Advertising, Biglaw, Intellectual Property, Lateral Moves, Litigators, Partner Issues, Patents, Shameless Plugs, This Is an Ad

The State of the Lateral Lawyer Market

Ed. note: This is the latest installment in a series of posts on lateral partner moves from Lateral Link’s team of expert contributors. Today’s post is written by Michael Allen, the Managing Principal of Lateral Link, who focuses exclusively on partner placements with Am Law 200 clients.

On the surface, the state of the legal market looks grim; in the third quarter of 2013, lateral moves declined in almost every practice area in comparison to Q1 and Q2 of 2013 and the three previous Q3s. Although the legal sector added 2,700 jobs in August, there has been stagnation within the top 200 firms relative to the last few years. Compared to the last two years, lateral movement has dropped 29% since 2012, after having risen 5.5% from Q3 of 2011 to Q3 of 2012. When compared to the first two quarters of 2013, the drop is less dire. From the first quarter to the third, total lateral moves dropped 6.3% (not nearly as significant), and from quarter two to quarter three, lateral moves decreased by 13%.

Since Q3 is not yet over, we have assumed that the market trends will hold steady over the course of the next few weeks, and we used this inference to fill the gaps in our data. Analysis of past years’ data shows that this is not an unreasonable assumption. Our findings indicate that lateral movement during Q3 is especially weak when comparing these last two years. In 2012, 5,725 attorneys moved laterally (January 1 through September 18th), compared to 4,840 in 2013 — a 15.4% decrease. While the lateral market would be depressed even without Q3, the drop for the year to date would not be as significant. Of the top Am Law 200 firms, nearly 40% either hemorrhaged lateral attorneys or had no net gain. Despite this lateral recession, Lateral Link has increased its market share over the last year, placing even more candidates than the year before despite the otherwise static lateral market….

From Q3 2012 to Q3 2013, the hardest hit lateral markets were: Bankruptcy (-47.7%), Environmental (-40%), Trusts and Estates (-37%), and Corporate (-36%). Unsurprisingly, Litigation saw comparatively less of a decline (-18%), and Insurance (-12% ) and Banking (-16%) also showed less of a decline.

One exception to this recent dramatic downturn in demand is Intellectual Property Litigation. As the Federal Reserve’s Beige Book confirms, IP Litigation has been increasing at a tremendous rate since 1980. In 1980, about 800 Patent Litigation cases commenced. 2012 yielded nearly 3,250 Patent Litigation cases alone (not including other IP Lit matters). Furthermore, the number of patents issued per year from 1980 to 2012 has quadrupled.

The Samsung and Apple saga is indicative of the thriving IP Litigation market. Both companies have corralled many of the top Am Law litigation departments into the fight, including firms such as Quinn Emanuel (including John Quinn himself), WilmerHale, and Morrison & Foerster. Apple and Samsung have filed nearly fifty suits across ten countries, with billions of dollars hinged upon these numerous decisions. As the growth of IP Litigation is tied to the growth of technology, the Samsung v. Apple matter is just one example of how IP Litigation is an inexhaustible practice.

Despite the decrease in lateral moves, the Beige Book reports that law firms reported increased demand for legal services in the third quarter. This comes after mixed demand in the second quarter, demonstrating that lateral movement does not necessarily positively correlate with demand. Nonetheless, the Beige Book is reporting that firms are reducing their fees in an attempt to recapture their lost market share.

Over the next 20 years, the overall job market is expected to grow around 14%. For law, this number is closer to 10%. According to the Bureau of Labor Statistics, the legal sector grew by a paltry 0.7% in 2012. If those rates were extended over a ten-year period, the legal market would only add around a maximum of 81,205 jobs over a ten-year period. The legal sector is especially vulnerable right now; the myth of the guaranteed $160,000 salary out of law school is becoming more and more infrequent every year. However, law firms are rethinking their compensation system to attract star associates.

Overall, although many are panicking, it is vital to remember that the legal sector has weathered one of the worst recessions of the last 100 years with relatively few casualties to show for it. The residual effects are undoubtedly still being felt, and the long-term direction of the market is unclear. There is still room for optimism as the market forces law firms to adapt to shifts in demand, especially within certain practice areas. It will be interesting to see how law firms counter this below-average growth rate and, more interestingly, how the recent declines in law school enrollment — down 38% nationally — will impact the overcrowded legal market. At Lateral Link we expect the legal industry to settle within the next few years, barring another market shock, so that these precipitous drops and gains from year to year and quarter to quarter are less common and less remarkable.

Disclosure: This series is sponsored by Lateral Link, which is an ATL advertiser.

Lateral Link LLP is one of the largest legal recruiting agencies in the world, with 13 offices in the United States and Asia. Lateral Link has been recognized by the Wall Street Journal, The American Lawyer, the ABA Journal, the Daily Journal, and the National Law Journal for its innovative approach to legal placement. Lateral Link recruiters are former practicing attorneys who have consistently succeeded in placing partners, associates, general and corporate counsel into some of the most reputable law firms and organizations in the world.