Last Days of Big Law - New Republic article Mayer Brown Forum

[bdubs]

Saw this posted in another thread and thought it deserved its own. Definitely worth a read for anyone approaching OCI or contemplating full time offers.

http://www.newrepublic.com/article/1139 ... oney-dries#

[bizzybone1313]

Thanks.

[NinerFan]

Nice to have an article to link to non-law people who don't understand why my JD isn't a an easy ticket to financial security and social prestige.

[NYstate]

I don't think that most people seeing the starting salaries of biglaw are going to be dissuaded from going into debt for law school. Biglaw is still the fastest ( if not only )way to a six-figure salary for 0Ls with a poor to decent GPA, high score on one exam and worthless liberal arts degree. People are always complaining that they have no idea what else to do if they don't go to law school. With PAYE, people are even less concerned about debt and taking a gamble on law school.

Most of the people on this forum are too far away from biglaw to listen to warning articles about the collapse of biglaw. No one thinks it will happen to them.

This article is good, but it isn't going to stop anyone from bidding on Mayer ( or Weil )at OCI.

People on this forum assess their odds based on what happened the previous year in hiring and keep assuming that hiring will improve. No one plans for hiring to decrease or for the random nature of no offers or layoffs. People also assume there are solid exit options from biglaw, but that is difficult, if not impossible to predict.

Biglaw is changing and as the article explains, has gone through massive changes already. The article does a good job explaining these changes.

[Louis1127]

They are about to discuss this on Morning Joe (after Sen. Toomey I think)

[brotherdarkness]

.

[sundance95]

Saw this posted in another thread and thought it deserved its own. Definitely worth a read for anyone approaching OCI or contemplating full time offers.

http://www.newrepublic.com/article/1139 ... oney-dries#

FN 3 is particularly interesting, and brings up a point I have never heard before, for all the sturm und drang regarding the death of Biglaw these days:

[A] low PPP could send a firm into the equivalent of a bank run: The most profitable partners would depart for bigger paydays, depressing PPP further and encouraging the next most profitable partners to leave. ^FN 3

There was a second development that reinforced this trend: A regulatory change in the 1990s allowed law firms to incorporate as limited liability partnerships (LLPs) rather than general partnerships. The change mattered primarily for the one thing law firms know best: lawsuits. If a member of a general partnership commits malpractice, and a court hands down a half-billion dollar judgment against him, every one of his colleagues is financially responsible. But under limited liability, the other partners are largely insulated.

Prior to the LLP-ization of the legal profession, inviting someone into your partnership meant vouching for their professional integrity with your home, you cars, your retirement savings. Not surprisingly, partners typically felt most comfortable promoting from within, since it gave them years to assess a lawyer’s scrupulousness at close-range. But amid the LLP craze, scrupulousness became secondary. Now it was in a firm’s interest to find partners who could make the biggest contribution to its bottom line. This made them even more interested in recruiting rainmakers from other firms.

[Louis1127]

Yea when I watched it live I was surprised at how little detail they discussed it. Generally their discussions are longer and more in-depth. O well... these discussions are generally never as good as the article itself

[Scurredsitless1]

The business model of BigLaw is certainly flawed and this article sheds light on particular flaws that I had never really considered.

However, I don't see how it would change much for current law students or recent grads. If you went to law school because of a passion for some public interest or with the intent on practicing criminal law - and you wind up in BigLaw, you're going to have a bad time. If however, you wanted to go into private practice, starting a career in BigLaw is still an attractive option. BigLaw gives you the best chance to pay down your loans, provides superior training, and provides the most attractive exit options. Most people that start out in BigLaw do not spend their whole careers there - and certainly not with the firm they started out with.

At the end of the article they said that most BigLaw firms won't be around in a decade or two.... I wouldn't turn down an offer for fear that the firm might not be around in 20 years....

[swimmer11]

The business model of BigLaw is certainly flawed and this article sheds light on particular flaws that I had never really considered.

However, I don't see how it would change much for current law students or recent grads. If you went to law school because of a passion for some public interest or with the intent on practicing criminal law - and you wind up in BigLaw, you're going to have a bad time. If however, you wanted to go into private practice, starting a career in BigLaw is still an attractive option. BigLaw gives you the best chance to pay down your loans, provides superior training, and provides the most attractive exit options. Most people that start out in BigLaw do not spend their whole careers there - and certainly not with the firm they started out with.

At the end of the article they said that most BigLaw firms won't be around in a decade or two.... I wouldn't turn down an offer for fear that the firm might not be around in 20 years....

Curious about this, any idea of why this is going to be the case?

[BVest]

At the end of the article they said that most BigLaw firms won't be around in a decade or two.

You mean this part:

Within the next decade or so, according to one common hypothesis, there will be at most 20 to 25 firms that can operate this way—the firms whose clients have so many billions of dollars riding on their legal work that they can truly spend without limit. The other 200 firms will have to reinvent themselves or disappear.

