Why are litigation practices less profitable than corporate ones?

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nealric
Posts: 2498
Joined: Fri Sep 25, 2009 9:53 am

Re: Why are litigation practices less profitable than corporate ones?

Postby nealric » Thu Apr 20, 2017 1:23 pm

Lacepiece23 wrote:
nealric wrote:
LaLiLuLeLo wrote:
nealric wrote:
lolwat wrote:
Also, the legal fees often pale in comparison to the amounts being transacted- $10 million in legal fees doesn't really register in a $10 billion deal.


I have no clue how billing for corporate transactions works, but I think something like the above might be a big part of the reason. On the litigation side, I keep hearing stories about how GCs don't want to pay for work done by first year attorneys, who nickel and dime every part of every bill, set caps on how much you can bill for legal research or meetings/conferences. Basically doing everything in their power to minimize costs when it comes to fees its paying attorneys to litigate cases. (To be fair, some of this is because firms tend to overbill on meetings and such. But other times it's the company being cheap.) This is also probably also why a lot of litigation work gets shipped off to boutiques that often promise flexible billing (not always hourly), fewer attorneys on cases, etc.

Basically, it's very likely that companies don't mind if you pile on as many associates as humanly possible on a $10 billion deal (hence generating a huge stream of income for the firm), but they will nickle and dime you on every little thing when defending a case. The potential damages in litigation also matters a lot -- who wants to spend $2 million defending a case where the potential judgment might be $3 million? It's gotta be something like Apple v Samsung before a company lets you throw 100 attorneys at the case.


Side point on not wanting to pay for first year associates: In many cases, it's not that clients aren't willing to pay for junior associates per-se. I'd rather a junior associate do the more labor intensive but lower skill work on my matters. Rather, clients tend to object to first years being used as a way to inflate partner billing rates. For example, the junior is on every single call with the partner to "take notes" or gets assigned to research questions the partner already knows the answer to off the top of her head.


I'm not a litigator, but my first year lit friends constantly complain because they're not staffed on some really cool cases because the client has an explicit "NO FIRST YEARS" clause in their fee letters/engagements/etc. These are very large companies in a variety of industries. Seems kinda silly to me because now you're just paying more senior, more expensive attorneys to do grunt work, but there you have it. It makes more sense to me to allow first years and then just negotiate the bill, but I'm not the GC of some big public company.


Yeah, some companies do that. The way my company often does it is to approve the attorneys who will work on a matter in advance. If it's a matter that is going to need some junior associate heavy lifting, a junior is fine. If it's a high-level advisory-type engagement, we may not be too keen on a very junior person.


I actually hate this. If you're the junior, and say you get a massive document dump, you can't rope in another junior to help you because he/she isn't preapproved on the bill. This turns into needless firedrills and all-nighters where another junior could have stepped in and very easily pitched in and helped out.


Ideally, it's not a 100% rigid requirement, though I'm sure it sometimes gets enforced that way. But at the same time, part of the reason why we are hiring biglaw instead of a boutique is so there's someone there to pull an all-nigher if we need them to.

lolwat
Posts: 642
Joined: Tue Nov 16, 2010 2:30 pm

Re: Why are litigation practices less profitable than corporate ones?

Postby lolwat » Thu Apr 20, 2017 1:53 pm

nealric wrote:Ideally, it's not a 100% rigid requirement, though I'm sure it sometimes gets enforced that way. But at the same time, part of the reason why we are hiring biglaw instead of a boutique is so there's someone there to pull an all-nigher if we need them to.


(Too many embedded quotes for me to quote everything again.) I think this series of posts really just highlights why litigation is less profitable than corporate ... and also why it sucks so much to be a junior associate. No one wants to pay to train you, so you're a money-suck either to the client or to the partners at your firm, and you're often gaining shit for experience because no one wants you to do anything more than the grunt work appropriate for your level of experience. I'm at a boutique and we seem to get that from clients pretty often too. The result is me basically doing all the damn research, writing, and prep work for all of the senior associates or partners to go and take the deposition or argue the motions/appeals, etc. Sucks.

I don't think our firm would ever take a matter in which we're not able to control who gets to work on what at any time just because it's an unnecessary restriction. But we generally staff our cases with like 2 people on a regular basis, we have a bunch of contract attorneys or law students or whomever we can bill out at low rates to do the total grunt work like doc review, and we only staff up the case more if we need the bodies to do heavy prep for trial or something like that. To the specific above-quoted point, I think a lot of litigation boutiques work just as hard (if not moreso) than biglaw and will put in all-nighters when needed. It's just sometimes difficult to separate out the crappy firms that call themselves "boutiques" to make them sound better, and the real boutiques that do high-end work.




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