Biglaw

The Biglaw Elite Are Running Around Like Their Hair's On Fire More Than You Might Think

Biglaw may look stable, but there's a lot going on under the surface.

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It’s Am Law 100 Week, meaning it’s time to remember just how much money Biglaw brings down, especially in New York and DC. But it’s also time to try and read the industry trends and figure out what, if anything, we can divine from gaudy PPP numbers.

One of the most glaring trends out there is the relative stability of the Am Law 100. Only one firm fell off of last year’s Am Law 100. One. And with the exception of a few easily explained major events — contingency fees that artificially inflated numbers in 2016 dropping off or a blockbuster merger — most firms landed right about where they did the year before. It’s enough to make one conclude that the era of volatility is over.

But that would be a mistake. Because roiling beneath that apparent calm, America’s elite law firms are experiencing more volatility than ever.

American Lawyer editor-in-chief Gina Passarella Cipriani discusses the hidden volatility of America’s top firms in a piece surrounding the release of the rankings:

Gretta Rusanow, head of advisory services for the Law Firm Group, says 45 percent of the 143 firms Citi surveyed experienced volatility between their 2016 and 2017 results, up from 42 percent that said the same between 2015 and 2016.

Ever since 2010, that variation has been a usual and growing part of law firm life, Rusanow says. And it’s not something that would get the bank concerned about a firm’s financial health.

But how can nearly half the market endure volatility and still find themselves performing at a consistent level year over year?

One leader of an Am Law 50 firm who didn’t want to be named says there is no question volatility is impacting every firm in the market. It’s just a matter of how those firms are managing it.

“None of us are getting a huge percentage of our revenue from repeat institutional clients the way we all did 20 years ago or even 10 years ago,” he says. “That is a form of volatility in itself because you have to replace work every year, every six months, every two years.”

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This is the real nut of it. The traditional Biglaw model of relying on a consistent stream of work from large institutional clients beholden to their outside counsel relationship is falling by the wayside as clients grow more and more active in shopping around their legal work. This doesn’t mean the firm can’t replace that work, just that firms have to exercise a lot more frantic effort to keep ahead. One of the luxuries of Biglaw practice back in the day was the ability to focus more energy on actual practice while the small firms had to devote far more time to business development. Leveraging support staff and the goodwill of the firm’s long-standing clients can’t carry partners as far as they used to. It’s a testament to modern Biglaw partners that they keep that many plates spinning at once. A few plates may shatter along the way, but the show goes on.

And hey, if billables take a hit, there’s always another rate hike to slip in there. The clients won’t mind.

Volatility Is Now a Fact of Life for America’s Biggest Firms [Law.com]

Earlier: Am Law 100 Released — A Lot Of Firms Made A Lot Of Money
Am Law 100 News: Elite New York Dominate In Profits And Revenue
Billion Dollar Firms Highlight DC’s Am Law 100 Presence

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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.

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