That's couched under the dubious heading of "one common hypothesis." I suspect it's first and foremost overstated. 90% of biglaw firms being a shadow of what they once were is fairly hyperbolic, even when backed by data. That kind of a dramatic change will have so many unforeseen consequences that no one can really predict that landscape.

In terms of the winnowing of biglaw suspect this comes in a combination of multiple forms: (1) Continued mergers as have been seen in large numbers and large firms of late; (2) A few more Deweys, Howreys, and even Jenkens & Gilchrists; (3) Biglaw firms with a heavy focus will narrow down to become bigtiques; (4) Regional biglaw which can't find a suitable merger partner will be further regionalized.

[timbs4339]

At the end of the article they said that most BigLaw firms won't be around in a decade or two.... I wouldn't turn down an offer for fear that the firm might not be around in 20 years....

That's an extreme position by most standards. Biglaw is a strange industry, and I have no doubt we'll see more firm blowups and closures. But at the time you pick your firm (before 2L year) it's almost impossible to know which firms to avoid because of financial collapse or layoffs. Even some of the partners at those firms probably don't know until a few months before the firm is going belly up.

[09042014]

I really want to know why some people hypothesize that big law will implode into 25 firms. And what does that even mean. Does that mean 25 firms basically consolidate the rest or steal their work. If that is the case, who cares.

Or do these people really think that the legal market for high end legal work is going to drop by 80%. That is absurd.

[09042014]

Also even when firms blew up like Howry and Dewey, the talent and work just moved to other firms. Those firms didn't blow a whole in big law, it was more of a rearrangement.

[BeautifulSW]

I saw a lawsuit a few years ago where one of the handful of firms that pass as big law here in the Southwest (no, not even close but they're the biggest we have) sued one of their own partners to recover the insurance deductible from a malpractice judgment. The firm paid something like $100K of a couple of million in damages and then sued their own guy to get it back.

Ex-partner, I guess, come to think of it.

Big law firms aren't going away. Standard Oil and AIG can't just dump some regulatory appeal on the desk of a typical lawyer; that kind of work requires resources far beyond anything that more than a few firms can provide. But I would expect to see consolidation of the market into a handful of international firms, something like what has happened in Big Accounting, though perhaps not to the same extent.

Bad time to borrow six figures for a law degree.

[bdubs]

I really want to know why some people hypothesize that big law will implode into 25 firms. And what does that even mean. Does that mean 25 firms basically consolidate the rest or steal their work. If that is the case, who cares.

Or do these people really think that the legal market for high end legal work is going to drop by 80%. That is absurd.

I don't think people mean that it's a literal drop from 100-250 firms to 25 but growing degree of stratification. The high end work will continue to sustain the excessive partner and associate pay of the past, but the middle market that cannot support those levels of pay will grow.

I think people are largely calling the end of the bimodal associate salary distribution and many firms' attitudes of "keeping up with the Joneses"(or Cravaths as it happens to be)

[09042014]

I saw a lawsuit a few years ago where one of the handful of firms that pass as big law here in the Southwest (no, not even close but they're the biggest we have) sued one of their own partners to recover the insurance deductible from a malpractice judgment. The firm paid something like $100K of a couple of million in damages and then sued their own guy to get it back.

Ex-partner, I guess, come to think of it.

Big law firms aren't going away. Standard Oil and AIG can't just dump some regulatory appeal on the desk of a typical lawyer; that kind of work requires resources far beyond anything that more than a few firms can provide. But I would expect to see consolidation of the market into a handful of international firms, something like what has happened in Big Accounting, though perhaps not to the same extent.

Bad time to borrow six figures for a law degree.

There is some good reasons why consolidation isn't as likely as the Big 4.

Conflicts are a bitch and impute to everyone at the firm.

There is almost no economy of scale after you get to a certain size of firm.

[BeautifulSW]

All true, especially as to conflicts but economies of scale haven't ever favored big law firms AFAIK.

EDIT: And anyway, it's still a bad time to borrow $100,000 for a law degree.

[AAJD2B]

I, for one, would feel safer landing an offer from the likes of DPW or STB versus Mayer Brown or Paul Hastings.

I figure the firms "who have so many billions of dollars riding on their legal work that they can truly spend without limit" includes the likes of:

Wachtell
Sullivan & Cromwell
Davis Polk
Cravath
Skadden
Simpson Thacher
Williams & Connolly
Quinn Emanuel
Paul Weiss
Cleary Gottlieb


....I wonder who else I am missing.

[09042014]

I, for one, would feel safer landing an offer from the likes of DPW or STB versus Mayer Brown or Paul Hastings.

I figure the firms "who have so many billions of dollars riding on their legal work that they can truly spend without limit" includes the likes of:

Wachtell
Sullivan & Cromwell
Davis Polk
Cravath
Skadden
Simpson Thacher
Williams & Connolly
Quinn Emanuel
Paul Weiss
Cleary Gottlieb


....I wonder who else I am missing.

