The self-described “legal tabloid” blog Above the Law has been busy lately keeping up with its Nationwide Layoff Watch. Among large firms that have fired attorneys in recent months are Cadwalader Wickersham & Taft and Clifford Chance. On Tuesday, ATL revealed that Sonnenschein Nath & Rosenthal had laid off 124 employees, including 37 lawyers. The firm had nearly 700 lawyers before the cuts.
Sonnenschein Chairman Elliot Portnoy told the ATL that the cuts were the result of changes in the needs of clients owing to the “economic downturn,” and were not “performance based.” But in today’s Wall Street Journal, Portnoy is quoted as saying that some “unproductive” litigators were also let go. “We have to take the steps necessary to make sure we are competitive for talent and achieve the profitability our lawyers expect,” he said. In terms of profitability, “A small group of firms are positioning themselves to pull away from the pack. We intend to be in that small group.” The Journal article also notes that industry analysts predict many law firms will have a difficult time achieving even slight revenue growth this year, much less the double-digit increases that were previously common.
Law firms are businesses, and the bottom line matters. In this respect we’re all in the same boat, whether we’re a global behemoth or a boutique. Where we differ, though, is how we reach that bottom line. Most large firms operate exclusively on the basis of the billable hour. This business model encourages maximizing hours worked by younger associates who bill at lower hourly rates but put in enormous numbers of hours. A study done in 2005 found that nearly a quarter of New York law firms required its lawyers to bill a minimum of 2,000 hours per year, and the percentages were even higher in other cities. The result is a profitable revenue stream to the firm, but a significant expense to the client. And, as in-house counsel consultant Rees Morrison points out in his blog entry about the study, bill padding in these circumstances is virtually inevitable.
When partners either can’t keep a cadre of associates busy or aren’t amassing their own billable hours they become “unproductive” and are pushed out. Worse, this business model is extraordinarily dehumanizing and cynical, in my view. That’s why we rarely practice it at our firm. We regularly offer reasonable fixed or flat-fee arrangements that are affordable for the client and fairly compensate us for our efforts.
There has been a lot of discussion in the legal blogosphere about alternatives to the billable hour, especially among corporate counsel faced with pressure to contain and predict legal costs. In his Legal Marketing Blog, Tom Kane described a panel at the Legal Marketing Association’s annual meeting in March led by the chairperson and general counsel of the Association of Corporate Counsel. One of corporate counsels’ complaints was the perceived unwillingness of law firms to discuss alternative fee arrangements. Kane notes that there’s a lot of work out there for medium-sized and smaller law firms because of their lower fee structure and flexibility in pricing. To paraphrase the Chairman of Sonnenschein, we intend to be in that small group. CR
There was a great article in Sunday’s New York Times about how the drop in the crime rate in New York City has affected writers of crime fiction. Crime in all categories is down to record low levels. In 2007 there were only 494 homicides in the city – the fewest on record since reliable statistics became available in 1963. New York City, once the murder capital of the world, is now the third-safest large city in the U.S., after Honolulu and San Antonio.
Some crime writers maintain that the real crime rate has little to do with popular perception, and that the image of New York in the bad old days will never fade. Others have adapted by focusing on terrorism or trying to infuse financial crimes with suspense. But Donald Bain, author of the “Murder, She Wrote” book series, is nostalgic for the grittier days, when the wise guys connected to Vincent “Chin” Gigante would interrupt their sidewalk card game to escort his daughter safely home from the subway. Times have changed, indeed.
When I began my career in 1981 as a young Legal Aid lawyer trying cases in the South Bronx, the crime rate was truly astronomical. Lawlessness was epidemic and affected many facets of daily life in the city. On the other hand, I got lots of experience as a criminal trial lawyer. An often overlooked collateral consequence of the laudably low crime rate today is that young lawyers, be they prosecutors or public defenders, just don’t get to have the same number of courtroom face-offs.
A strong, experienced defense bar helps to preserve our constitutional rights. Seasoned defense lawyers can breathe precious life into the Sixth Amendment’s guarantee of the right to counsel because we are practiced veterans. Novelists can invent crimes, but lawyers can’t invent cross-examination skills. It takes practice, and lots of it.
