Will AmLaw 100 Firms Finally Accept Their Limited Role In The Legal Services Market? Will Their Clients?

Huge corporate law firms with hundreds of lawyers do two things well: represent corporate clients in billion-dollar matters (like mass torts defense and mergers and acquisitions) and provide one-stop-shopping for corporations with ten or eleven figure annual bills for legal services.

For example, if you’re one of the largest oil companies in the world, and just polluted an area the size of France with millions of barrels of oil, you need help, and lots of it. If you’re a Fortune 500 company and are about to acquire your chief competitor, then both companies will need dozens of lawyers working frantically to finalize the deal and get regulatory approval before market conditions change or someone gets cold feet.
 
Beyond that, representation by big firms often does more harm than good. I’ve seen it before: a mid-size or small business chooses a huge law firm to defend them in a class action or patent infringement suit or some other large damages case. Right off the bat, the big firm makes a lot of noise, wastes a lot of time, and huffs and puffs that they’ll blow the plaintiffs’ house down.
 
Once the case gets really going, though, things change. The big firm starts being cooperative and then, after enough time, annoyed by the case. 
 
Then the defendant starts talking settlement.
 
Why?
 
Because the huge firms soaked them on the attorneys’ fees until the defendant wouldn’t even pay the bills anymore. The plaintiff didn’t need to "apply pressure" — the company’s own lawyers did it for them.
 
But I don’t feel sorry for those businesses: there are thousands of great lawyers at mid-sized and small firms and thousands of solo practitioners equal to anyone you find in a skyscraper. If the corporate defendant didn’t want to pay Fortune 500 rates, they shouldn’t have hired an AmLaw 100 firm.
 
Put another way, if you’re not in the Fortune 500, you’re probably better off staying away from the AmLaw 100. Maybe make it the AmLaw 200 to be safe. Your wallet will thank you.
 
Which brings us to the subject at hand. It’s no secret that, since about 2007 or so, clients have started pushing back against the AmLaw firms. The AmLaw firms responded by freezing hiring or firing associates. Almost two years ago I pointed out that firing associates wasn’t a long term strategy:

First, bonuses fall. Second, raises are postponed or frozen. Third, hiring is slowed. Fourth, associates are laid off. Fifth, new hires are delayed. Sixth, the firm starts cannibalizing its own resources. Do firms really want to broadcast to their current and potential associates that the firm has already gone through five different assaults on associates to no avail?

The BigLaw "leverage" business model lives and dies on churning through associates. Associates work the hardest, followed by equity partners, followed by income and non-equity partners. Without fresh blood, a BigLaw leverage-model firm stalls and crashes as rainmakers leap elsewhere.

I do not agree with this business model. I do not practice this business model. But I do know that wishing away its complexities and complications, such as the difficulty with which you reduce the salary of non-partners (a problem in every industry), will not make them go away.

As predicted, it didn’t work. So having already cannibalized their associates, they’re now going to cannibalize their clients: DLA Piper, one of the biggest of the big firms, has implemented a minimum annual billing fee for clients of $200,000 annually. 
 

Much rejoicing for small firms or solos, right?

No so fast, my little friend.

The firm that set this off is one of the largest global law firms. As one intrepid GC has pointed out, if you can’t meet the minimums with your international spend, then you really aren’t trying. And for a large law firm to risk big conflicts over small clients doesn’t make legal or business sense.

That is why I think minimums for global law firms (to call them large also seems oxymoronic) will actually move up, that $200,000 could just be a starting point.

It is another example that the legal industry is splintering; clearly small local firms in the US are not going to serve clients on global matters. Will they get some clients that formerly went to larger firms? Just be careful about what you mean by smaller. The firm that set this off notes that it has “3,500 lawyers located in 30 countries and 69 offices.” So a firm of 500 lawyers is *smaller*, just not *small*.

As he concludes, "one of the most interesting aspects of the client minimum issue is what it means to senior associates or junior (non-equity) partners. If you have some real expertise, client relationship skills, and guts, you have to think about going free agent. Taking your legal talents to (a virtual) South Beach."

Indeed. But the big question is if non-Fortune 500 clients figure it out and don’t just jump from the top of the AmLaw 100 to the middle or the bottom of that same list. So far, mid-size and small business have inexplicably tolerated years of oversized staffing and bills next to undersized value and results from AmLaw 100 firms, since they wrongly believe that the size of a law firm somehow translates to the quality of its lawyers, as if it was a better deal to buy five hundred bucks of Pizza Hut pasta instead of going to Vetri’s

But the corporate legal market is like cast iron cookware: slow to cool, but slow to heat, too. The AmLaw 100 pot might still be cooking for now, but if they’re not tending to the fire they’re going to be disappointed. Few things would serve mid-sized and small businesses better; it’s time the AmLaw 100 stuck to its rightful place in the market.

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