But these firms aren't going to make you partner anyway.

And I think Quinn and Paul Weiss shouldn't be on that list.

[AAJD2B]

I, for one, would feel safer landing an offer from the likes of DPW or STB versus Mayer Brown or Paul Hastings.

I figure the firms "who have so many billions of dollars riding on their legal work that they can truly spend without limit" includes the likes of:

Wachtell
Sullivan & Cromwell
Davis Polk
Cravath
Skadden
Simpson Thacher
Williams & Connolly
Quinn Emanuel
Paul Weiss
Cleary Gottlieb


....I wonder who else I am missing.

But these firms aren't going to make you partner anyway.

And I think Quinn and Paul Weiss shouldn't be on that list.

Where have I indicated I was after partnership, besides which you're in no position to predict anyone's potential.

Partners are not immortal. Anyway......

[09042014]

I, for one, would feel safer landing an offer from the likes of DPW or STB versus Mayer Brown or Paul Hastings.

I figure the firms "who have so many billions of dollars riding on their legal work that they can truly spend without limit" includes the likes of:

Wachtell
Sullivan & Cromwell
Davis Polk
Cravath
Skadden
Simpson Thacher
Williams & Connolly
Quinn Emanuel
Paul Weiss
Cleary Gottlieb


....I wonder who else I am missing.

But these firms aren't going to make you partner anyway.

And I think Quinn and Paul Weiss shouldn't be on that list.

Where have I indicated I was after partnership, besides which you're in no position to predict anyone's potential.

Partners are not immortal. Anyway......

I didn't mean you in particular. I mean generally. Partnership prospects are so freaking slim, it's not worth worrying about.

And if you aren't interested in partnership why are you so scared about the long-term aspects of the firms? Mayer Brown isn't going to implode in the next decade. And even if it does, you'll find another biglaw job.

[NYstate]

Also even when firms blew up like Howry and Dewey, the talent and work just moved to other firms. Those firms didn't blow a whole in big law, it was more of a rearrangement.

My take is that there isn't enough work anymore for all these firms and partners can't just raise billing rates to increase revenue like they used to. Maybe this will change for the positive at some point.

The relevance to people on TLS is to understand that biglaw is not stable. I doubt that every associate from Howry, Dewey or any firm that stealths people gets a comparable job.
Maybe most of the partners find work, but junior associates may have a tough time even at the biggest firms.

The article describes how safe biglaw used to be compared to where it is currently and where it might go. Partners aren't going to take less just to hold a firm together, at least not for the long term. Partners greed is a large part of the problem. They want to make as much as possible, for the most part. And they don't want to share.

[c3pO4]

wait, when did law become a business? i thought it was a profession! but seriously, this is old news to every other industry. our generation is poised to bring concepts of value and efficiency to the practice of law. when markets change, it is a great time to be in as long as you can avoid getting drowned. anybody who started law school after 2008 is not going to be surprised by any of this. the people currently in power at biglaw firms are not equiped to handle this - they are from a dfiferent universe

[09042014]

Also even when firms blew up like Howry and Dewey, the talent and work just moved to other firms. Those firms didn't blow a whole in big law, it was more of a rearrangement.

My take is that there isn't enough work anymore for all these firms and partners can't just raise billing rates to increase revenue like they used to. Maybe this will change for the positive at some point.

The relevance to people on TLS is to understand that biglaw is not stable. I doubt that every associate from Howry, Dewey or any firm that stealths people gets a comparable job.
Maybe most of the partners find work, but junior associates may have a tough time even at the biggest firms.

The article describes how safe biglaw used to be compared to where it is currently and where it might go. Partners aren't going to take less just to hold a firm together, at least not for the long term. Partners greed is a large part of the problem. They want to make as much as possible, for the most part. And they don't want to share.

Big law firms absolutely are not stable. The LLP where partners are paid directly from profits is not stable. They cannot withstand a bad year.

The problem wasn't that Dewey (I don't really know about Howrey), had no work. It's that they had too many partners for their amount of work. And when that happens, it creates a "run on partners." Even a small inbalance will destroy PPP, and a low PPP sends the rainmakers to other firms for safety. This small lag between what they thought they had, and what they had destroyed the firm. That shows how unstable the firms are. But, til it's dying day, it was a really massively profitable operation. The problem is, with bad decisions, the profitable partners took their work to other firms.

Most Dewey associates found their ways to new firms. A lot just went with their partners to new firms. Stealthed associates aren't so lucky because they have the stink of failure on them.

But when Dewey collapse the revenue it had just shifted to other firms. It doesn't really hurt the industry as a whole.

If you want to look at the health of big law as a whole, you really need to look at how the revenue is going to trend. We've been hearing about flat fees and clients refusing to pay for juniors for what, 4 years now. Still hasn't destroyed the system.

But I certainty don't think Big Law as an industry is going to take off.

I think the real problem firms face is that they have too many useless partners making too much money. The associates got culled during the crash, I think now the partners are going to be.