Biglaw, In-House Counsel, Litigators

Is Litigation In 'Secular Decline'?

And is it a good idea to emphasize corporate work and de-emphasize litigation today?

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Stock analysts talk about a security being in “secular decline.” This is when long-term trends doom an entire business model. The advent of the automobile, for example, put the buggy whip business into secular decline.

I recently had lunch with a litigation partner at a big international firm, and he opined that litigation is in secular decline. The litigation business is not just temporarily slow, he said, but is permanently depressed and will never recover. This sad fellow noted that he was glad he’d be retiring in a few years, because it would be awfully hard to create a decent career as a litigator if you were just now graduating from law school.

This startled me. I hear from lots of glum partners, but rarely from successful, rich guys convinced that the world is crashing down around them. Not only that — if this guy was right, then he’d surely (inadvertently) written a blog post for me. Is it possible that litigation is in secular decline?

Nah.

Look: The economy busted in 2007 and 2008, and the resulting financial crisis triggered some lawsuits. That fed litigators for a while. (The crisis starved corporate lawyers, but that’s another story.) Financial crisis litigation has now worked its way through the judicial system, and the big New York firms are surely feeling the result of that. But that doesn’t mean that litigation has died; it means only that litigation has its ups and downs, as do all fields.

Moreover, there were countervailing trends growing out of the financial crisis. Beyond the financial field, the great recession did have an effect. Companies were worried during the recession, and they wouldn’t easily spend a few million bucks litigating in the hope of recovering a few tens of millions. My sense is that we thus saw less of some types of complex litigation in 2009 and 2010, because companies were nervous about footing the bill. That restraint on litigation has recently eased somewhat; companies aren’t suing with abandon, but they’re more willing to spend some dough.

I think my lunch buddy’s mood was influenced by something else: Today, private equity and public M&A lawyers are commanding insanely high rates. Litigators, not so much. There are a very few firms, blessed both with great corporate and with great litigation practices, that are now intentionally choosing to emphasize deal work. Deal work pays higher rates; if a firm does proportionately more deal work than litigation work, the firm is recovering a higher average rate and is more profitable. If you’re a litigator at one of those firms, it feels as though litigation is dying. But litigation is not dying; litigation at your firm in particular is suffering because of a choice that management is making.

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Is it a good idea to emphasize corporate work and de-emphasize litigation today?

It depends.

First, for virtually all lawyers, there’s no reason to ask this question; you don’t have a choice. You do the work that comes in the door (and can be handled within your firm’s cost structure); you don’t pick and choose the most profitable stuff. If you’re choosing between doing private equity deals and complex litigation, you’re breathing very rarefied air.

Second, even if you have the choice, I’d bet that private equity and public M&A work are only temporarily booming. Eventually, the economy will slow down, deals will stop, and the corporate guys will have nothing to do. When that happens, firms that maintained robust litigation practices will be sitting in the catbird seat. Diversified practices don’t throw off as much money when transactions are hopping, but they hedge against a downturn. It’s just a question of how firm management chooses to play the game.

When I double-checked my glum lunch buddy’s thesis, asking partners at other firms whether litigation was declining at their joints, I heard almost universally that life’s okay. Litigation’s up and down, but there’s no reason to abandon litigation as a career.

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So there you have it: A thesis. An unscientific testing of a thesis by speaking to a small, non-randomly selected cross-section of people. And the public presentation of those results as though they mean something.

But really: Did you expect anything more?

Mark Herrmann spent 17 years as a partner at a leading international law firm and is now responsible for litigation and employment matters at a large international company. He is the author of The Curmudgeon’s Guide to Practicing Law and Inside Straight: Advice About Lawyering, In-House And Out, That Only The Internet Could Provide (affiliate links). You can reach him by email at inhouse@abovethelaw.com.

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