Law Firms Suffer with the Economy

Belt-tightening is pretty much your only option when business for your company, organization, or partnership dries up. It's no different in the legal industry than in any other sector experiencing the current dismal economic circumstances. Real estate transactions, usually reliable meal tickets for many law firms, have plummeted, as have other ordinary legal proceedings, because folks are delaying decisions on such things as estate planning and related lifestyle and time-of-life issues. On the other hand, bankruptcy work and litigation over employment termination have increased, a phenomenon noticed in other recessions, such as the one in the early 1990's.

Examples of belt-tightening measures include delaying starting dates for new associates, cutting the length of summer internships, laying off some lower-performing associates as well as support staff, and even instituting pay cuts and curbing bonuses not only for associates but also for partners. Fees for some services have also been lowered in some instances in order to accommodate clients who are also struggling financially or who indicated that they might otherwise have to delay payment, perhaps by months. Indeed, inroads on the traditional structure of legal fees, notably the well-known "billable hour", have been so considerable in the current crisis that the effects are expected to be widespread and long-lasting for the sector.

Whatever the future holds for legal salaries or payment options, computer technology has definitely become a force for change in the industry. Electronic court filings, time management software, and email conversations with clients are convenient and, in some cases, mandatory. So predictable has the concentration of information in complex proceedings become that hackers engaged in industrial espionage have expressly targeted law firms in order to gain access to critical secrets and strategies. Funds for IT have also been affected by the necessity to cut costs in all areas whether it be megafirms, boutique outfits, or sole practitioners.

One outstanding silver lining to the legal industry's current woes is the increase in pro bono efforts by laid-off lawyers and incoming associates whose paid starting dates have been postponed by many months. Legal aid agencies are also suffering the ill effects of the poor economy and, naturally, are enthusiastically welcoming the volunteer lawyers.

Some firms have closed or merged with other legal services organizations. Others have moved into smaller, cheaper quarters and have sublet or rented out their former digs, or else have renegotiated current leasing arrangements. D.C.'s Hogan & Hartson is expected to merge with London's Lovells and to refocus on international legal issues and litigation. Buffalo's Offermann Cassano is scheduled to dissolve by the end of the year. New York's Heller Ehrmann, in bankruptcy, is planning to auction off its extensive modern art collection.

Among major law firms that have shed attorneys in recent months are Milwaukee-based Foley & Lardner, Chicago's DLA Piper, and Los Angeles- and New York-based Latham & Watkins. Bucking the trend is Miami's Greenberg Taurig, which has recently added lawyers specializing in environmental concerns and has also signed a long-term lease on a new downtown headquarters.

"FBI Says Hackers Targeting Law Firms, PR Companies", New York Times/AP
Judith Messina, "Less work means few winners, in any case", Crain's New York Business/LexisNexis
Mike Silvestri, "Commentary: In tough times, lawyers go pro bono", MD Daily Record/BNet