Small, Nimble Firms are the Future of Law

The Wall Street Journal published an article on May 29, 2012 by Clifford Winston and Robert Crandall entitled “Winston and Crandall: The Law Firm Business Model is Dying.”  In it, Winston and Crandall argue that, because large clients are increasingly using in-house counsel to reduce costs and the public is increasingly taking the do-it-yourself approach, deregulation of law firms to allow non-attorneys to have an ownership stake in a law firm will enhance a mid-sized to large firm’s ability to (1) attract investment, (2) assist large firms to realize inefficiencies, and (3) make more money.

While I agree with Winston and Crandall’s premise that the Law Firm Business Model is struggling, I disagree that deregulation is the answer to law firm inefficiencies and billing  abuses.

Having worked in big, mid-sized and small firms, as well as having hiring mid-sized and large firms to pursue litigation on behalf of cases in which Savage & Associates has been appointed a litigation trustee in Chapter 11 cases (and thus vested with pursuing certain litigation in mega-bankruptcy cases), law firm inefficiencies and problematic business models arise for a whole host of reasons that would not be resolved by partnering with accountants, banks, professional managers or financial advisors.  Moreover, none of Winston and Crandall’s suggestions address the underlying reasons that companies are using in-house counsel or people are engaging in do-it-yourself legal services.

Obviously, accounting firms, banks and financial advisors have all had their share of well publicized business challenges/inefficiencies/failures and have been criticized for their respective billing and compensation models, as well.   To imply that partnering with such professionals would implicitly render mid and large sized law firms more efficient and affordable is a blatant fallacy.  By way of example, Dewey LeBeouf had plenty of bank and bond debt and presumed oversight in connection with such debt.  Dewey failed nonetheless mostly, it appears, because (1) certain attorneys believed they warranted exponentially higher pay than others; (2) it was acceptable to use junior partners as underpaid workhorses; and (3) Dewey Partners may have failed to maintain adequate oversight of the obligations being incurred by the controlling committee.

Manifestly, a universal fault line in large firms is that the established large firm model is upside down.  Totally inexperienced first-year Associates are being paid upwards of $160,000 (plus a bonus), while junior partners (notably at Dewey) were being paid as little as $300,000 (relatively speaking).  Moreover, Associates at mid-sized and large firms are compelled to bill in excess of 1800 t0 2000 to justify their existence, thus creating a perfect storm for over-lawyering and over-billing if business gets slow.  Why has this model persisted?  Even corporate clients are beginning to ask this question and are now balking at underwriting the cost of educating/financing these young Associates.

Ultimately, the answer to law firm inefficiencies and streamlined client services are three-fold:  (1) Corporate clients must be diligent in oversight of their outside counsel and compel their counsel to not only justify services undertaken, but the time billed in connection therewith; (2) law firms must endeavor not to over-lawyer and over-staff projects; and (3) young Associate compensation and mandated hours billed must be moderated.  None of the foregoing means that law firms should not zealously represent their clients.  However, personal experience with mid and large-sized firms has disclosed a failure of Partners to adequately monitor their Associates, resulting in over-lawyering and mistakes being made by inexperienced Associates.

At Savage Law, we are cognizant of a client’s budget, as well as their legal objectives, and work to render the two compatible.  We invest in and hire mature and experienced attorneys and staff.  Moreover, a Partner maintains strict and constant oversight of Associates, reviewing all relevant case law, underlying facts and relevant documents, as well as consistently interacting with our clients.  Savage Law is extremely efficient, having developed both technological and management systems which enhance Savage’s ability to promptly and effectively respond to litigation requirements.

Finally, Savage Law has a strong belief in and commitment to Alternative Dispute Resolution and will always seek ADR options in best interests of its Clients.

At Savage Law, efficiency and success are our hallmark.

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