Economic crisis: Law firms weather a changing climate

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One could only speculate on the effect the economy will have on future lawyers who are now making their way through law school. But the future law school graduates probably won’t be as successful in their career searches as those who got their law degrees in 2007, which had the highest employment rate — nearly 92 percent — for any class in the last 20 years.

Those in this year’s graduating class won’t see a dramatic impact because many of them received job offers after their summer associate stints in 2007, said James Leipold, executive director of the National Association for Law Placement.

”We don’t expect to see the full impact of the slowdown until the classes of 2009 and 2010,” Leipold said.

A time to adjust

Moving forward, firms will do more than just form new task forces to enhance their client services.

The Internet is an obvious place to start as some firms are trying to become another online news source.

At Franczek, Radelet & Rose, a news web page made its debut in November.

The firm’s client roster includes school districts that face education law matters, and it represents management in labor and employment disputes.

The point is to give firm clients a one-stop shop to access news that affects them, as well as report on the relevant platforms of the country’s president-elect, U.S. Sen. Barack Obama.

”The first premise is that the world is changing, and the world is changing at a incredible pace,” said Jim Franczek, president of the firm. ”In addition, it’s how do you anticipate and how do you serve clients best with a new [presidential] administration coming in — in terms of the policies they’re going to have in labor, employment, and education.”

With all the work available to try to mop up the economic mess, it’s not just attorneys who work in law firms who will benefit. In-house general counsels might want to start dusting off their resumes.

In a survey released in October, Fulbright & Jaworski polled 251 corporate law departments in the United States. Attributing the numbers to the nation’s economic crisis, respondents said by a 5-to-1 margin that they would hire more in-house attorneys instead of cutting back in those departments.

Moreover, a mere 8 percent of the survey respondents expect to have fewer legal disputes in 2009, compared to 2008.

At the same time, it’s possible that companies will ask law firms to reduce their rates as the business world faces the possibility of shrinking profits and increased litigation.

”I talked with one head of a big manufacturing company in Chicago, and he said that business just came to a grinding halt in mid-September,” said John Challenger, chief executive of Challenger Gray & Christmas, an outplacement company that helps laid-off employees find work.

”It’s not a bank; that’s a big manufacturing company,” Challenger said.

”So those companies are under real pressure — as this recession moves out from Wall Street to the rest of the economy, from banking and housing to the other areas of the economy — to cut their costs. There may be pressure on legal rates.”

There’s also pressure on firms to shed their ranks. In October alone, at least four law firms announced staff cuts.

Bell, Boyd & Lloyd trimmed its associate numbers by 10 lawyers.

Sonnenschein Nath & Rosenthal laid off 24 lawyers and a significant amount of support staff.

Katten Muchin Rosenman laid off 21 associates and counsel in multiple offices. And the London-based firm of Clifford Chance announced that it would lay off 20 associates from its litigation and dispute resolution practice.

In a report released in October, legal consulting firm Hildebrandt suggested that layoffs should be completed this year so that the severance payments can be made before the end of the year.

”Layoffs are never a short-term way to save money; they’re a long-term way to save money,” said Jones, of Hildebrandt. ”So partners take a hit on profit in 2008, but maybe you can avoid that hit in 2009.”

In another move to cut costs, law firms are showing a heightened interest in outsourcing tasks such as document review and legal research.

”They’ve come to the conclusion that this global recession isn’t going away soon. Billings are down almost across the board. Profits are down for the first time in decades, and they’ve started to lay off staff. And corporate customers are only tightening the screws even tighter,” said Chris Veator, executive vice president of CPA Legal Services, an outsourcing company in Alexandria, Va.

”The law firms have come to the conclusion that they need to find a way to respond, because what corporations are typically doing now is either capping fees or looking to do fixed-priced contracts,” Veator said.

But whenever the economy turns a corner, law firms will lead the way, Jones said.

”The impact on the general economy sort of follows the impact on legal market,” Jones said. ”When businesses decide ‘We want to go ahead with a merger or transaction,’ the first thing they need to do is get the lawyers involved.”

 

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