The Brave New Biglaw World
What does 2017 have in store for the nation's largest law firms?
What does 2017 have in store for the nation’s largest law firms? Some observers are cautiously optimistic. Take our very own Mark Herrmann, former Biglaw partner turned senior in-house lawyer. Earlier this week, he predicted that “larger economic trends will spur economic growth — and thus law firm profitability — in 2017…. Corporations will have money to spend in 2017, and law firms will prosper.”
Yes, the current economic recovery is running rather long. And yes, another recession will eventually arrive; we have not yet transcended the business cycle. But that recession won’t come this year, at least according to Herrmann.
Not every picture of Biglaw is so rosy, though. Take the one painted by this interesting New York Times piece by Elizabeth Olson (noted in Morning Docket):
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America’s law firms, even the most prominent, are mired in an era of noticeably modest growth and volatility in the industry, and 2017 promises to be no better.
Fierce competition is prompting firms to take unusual steps to bolster their profiles. Top firms are hiring groups of lawyers to expand specific practice areas, changing pay practices, jettisoning or demoting some partners and staff members and seeking ways to distinguish their brands to set them apart from competitors.
Beyond that, the top-drawer firms are increasingly jostling with one another to win lucrative legal work. It is getting tougher for firms to hang onto traditional portfolios of corporate business and avoid elbowing from rivals.
This isn’t news to folks billing away in Biglaw; we’ve been discussing for years how growth is dead (affiliate link). But the consequences, including greater competition and more lateral hiring, are somewhat more interesting.
Which recent lateral moves are the most notable? Here are the ones that get shout-outs from the Times:
- Paul Clement, Viet Dinh, and all of their colleagues, renowned for their appellate and Supreme Court prowess, from Bancroft to Kirkland & Ellis.
- Kevin Arquit, antitrust attorney extraordinaire, from Simpson Thacher to Weil Gotshal.
- Scott Barshay, mergers maven, from Cravath to Paul, Weiss.
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And pretty much every day brings notable news of a move. Last week, for example, we learned of former SCOTUS clerk Roman Martinez rejoining Latham & Watkins, after a three-year stint in the Solicitor General’s office. And just today we learned of John Carlin, former assistant attorney general for the Justice Department’s National Security Division, joining Morrison & Foerster (after talking to 15 different law firms). Carlin will lead MoFo’s risk and crisis-management practice — a great fit for him, given his expertise in cybersecurity and his experience handling such matters as the Sony hack.
What else will we see in 2017 besides more moves? Possible shrinking of margins:
Law firm spending outstripped demand in the first three fourths of last year, according to an annual review by Citi and Hildebrandt Consulting. Expenses, including last summer’s junior lawyer pay raises, rose 3.4 percent while demand for law firm services grew a mere 0.3 percent. Law firms were able to offset that imbalance by charging higher rates, up some 3.2 percent, bringing overall growth through September to 3.7 percent.
And continued consolidation:
Firm mergers are also expected to continue. To date most such mergers are among small and medium-size firms, but the combination in 2016 of the prestigious Arnold & Porter law firm, based in Washington, with the New York firm Kaye Scholer brought the prospect of consolidations more firmly into view.
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The Times piece sounds some dark notes, which contrast with Herrmann’s optimism. Readers, you’re in the Biglaw trenches — what do you predict? Take our not super-scientific poll:
What kind of year will 2017 be for Biglaw?
Loading ...With Competition Fierce, Even Elite Law Firms Resort to the Unusual [DealBook / New York Times via Morning Docket]
Morrison & Foerster Nabs DOJ Security Expert John Carlin [WSJ Law Blog]
Former Top Justice Dept. Lawyer to Join Morrison & Foerster [DealBook / New York Times]
An Assistant SG Rejoins Latham After Three-Year Stint [National Law Journal]
Earlier: 3 Predictions For 2017
Two New York And D.C. Powerhouses, Arnold & Porter And Kaye Scholer, Agree To Merge
David Lat is the founder and managing editor of Above the Law and the author of Supreme Ambitions: A Novel. He previously worked as a federal prosecutor in Newark, New Jersey; a litigation associate at Wachtell, Lipton, Rosen & Katz; and a law clerk to Judge Diarmuid F. O’Scannlain of the U.S. Court of Appeals for the Ninth Circuit. You can connect with David on Twitter (@DavidLat), LinkedIn, and Facebook, and you can reach him by email at [email protected].
