Legal News

BigLaw & the ?Tsunami Economy?: Demand Down, Billing Rates Up

By Ashby Jones

As the year winds to a close, stories chronicling the year in legal biz start making their inexorable appearances. Expect variations on the following theme: the year was bad. Very bad. An historical worst bad.

The first entrant in the category comes from Bloomberg’s Cynthia Cotts. She reports that based on projections made by Citi Private Bank Law Firm Group, law-firm revenue in the U.S. will fall 5 to 10 percent this year, despite an uptick in demand in the third quarter. Click here for Cotts’s story.

Cotts fleshes out what LB readers have long been aware: firms are struggling to maintain profits as the recession has cut demand for legal services.

"It's not an easy year for lawyers," Leslie Corwin, a shareholder at Greenberg Traurig who advises professional services firms, including law firms, told Cotts. "I've been doing this for 36 years and this year's the toughest ever. We're in a tsunami economy."

Here’s an interesting little tidbit, however: Demand for legal services dropped 7.1 percent during the first two quarters of 2009 compared with last year, according to Citi's data. Despite this, the average billing rate for U.S. law firms grew by 2.5 percent this year to $372 an hour, the NLJ reported Dec. 7. That's the smallest increase in "recent years," the newspaper reported, though it’s still, of course, an increase.

Perhaps this helps explain why fifty-eight percent of corporate counsel think law firms are still too profitable while 77 percent of private lawyers say clients are too focused on cost-reduction, according to LexisNexis survey, the executive summary for which we linked to on Wednesday.

"There's a Grand Canyon-sized divide between the opinions of corporate counsel and those of law-firm attorneys," LexisNexis Chief Executive Officer Andy Prozes said Dec. 8 in a statement.

And what to expect heading into 2010? Law firm leaders, while relieved the free-fall appears to be over, aren't confident the third-quarter rise in demand for legal services is sustainable, DiPietro said.

"The worst could be over," he said, "but we're not expecting anything like the profit margins that law firms experienced from 2000 to 2007."

Full post as published by Law Blog - WSJ.com on December 10, 2009 (boomark / email).