Biglaw, In-House Counsel

Biglaw Is Doomed If This Becomes A Trend

Surprising no one, clients are increasingly refusing to pay for associates.

By  
on

The Biglaw financial model relies upon leverage, the fancy term for throwing armies of young associates at a matter and watching the profits funnel ever upward into the partnership coffers. While $2000/hour partners may inspire a few headlines, multi-millionaires billing four figures aren’t nearly as lucrative as a couple of $180K associates grinding out 2400 hours at $400 an hour. This is how Biglaw stays big.

The fact that deep-pocketed clients are forking over — in substantial part — for these fresh-faced lawyers to get all their on-the-job training is just another perk of sitting on top of the Biglaw food chain.

But general counsel may have finally had enough of it. At least according to this Am Law Daily report on the recent SOLID Summit:

At a Manhattan conference on legal innovation this month, Mark Smolik, the general counsel of DHL Supply Chain Americas, had a message for the law firm representatives in his audience.

“Sorry, law firms. You spend on the training,” Smolik said. “I cannot afford to pay your associates $325 an hour.”

Instead, Smolik told the group, he’d go straight to the source for young legal talent, and “pick them up right out of law school.”

Biglaw already faced an associate demand problem as document review vendors have chipped away at the need for the legions of litigation minions of the past, while review technology — for example, Kira Systems — will reduce the need for transactional headcount. If clients rob firms of the profit motive to hire young lawyers, then just how much business sense does it make to be Biglaw? That overhead doesn’t pay itself.

That said, we’ve heard clients talk about drawing a line in the sand over paying for associate salaries before. At the end of the day, Cravath still got its pound of flesh. But it’s one thing to complain about fees and another to take the bull by the horns and hire young lawyers directly. With in-house departments using their own headcount to handle more matters, the Am Law 50 may still manage to collect some associate billables on complex matters. A solid brand can open even the stingiest wallets.

But the rest of the legal industry might find all their leverage blink out of existence.

Sponsored

Pay for Associate Hours? More Companies Say ‘No Thanks’ [Am Law Daily]

HeadshotJoe Patrice is an editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news.

Sponsored

Topics

, ,