Five years ago, there was no shortage of legal business thinkers predicting the demise of the corporate law firm as we know it. Too bulky, they clucked. Corporations were looking to cut their costs and at the time, law firms looked like a pretty fat target.
All those underqualified associates toiling away, racking up billable hours in legal libraries. And how about the exorbitant overhead costs? Law firms are addicted to downtown addresses and pricey rent. Meanwhile, corporations were supposed to expand their in-house legal operations, betting that they could pare expenses if they owned the talent rather than leasing it through an outside law firm.
The hatchet was going to fall and law firms were going to feel the pain.
Well, take a look around. The typical large corporate law firm is not just alive, it's more profitable than it has ever been. Firms have become somewhat leaner -- fewer associates working for each partner -- but at mega-firms, associates still outnumber partners, sometimes by as much as six to one, according to legal consultants at Altman Weil Inc. The art of "leveraging" associates into profit endures.
And rare is the law firm that has abandoned the city for cheaper rent in the suburbs. Not a single big Washington firm, for instance, has picked up stakes. Far from an endangered species, the corporate law firm is the horseshoe crab of the corporate world: a seemingly prehistoric creature that just won't go away.
What explains this remarkable display of survival? In a word, prosperity.
"There's lots of activity, lots of deals and pressure to get things done quickly," said Jim Cotterman, an Altman Weil principal. "So while cost is out there as an important item, it's nothing like it was in the early 1990s."
Plus, many law firms had cut to the bone during the economic downturn at the start of the 1990s. So when the good times rolled in and stock markets surged, many increased their hiring. At the same time, say experts, even though firms stayed in high-rent cities, most got better at managing their expenses. The ratio of secretaries to partners has been dropping, for instance.
And rather than bringing lawyers in-house, many corporations concluded that it made more economic sense to maintain their ties with outside firms. It's true that when a general counsel hires a third-year associate, the company suddenly is not covering a law firm's profit margin and overhead. "But 15 years down the road," explained Joel Henning, a law firm consultant at Hildebrandt Inc., "you've got an 18-year lawyer earning a huge salary and in many cases doing the work you could have done by a third-year associate at a firm. Law firms are often cheaper because they have turnover and in-house legal staff don't."
Paul Mickey, managing partner at Shaw, Pittman, Potts & Trowbridge, remembers the dire forecasts of a few years back. "The prediction was made, I heard it a lot, sometimes from threatening clients," he said. Plenty of "commodity" work -- routine research tasks, for instance -- has been taken in-house, "but most law firms concentrate now on high-end work of strategic significance to their clients, and that work has grown," Mickey explained.
Still, some consultants are betting that the apocalypse lingers just around the corner. "I think it's just a matter of time," said Jay Jaffe, a Washington legal consultant. "Things will stay the same for the next three to five years, and then you'll see a radical shift."
A High-Tech Raid
In one of the most brazen -- and successful -- raids in modern Washington legal history, the Boston-based law firm Mintz, Levin, Cohn, Ferris, Glovsky and Popeo has hired away the entire five-lawyer technology practice at Michaels, Wishner & Bonner.
"We basically swooped in and took their entire emerging company business," said Bruce Sokler, the managing partner at Mintz, Levin. "We felt that the group has the credibility and visibility and could get us up and running very quickly."
Last Monday, Mintz, Levin became the umpteenth firm to open a Northern Virginia operation in the past year, launching a seven-lawyer satellite office in Reston. Though certainly splashy, the arrival seems a tad belated. Mintz, Levin has been the outside firm for America Online for years and helped take the company public.
Mark Wishner, Scott Meza and Stephen W. McVearry joined as partners and Anne Fletcher and David Fuentes joined as associates, the firm announced. Two lawyers in Mintz, Levin's Washington office are relocating to Reston as well: partner Martin Zoltick and associate Brian Rosenbloom.
For Michaels, Wishner -- which will now be known as Michaels & Bonner -- the loss comes only two months after the firm opened its own Northern Virginia office. "They thought that a larger firm is where they wanted to be," said partner Art Lerner. "We wish them well."
Legal Wizardry Pays Off
MCI Center owner Abe Pollin will soon write a very large check to cover the legal fees of a firm that sued him. Working on behalf of the Paralyzed Veterans of America (PVA), Miller, Cassidy, Larroca & Lewin took Pollin to court, arguing that seating at the MCI Center did not comply with standards set by the Americans With Disabilities Act. The problem: People in wheelchairs were unable to see the action when spectators stood.
The PVA won the case and subsequent appeals, which entitled PVA to "reasonable" legal fees. Not surprisingly, Pollin's lawyers at Williams & Connolly -- including Brendan Sullivan, John Kester and Paul Mogin -- had a different definition of reasonable than lawyers at Miller, Cassidy, who included William Jeffress, Niki Kuckes and David S. Cohen. Negotiations between the parties stretched on for months. The final bill, according to people familiar with the matter: $850,000.
That's a whole lot of Wizards seats.
And the money Pollin spent for his own attorneys could probably have purchased a few buckets of popcorn. In addition to a team at Williams & Connolly, Pollin was paying Michael Evan Jaffe and Gerald Zingone at Arent Fox Kintner Plotkin & Kahn.
Bullish on Baer's Departure
Is Bill Baer's recent announcement that he will soon depart as the head of enforcement at the Federal Trade Commission good news for the proposed Exxon-Mobil merger? Certainly, the timing has tea-leaf readers and Wall Street arbitrageurs thinking. That's because Baer has said he is leaving in October and wants to exit only after the major cases on his plate have been resolved. That, of course, includes the $77 billion oil deal. If the agency planned on challenging the merger, or insisting on conditions that spark a court fight, it's hard to imagine the matter being settled by October.
"The fact is that if it goes to litigation, I wouldn't be the guy in court anyway," Baer said, politely demurring from further questions on the topic.
Baer then suggested that Hearsay call Janet McDavid, a partner at Hogan & Hartson and Mobil's attorney, as well as Rick Rule of Covington & Burling, who represents Exxon. McDavid declined to comment. Rule declined to call back.
Send scoops and gossip, but not flackery, to firstname.lastname@example.org