Legal News

Is the Law-Firm Model Dying? Not Yet, But It Might Be On The Clock

By Ashby Jones

Frequent readers of this blog will be able to tick off the more significant changes to have hit the BigLaw world in the past 18 months: reduced salaries for fewer associates, more pricing pressure by in-house counsel, an increased willingness by even the largest firms to handle work on a flat-fee or highly discounted basis.

The $64,000 question: Are the changes we’ve seen take place over the last 18 months here to stay? Or will things return to normal once the market stabilizes?

These and a host of related questions were teed up in the nation’s capital Sunday night — at the Georgetown Law Center for the Study of the Legal Profession, which kicked off its annual conference.

According to the American Lawyer’s Aric Press, who seems to have thrown on his reporter’s hat for the event, the opening speech and ensuring panel discussion were nothing if not lively. During the panel discussion, the Association of Corporate Counsel’s Susan Hackett put BigLaw on the clock. According to Press,

[Hackett] said she thought there was now a window of “a year to 18 months” for firms and clients “to start figuring out how to get it right before clients start walking and talking to other firms . . . and to non-lawyers” to take on their work. She said many firms don’t recognize the underlying dissatisfaction felt by their clients. And their pent-up demand for a new definition of quality, namely one “defined as value, defined by results not hours.”

Historically speaking, of course, law firms and value have gone together like Lady Gaga and sartorial subtlety. That is, not at all. Law firms are filled with many smart people who strive to do top-flight work. But they’ve never had an incentive to try to save clients money. In fact, many critics have argued, their incentive is to do the opposite — wring their clients for every last dime.

The trick, of course, is to align the financial incentives. And how might this work? Trevor Faure, Ernst & Young’s global general counsel, put forth an intriguing notion — one that we’d never before considered. Writes Press:

Faure offered an example of a “litigation avoidance” program in which a firm with a long-standing relationship with a client might be paid based on annual reductions in the number of filed suits. A firm with knowledge of the client could have an incentive to find destructive or provocative patterns in a client’s behavior, recommend changes and then receive a bonus for the percentage drop in new litigation. In Faure’s view, a client could share most of the savings with a law firm, still come out ahead and have a better relationship with its lawyers.

Could this work? Perhaps, in our opinion, in an area like employment litigation, where systemic training programs might lead to a step-down in cases filed. But in other areas, it might be a tougher sell, especially for a law firm. After all, to what degree can a law firm stave off a big product-liability problem, for example, before it happens?

Photo: iStockPhoto

Full post as published by Law Blog - WSJ.com on March 22, 2010 (boomark / email).