Legal News

As BigLaw Stumbles, SmallerLaw Picks up the Pace

By Ashby Jones

The well-chronicled woes of BigLaw over the last 18 months or so began, it’s widely agreed, when deal-making all but dried up in the wake of the credit crunch. Since then, however, the troubles have metastasized; at many firms, litigation work — traditionally thought of as countercyclical — has unexpectedly dipped as well.

Part of the reason behind the latter trend, it seems, is chronicled in a WSJ story today by Chris Herring, who writes: “to cut costs during the recession, U.S. businesses increasingly are handing work to less expensive small and midsize firms, typically those with fewer than 200 attorneys.”

Things are so good at some smaller firms that they’re actually doing the unthinkable in this era of mass layoffs: hiring attorneys to keep up with new business. In return, the larger firms are adjusting to compete with their smaller brethren, which have more flexibility in billing, thanks to lower fixed costs like payroll and rent.

A survey of 550 large companies by BTI Consulting Group found that 38% of the law firms they hired last year came from below the nation’s top 200 in terms of revenue, which generally means small and midsize firms. That was up from 25% in 2007.

Take, for instance, AutoNation Inc., the largest car-dealership chain in the U.S. Recently, the company had to rein in spending. So the Fort Lauderdale, Fla., company recently handed the legal work for its move across town to Angelo & Banta, a South Florida firm of just seven lawyers.

Georgia Pacific Corp., a paper and building-products manufacturer, in February gave a large piece of commercial litigation to Houston-based Chamberlain, Hrdlicka, White, Williams & Martin, which has about 100 lawyers. Atlanta-based Georgia Pacific might not have hired the firm before the recession, says General Counsel John Childs. “There are a number of factors that go into choosing which firm to give your work to, but it’s fair to say that economics have shot up to the top of that list.”

Chamberlain Hrdlicka bills $420 an hour on average for work done by senior partners, says managing shareholder Wayne Risoli (pictured). Georgia Pacific’s large firms typically bill between $700 and $800 an hour, says Childs.

Chamberlain Hrdlicka’s billings are up 8% from the same time last year, Mr. Risoli says, and because of the firm’s success he plans to hire another 10 lawyers or so within the year.

Full post as published by Law Blog - WSJ.com on July 06, 2009 (boomark / email).