Citibank

With this year more than halfway done, let’s look in the rear-view mirror and survey managing partners’ confidence in the legal industry during the second quarter of 2014. Wall Street investors seem generally optimistic, at least based on the state of the stock market (despite today’s turbulence). Are law firm leaders similarly hopeful?

Survey says — well, nothing terribly exciting, but let’s have a look anyway….

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Last week, the American Lawyer announced its eagerly anticipated Am Law 100 rankings, reflecting the financial performance of major law firms in 2013. On the whole, the news wasn’t bad. The elite firms did great, and most other firms eked out “modest, hard-won gains.” Am Law suggested that the big vereins underperformed, but that indictment might have been too harsh.

The Am Law data focuses on last year. What about last quarter? How are law firms doing in 2014 so far?

A new report from Citi Private Bank, a leading provider of financial services to leading law firms, has some answers….

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Thumbs up, managing partners!

April Fools’ Day is a terrible day to be in this business. Every tip that comes in requires an extra layer of scrutiny because even longstanding, trusted sources are trying to troll. It’s really not all that funny to make up false but entirely believable stories and pass them off as real. That’s why the Daily Currant isn’t funny.

Which is why when Citi Private Bank issued its First Quarter report on the confidence of managing partners across the legal landscape and declared that managing partners have a rosy outlook, it earned a double take on this end. After all, wasn’t it just a few months ago that managing partners were telling the American Lawyer that it was all gloom and doom on the horizon?

So is this result real? It is, but the headline isn’t the end of the story….

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Good news: According to the Citi Private Bank Law Firm Group (and its partner, the Hildebrandt Institute), firms are looking at nice, steady profit growth in the coming year. It’s not super, but who can be choosy in the current market? And partially driving this growth is an expected uptick in demand, so that’s good.

Bad news: While the media latched on to the favorable demand projection, the report expects firms to be more profitable because they are finally taking Citi’s advice on how to become more profitable — and that doesn’t bode well for rank-and-file attorneys.

Let’s see what’s in store for 2014….

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As noted in Morning Docket, Citi’s quarterly review of the financial landscape facing law firms just came out. The surface level verdict is — as it has been for some time — slow and steady, with a bunch of red flags.

The firms are happy to see positive revenue growth, even if it’s only 2.7 percent. I mean, other industries aren’t so lucky. But when the industry is a few years into the “New Normal” and analysts are still pointing to the same failings, it’s hard to feel too optimistic.

Let’s look at the other highlights of the report:

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Missing: multiple midlevels

Even though there’s significant excess capacity — meaning too many lawyers chasing too little work — I am hearing the concern that there aren’t enough midlevel associates.

Dan DiPietro, chairman of the Citi Private Bank Law Firm Group, offering an explanation as to why he thinks Biglaw firms want to increase headcount in this time of economic stress. In the latest Law Watch Managing Partner Confidence Index Survey, law firm leaders’ overall confidence level was lower than it has been since last year at this time, with expectations for profits and revenues also on the decline. The only area where their confidence rose was in expectations for hiring associates and equity partners.

D.C. is dysfunctional, as pundits constantly complain about. Has the lack of productivity on Capitol Hill expanded to affect the private law firms of Washington?

Perhaps. According to Citi Private Bank’s recent survey of law firm performance, which showed that the first half of 2013 was bad for Biglaw nationally, D.C.-based law firms did even worse than their counterparts in other cities.

Let’s look at the numbers….

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The sky is not falling for the world of large law firms. But could Biglaw be a frog in boiling water? We can’t rule that possibility out just yet.

The latest report on law firm performance, focused on the first six months of this year, shows some signs of weakness. The numbers aren’t awful, but if Biglaw continues to travel down this path, it won’t wind up in a good place….

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* Justice Ruth Bader Ginsburg is definitely one of our favorite judicial divas. When asked if she thought the Supreme Court’s work was art or theater, she mused, “It’s both, with a healthy dose of real life mixed in.” [New York Times]

* According to the Citi Private Bank’s Law Firm Group report on the first half of the year, the legal industry should count itself lucky if it manages to meet last year’s single-digit profit growth. This “new normal” thing sucks. [Am Law Daily]

* Howrey going to celebrate these “monumental” settlements with Baker & Hostetler and Citibank? The failed firm’s trustee might throw a party when he’s finally able to file a liquidation plan. [Am Law Daily]

* Uncommon law marriage? A man stuck in an inheritance battle who lived with his late partner since 1995 now asks the District of Columbia to declare him common-law husband. [Wall Street Journal (sub. req.)]

* The ABA’s Section of Legal Education and Admissions to the Bar proposed a major overhaul to its accreditation standards. Action, of course, likely won’t be taken until next year. [National Law Journal]

* Despite the fact that these measures could help struggling graduates, law deans are at odds over the ABA’s proposed changes to tenure requirements for professors. [Capital Business / Washington Post]

* “Sooner or later you’ve got to make a choice, because you need enough revenue to cover what your expenses are.” Cooley will weather the storm by introducing a massive tuition hike. [Lansing State Journal]

* “How would you feel if you spent well over $100,000 on law school, only to have to spend an extra couple of thousand dollars on a course to get you to pass the bar?” You’d probably feel like everyone else. [CNBC]

* Requiring porn stars to wear condoms might not be sexy, but a federal judge says it’s constitutional. Don’t worry, unlike its actresses, the adult film industry won’t go down without a fight. [Los Angeles Times]

The first quarter of 2013 was not particularly kind to large law firms. There’s no crisis at hand, but things aren’t exactly great either, with demand registering as slightly sluggish.

Citi Private Bank’s Law Firm Group, which possesses great insight into the legal industry because of Citi’s role as a leading law firm lender, just released its quarterly survey of managing partners’ confidence. The results are consistent with the general sense of “meh” that we’ve been anecdotally picking up from partners we hear from….

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