California Bar Journal
CBJ - January 2009 #01.
Will a bad economy force more changes in the profession?
California Bar Journal January 2009 Will a bad economy force more changes in the profession?By Diane CurtisStaff WriterWhile some people hope the flagging economy will get law firms to rethink how they bill clients, others are warning that associates had better churn up the billable hours or face the prospect of losing their jobs.
"The poor economy has definitely gotten everyone's attention, so in that sense, it's helpful," said Michael Roster, chairman of the Association of Corporate Counsel's (ACC) Value Challenge Steering Committee. He referred to the need to draw attention to how law firms bill. The challenge was launched in September to get in-house legal counsel and outside law firm leaders to rethink the current financial structure of law firms.
The main issue for the Value Challenge, said Roster, retired general counsel for Golden West Financial and Stanford University and former managing partner at Morrison and Foerster in Los Angeles, "is getting cost related to value . . . The constant increase in rates without an accompanying increase in productivity is unacceptable." The goal at corporations is to reduce costs while increasing productivity. "We look at law firms and see none of that behavior."
A survey by the Corporate Executive Board found that large-company spending on law firms grew by 49 percent between 2002 and 2005. And while non-law firm costs increased by 20 percent over the past 10 years, large law firms' prices jumped almost 75 percent in the same period.
At the same time, legal jobs are declining. Reports of law firm retrenchment are frequent - Heller Ehrman and Thelen going belly up; Orrick, Herrington and Sutcliffe, Reed Smith, White and Case, Proskauer, among others, announcing layoffs. According to the Bureau of Labor Statistics, the number of legal jobs declined for the sixth consecutive month in November, moving from 1,180,700 in May 2007 to 1,163,500 in November 2008. The drop between October and November was the sharpest monthly drop since the decline began in June.
Peter Keane, dean emeritus and professor at Golden Gate University School of Law in San Francisco, said the economy is going to push more law firms into being more competitive. "To become more competitive, you lower...