Era of great expectations for BigLaw ended with bankruptcy of Howrey, Dewey and others, say experts
Cover of Bloomberg Businessweek for May 3, 2013.
A death-knell for the era of great expectations for BigLaw firms has been sounded by the bankruptcies of, among others, Howrey; Heller Ehrman; Thelen; and last year’s record-breaking Chapter 11 filing by Dewey & LeBoeuf, experts say.
They predict further law firm failures and a move toward smaller, less cumbersome legal partnerships, as clients look to hire practitioners with the right expertise at the right price rather than simply selecting counsel based on a BigLaw brand name. There are some exceptions–firms such as Cahill Gordon & Reindel and Quinn Emanuel Urquhart & Sullivan, as well as Cravath Swaine & Moore and Wachtell, Lipton, Rosen & Katz are still clear go-to choices for bet-the-farm litigation and corporate matters, respectively.
But Cahill, Cravath, Quinn Emanuel and Wachtell are not among the largest U.S.-based law firms, measured by the size of their attorney rosters, points out Bloomberg. Only when the amount of their profits per partner is taken into account do they catapult to the top of the list.
“The ultra-elite have remained relatively modest in size,” says Steven Harper, a retired Kirkland & Ellis partner who wrote The Lawyer Bubble: A Profession in Crisis. “The firms that have chased growth by hiring high-priced lateral talent and doing lots of mergers are the ones you see blowing up or in danger of blowing up.”
And, yes, large law firms that expect to charge corporate clients high hourly fees are at risk, in an economy in which an oversupply of lawyers makes it easy for companies to bargain for lower rates. During the 10-year period that ends in 2020, the Bureau of Labor Statistics predicts 73,600 new jobs will be created for lawyers. Meanwhile, American law schools are sending about 25,000 new graduates into the world annually. That suggests a surplus of 176,400 individuals with juris doctor degrees, Bloomberg reports.
The Bloomberg Businessweek issue on newsstands Friday promotes this story with a question on its front cover: “What do you call 176,000 lawyers lying at the bottom of the ocean?” The answer, the magazine says, is “The Future.”
Among those who share a similarly gloomy view is Adam Epstein, a consultant based in San Francisco.
“The law business has changed a lot over the past 20 years,” he tells Bloomberg. “I see it changing even more drastically in the next five to seven years as the shakeout continues.”
Related article:
ABAJournal.com: “‘Lawyer Bubble’ author discusses what the future looks like for today’s new lawyers”
