Partner Issues, Partner Profits

Departing DLA Piper Partners: High Rates (Not Associate Compensation) Responsible for Client's Concerns

By  
on

We’ve spent a lot of time discussing DLA Piper’s new compensation structure for its associates. I’ve assumed that DLA Piper’s changes have the support of DLA partners. I mean, we’ve received leaked memos from DLA partners defending the plan. But it’s wrong for me to think of partnerships as monolithic groups, especially at a firm as big as DLA. Partners don’t uniformly support every single move that leads to increased profits per partner — even when the decision is merely about keeping partner billing rates high. The ABA Journal reports:

Labor and employment partner Richard Hafets worked at DLA Piper for 34 years, but he has some gripes about the firm that is spurring him to jump to Jackson Lewis along with three other partners and four associates.
At DLA, Hafets told the Maryland Daily Record, the firm’s billing rates were so high that the employment lawyers were being priced out of the market.
“It was either stay here and see our practice stagnate at best and wither at worst, or try to find a way to revitalize our practice by reducing our rates,” Hafets told the Daily Record. He said he will be able to drop his billing rates by more than $100 an hour at the new firm.

From time to time, we hear that this kind of situation is one of the most underreported aspects of the legal recession. Some Biglaw partners feel that the rates they are forced to charge make it difficult to develop or grow business with cash strapped clients.
In this situation, Hafets blames the entire DLA model for crowding out his business. Details after the jump.


Hafets takes a couple of shots at the DLA business model on his way out the door: The Maryland Daily Record reports:

Hafets said he has spent his entire 34-year legal career at DLA Piper but in recent years has watched it grow into a “global behemoth” whose rates have become unworkable for him.
“We have obviously many, many offices around the world, and those offices are of little benefit to our clients,” he said.

Ouch.

He said the firm has “invested millions of dollars” in bringing on former politicians who do not actually bill time and in paying bonuses to lawyer-managers who practice little or not at all.
“The working lawyers like myself and my group are charged with the task of supporting that structure,” Hafets said.

Sponsored

Ten to the power of ouch.
It’s very interesting that a departing partner — one who is leaving specifically because he feels DLA isn’t meeting his client’s concerns — didn’t say one thing about associate compensation. He didn’t say one thing about first year associate “training” that clients are no longer willing to pay for. And he didn’t suggest that his clients care or even know about DLA’s new merit-based compensation scheme.
Instead, he said that his clients were concerned about rates — his rates. It’s not all about the rates of junior attorneys, it’s about the rates of the big fish, the partners, the most expensive guys in the room. That is what clients are concerned about.
That should be an obvious point. But I highlight it here because firms have been so relentless at pushing this idea that clients care about how much a first year associate make. They’ve been pushing that line so much that one wonders if management is starting to believe its own hype.
Call me Jabba the Hut if you must, but don’t try a Jedi mind trick with me. Your feeble skills are no match for the power of rational thought.
And it seems like Richard Hafets, three other DLA partners, and five DLA associates also figured out the crucial role billing rates play in the fight to get business during the recession.
I imagine they are not alone. I expect that in Biglaw offices around the country, partners and fighting with other partners over how low rates can go. That is the elephant in the room.
DLA ‘Working Lawyer’ Explains Why He and 8 Others Moved to Jackson Lewis [ABA Journal]
Nine at DLA defect to Jackson Lewis [Maryland Daily Record]
Earlier: DLA Piper: Taking the Merit Based Model Out for a Spin
DLA Piper: Bringing the Curve to Biglaw

Sponsored

Topics