will reshape the legal market for years to come, or if it was more akin to a “knee-jerk” reaction by clients to the economic downturn. But nowadays we know that corporate clients, who previously hadn’t blinked when their legal bills included charges for first-year associates to sit in on meetings at $400 per hour, don’t hesitate to question whether they are getting good value for their legal dollars. So I don’t see things returning to business as usual, although some disagree.

Then there are the changes in the other end of the market that have taken place since my column first appeared. For example, back in 2002, no one had heard of LegalZoom and similar online legal services or information providers. Now, their TV commercials compete with personal injury and bankruptcy lawyers for spots on reruns of Perry Mason, and a new breed of lawyers is entering the virtual practice realm with their own advanced web-based legal document assembly tools.

To quote the philosopher Mortimer Snerd (a ventriloquist’s dummy of early-TV vintage), “Who’d a’ thunk it?”

But still, sadly, many families that used to be able to tap a home equity line to pay for legal fees now have no line of credit, and unemployment continues to be a big concern, too. My colleagues handling bankruptcy cases are doing quite well, but those who previously represented builders and handled property transactions find themselves with plenty of time on their hands. However, various smaller and midsize practices are finding themselves on solid ground owing to their ability to offer clients better efficiencies and more-flexible fee arrangements, and (with fingers crossed) we can watch for more bright spots when the economy’s speed increases in the future.

I have to pause in closing to wonder what I might be writing about in the next years were this column to continue. I would probably be writing about the consolidation of BigLaw; the struggle of regional firms to maintain their dominance while fighting off competitors from above and below; the increasing prevalence of online legal providers; and perhaps the growing efforts by some to continue providing free or low-cost legal services to the underserved.

Of course, nobody accurately predicted in 2003 what the legal market would look like in 2011, so in short, how it will all shake out is anybody’s guess. Thanks for reading.

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SPOTLIGHT

New and notable books and resources for the business of practicing law


The Lawyer’s Guide to Microsoft® Word 2010
by Ben M. Schorr
Focusing on the tools and features that are essential for lawyers in their everyday practice, this handy reference offers clear explanations, legalspecific descriptions and time-saving tips.

 

Financial Statements and Trust Accounts: Essential Forms, Checklists, and Guidelines
by Gary A.Munneke and Anthony E. Davis
This desk reference will help lawyers structure and manage their practice to achieve two fundamental goals: provide ethical service to clients and make law practice profitable. Customizable forms are included on an accompanying CD-ROM.

 

Disaster Planning and Recovery: Essential Forms, Checklists, and Guidelines
by Gary A. Munneke and Anthony E. Davis
This book provides specific guidance on how law firms need to cope with disaster, including planning, response, recovery, and relief. Customizable forms are included on an accompanying CD-ROM.

 

For more information, visit the ABA Bookstore at www.ababooks.org.