How This Year Stacked Up, Financially, And How Bill Arrangements Will Be Affected

According to a recent posting in the prestigious NLJ, firms had a cloudy 2010 and there’s more rain predicted… but that grey Cumulus has a silver lining.   Although the billable situation didn’t touch off nationwide alarms, as 2009 likely did, it was tough—especially for big firms.   

During a top-three round-table that featured Washington’s leaders in the D.C. law firm community, a Citi Private Bank quarterly report was cited in which demand for legal services was “stagnant, at best”.  Regulatory work was expected to be the saving grace for firms, especially in Washington, but even that has dropped off.   The partners variously went on record as stating that restructuring and refinancing or bankruptcy practices went quite well; that clients wrote them letters saying that “you’d better not even think of having a rate increase”—in fact, some clients demanded a decrease to stay onboard—and that the firms coped by deferring new arrivals and freezing associates’ salaries.     

There were exit interviews, as well. Steptoe & Johnson LLP’s Chairman, Roger Warin, said: “We tried to assist those people who were not succeeding…to find someplace where they’d have a better chance.”  It was also mentioned that the legal spending overall was down just over 10%.   There was an interesting aside by Karl Racine, General Partner of Venable, who previously served in the Clinton White House.  Racine said that general counsel was taking over national and international law, and that it’s general counsel’s opinion that firms are overcharging Americans. He also interpreted the overall mood of being one in which, although Wall Street is definitely on the mend, it’s big law that has to step back…not the corporations…for economic health.  

Racine also mentioned that the worst letter in the world is when you get an RFP (Request for a Proposal) from a long-time client, but that those are exactly the kind he’s getting. In essence, those RFP’s turned out to be nothing more than rate negotiations, his colleague, Warin, mentioned.  At best, they were meant to keep the firms thinking competitively.   

Chairman Warin said that they’ve pretty much stopped spinning their wheels on stellar presentations which went no-where.” The success rate wasn’t justifying [the] cost…” Warin said.  He also took the general counsel issue one step further, adding that they may have “taken over”, but that they still answer to their CFO’s when it comes to the firm’s budgetary line item.  

T. Mark Flanagan, the managing partner of McKenna Long & Aldridge, admitted that “there’s a great deal of price pressure”.  In one three-week period in the beginning of the year, he said, he received 10 letters talking about what they were or weren’t going to do in terms of price.   “You do have to look at alternatives to the billable hour,” he said.  The aim was to bring in a margin while still “pricing…to deliver certainty.”  Predicting what something would cost in advance was an option that was being tossed about, as was establishing more of a corporate model.  Flanagan mentioned having separate profit centers.  Another idea that was bandied about was adding computer terminals and proprietary software for document management.  

What’s the prognostication?  It was expected that litigation was going to progress a little bit more and that, when all is said and done, you’re looking primarily at value and not the billable rate. That, at the end of the day, is going to serve as many firms’ all-weather umbrella. Read more at:  http://www.law.com/jsp/nlj/PubArticleNLJ.jsp?id=1202475667899

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