This article incorrectly said that the number of lawyers working at offshore firms doubled from 2006 to 2008. The figure referred to the staff working offshore for one such firm, Integreon. The article also misstated the firm's headquarters; it is based in Los Angeles, not Arlington.
Recession Sends Lawyers Home
Monday, March 9, 2009
Across the country, the recession is putting increasing pressure on law firms to slash spending and discount their services. Client demand for lower prices is prompting firms to outsource some of their document work to India, hire more temp or contract lawyers, shift from billable hours to fixed fees and eliminate staff.
Geoff Willard, a Northern Virginia lawyer who largely represents newly launched companies, illustrates how the Wal-Mart effect of discounting is playing out in the Washington region's legal community.
Willard left his job as partner at DLA Piper, a huge global blue-chip law firm, because, he said, he was fed up with the traditional business model that required it to annually increase rates and billable hours to finance ballooning profits and overhead.
Last fall, he joined a start-up "virtual" law firm that he said is much better suited to the current economic conditions: It does business mainly over the phone and Internet and through video conferencing. Because the firm lacks two of the biggest cost drivers -- a prestigious brick-and-mortar office and associates -- he said he is offering his clients substantial savings compared with what they paid before.
"Everyone realizes the big law firm model is broken," said Willard, a partner in Silicon Valley-based Virtual Law Partners, who works out of his office -- adjacent to his kitchen and family room -- at his Reston home.
Although thousands of lawyers and staff members across the country have been let go during the past six months, Willard and Virtual Law's founder say that since June they have been adding three partners per month. "When you tell people, 'I'm going to drop my rates 25 percent,' it's a pretty easy decision" for them to hire you, Willard said.
More than 60,000 people work in the legal profession in the Washington area, which, per capita, employs more in that sector than any other metropolitan region in the nation. Much of the work centers on the federal government, providing stability and steady work for many lawyers. But because so many global law firms have offices here, the local legal sector is subject to the same economic turmoil seen around much of the country. Experts say the changes across the country are unprecedented and are hitting the bigger firms in particular.
Unlike previous recessions, during which lawsuit filings increased, litigation this time is down sharply because the credit crunch is forcing corporations to curtail their legal spending, experts said. Partners are being de-equitized, associates fired, practice areas phased out, and some large firms are closing.
Last week, Latham & Watkins, which announced plans in late February to cut 440 lawyers and staff, said it was offering newly hired lawyers $75,000 -- nearly half of what would be their annual salaries -- to put off their start dates from October 2009 to October 2010.
"Right now as an industry, everyone is worried," said David Nersessian, executive director of the Harvard Law School Program on the Legal Profession. "No one knows what will happen next."
As the shedding of lawyers accelerates, business among outplacement services is booming. Marcia Pennington Shannon, principal of D.C.-based Shannon & Manch, said that since November her staff grew from 10 to 21 to meet the demand.
"The phone is ringing pretty constantly," said Shannon, whose company advises the unemployed lawyers on preparing résumés, interview techniques, negotiating and evaluating offers, and even finding alternative careers. "We're seeing people in their first year of practicing all the way up."