Biglaw, Money

Biglaw Billing News Spells Opportunity for Others

For those lawyers and firms -- the ones that are not charging (or compensating) at the very highest levels -- these stories could present a significant opportunity.

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David Perla

David Perla

By now, you’ve heard the big stories about billing practices at large law firms. First came the news, via the BTI Consulting Group, that the billing rates of the priciest lawyers in the country have reached $2,000 per hour. Shortly thereafter, Above the Law broke the news that Cravath has elevated first-year associate salaries to $180,000, with many peer firms rushing to follow suit.

You’ve also probably heard some of the reaction to these stories, not all of it positive. With regard to the $2,000 per hour lawyer—the ranks of which reportedly include David Boies, Paul Clement, and Ted Olson—some have said that lawyers of such quality are worth every penny. But there are also grumblings of discontent. One source told The American Lawyer that the $2,000 per hour lawyer “seems so crazy and out of market”; that speaker, believe it or not, is a leader at a Wall Street firm. The word from corporate clients, unsurprisingly, has been similarly unenthusiastic on the topic of the $180,000 first-year lawyer. The global general counsel for Bank of America, for one, let the nation’s largest law firms know that he doesn’t intend to absorb the cost of the salary increase. “While we respect the firms’ judgment about what best serves their long-term competitive interests,” he wrote in an email that has become public, “we are aware of no market-driven basis for such an increase and do not expect to bear the costs of the firms’ decisions.”

These billing stories are being discussed vigorously, as well they should. Most of the talk, however, has centered on their implications for Biglaw. What you are less likely to have heard is what they mean for other practitioners. And yet, for those lawyers and firms — the ones that are not charging (or compensating) at the very highest levels — these stories could present a significant opportunity.

Some years ago, the Association of Corporate Counsel led a pushback against the rates being charged by outside firms, stoked in part by inside counsels’ incredulity over the $160,000 salary for first years. (The ACC still runs its “Value Challenge” campaign.) With these two billing stories happening at the same time, the climate feels ripe for another backlash moment, in which “value” firms may have particular appeal to corporate legal departments.

Fortunately for them, the resource gap between firms inside and outside the Am Law 100 has never been narrower or less meaningful. With the many tools available today, smaller providers of legal services have the capacity to present (in both appearance and reality) truly viable alternatives to their elite competition. This is true both for individual lawyers and for law firms as a whole.

There may have been a day when it was difficult for lawyers working outside a coterie of elite firms to catch the attention of in-house counsel. The advent of digital publishing and social media platforms, if nothing else, has changed that dynamic entirely. Those tools have democratized the conversation of sophisticated legal issues, and made it much easier for individual lawyers to establish reputations as thought leaders in their areas. Today, lawyers and firms with something to say can create strong personal and institutional brands, and catch the attention — and business — of corporate counsel, whether they work in New York or Peoria, Illinois, at a megafirm or a solo shop.

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The barriers to entry have fallen for firms as well. Once, firms with armies of associates could do things that smaller firms could not: 50-state surveys, large discovery projects, complicated M&A deals, complex litigation, and more. Now, with advances in technology (like drafting tools, complex search and retrieval tools, heat maps, chart builders, technology assisted review, etc.) and business processes (like outsourcing, legal project management, etc.), smaller firms can accomplish those tasks relatively easily. Meanwhile, publishing software and the existence of the web itself allows the smallest law firms to prepare world-class materials and market themselves to a vast audience.

Indeed, with tools available today, small and medium firms can legitimately claim many, if not all, of the benefits of much larger operations. Most importantly, the powerful informational tools on the market now make it possible for firms to credibly claim expertise in a broad universe of topics, even with limited number of attorneys. Even the larger firms’ most durable advantage—their number of physical locations—has been eroded. Lawyer referral networks have become commonplace, allowing even small shops to act as a one-stop source for work in a large number of practice areas and locations. Members of the World Services Group, for instance, can give their clients access to a 19,000-lawyer network, including those from powerhouse firms such as Hunton & Williams and Haynes and Boone. Ditto that for Lex Mundi, which includes numerous domestic and offshore law firms, from widely known national firms to much smaller and less well known regional and local firms, in countries around the globe.

It’s true that best lawyers and firms will always attract clients. But it’s also true that the news stories making the rounds may be putting an unpleasant taste in the mouths of corporate counsel. If that’s the case, it’s an ideal time for firms outside the Biglaw elite to find out what’s possible.

David Perla is the President of Bloomberg Law and Bloomberg BNA’s Legal division. Perla plays a key leadership role in the continued growth of the company’s legal business, which includes legal, legislative, and regulatory news analysis and the flagship Bloomberg Law technology platform. You can reach David at dPerla@bna.com and follow him on Twitter at @davidperla.

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