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Bar News - January 15, 2014


Legal Outlook for 2014: More Hot Than Not

By:

Editor’s note: Law practice management consultant Robert Denney has been publishing annual reports on trends in law practice for 25 years. He granted us permission to condense his latest observations, first published last month, in this article for Bar News.

It’s hard to believe, but this is our 25th annual report on what’s going on in the legal profession. Like all previous reports, it is based on information we compile throughout the year, not just from clients, but also from many other sources, including surveys, discussions with firms’ management, and other leaders in the profession.

Much has changed, of course, particularly in the last five years. As always, some of our findings are obvious, but they must be reported because they may have unexpected consequences. Others are little noticed, but we feel they may be significant now or in the future.

What is most important to recognize is that, more than ever before, the outlook for each firm will vary depending on its size, practice areas, strategic focus, and geographic market(s). The resulting picture is a montage of a profession that is in a state of flux and will continue to be so, not just in 2014 but for years to come.

Practice areas

RED HOT

Energy. In many parts of the United States and certain foreign markets.

Regulatory. Particularly in health care, energy, and financial services.

Health care. The Affordable Care Act adds more confusion to a broad and complex area.

HOT

Financial Services. Including banking.

Initial public offerings. They have been surprisingly hot but may be showing signs of cooling.

Litigation. Actually, the outlook varies widely by firm. Except for bet-the-company, high-stakes matters, large companies continue to send work to midsize and smaller firms due to lower rates.

Labor and employment. Collective bargaining is just one of many reasons.

Intellectual property. Patent litigation continues to be hot because of infringement claims filed by “patent trolls.” Trademark suits have also increased. Patent prosecution continues to be hot.

Real estate. Due in part to a big increase in multi-family developments.

Corporate. Despite general counsels’ efforts to keep more work in-house, midsize and even some smaller firms continue to receive more work due, in part, to their lower rates.

GETTING HOT

Interns’ rights. A small but growing area due to recent legislation in Oregon and proposed legislation in New York state to give unpaid interns the same protection as employees.

Elder Law. Like it or not, we’re all getting older.

Alternative dispute resolution (ADR). The high cost of litigation has reawakened interest in mediation and arbitration.

Trends to Watch

Marketing by industry. A growing number of firms are forming more industry teams and marketing them as opposed to practice groups. Both are needed - some clients want substantive area experience while others want knowledge of their industry.

Non-lawyer competition. Several developments indicate that non-lawyers may become a larger factor in providing legal services.

General counsel compensation. A new survey just released by Equilar Inc. reports that median total compensation for general counsels at Fortune 1000 companies has jumped almost 5 percent from last year.

Divorce is getting easier thanks to technology. Wevorce, a start-up online service, has run a pilot program that separates the process into discrete steps that are easily managed without getting into a court battle.

Mergers. The number of completed mergers shot up in 2013 and more are under consideration. Some resulted in even larger international firms, while others have mostly involved larger or midsize U.S. firms acquiring — and that is the proper word — much smaller firms.

SOMEWHAT HOT

Virtual law firms. The trend continues. But what is a “virtual law firm” and are they here to stay?

Malpractice claims. Seven major insurers report that law firm malpractice claims increased last year as angry clients filed suits over conflicts of interest and other alleged missteps.

Smaller firms getting a bigger piece of the pie. Midsize and small firms are receiving more work that used to go to big-name firms. According to the Wall Street Journal, midsize firms are now getting 41 percent of the big-ticket litigation, three years ago they only got 22 percent.

Hourly rates. Many firms, particularly the largest ones, have raised their rates — again! But that’s not the whole picture. You have to look beyond the standard rates. Except for “bet the company work,” these firms are then offering widespread discounts and write-offs.

Seeking new paths for young lawyers. The New York City Bar Association is exploring some alternatives for young lawyers who are not getting hired after graduation. Other approaches include starting up a law firm where young lawyers could gain experience — and hopefully earn a decent living — by helping people and small businesses that can’t afford market-rate legal fees.

Still a buyers’ market for hiring. Midsize and smaller firms continue to benefit from the availability of qualified laterals who either have been pushed out of large firms or leave of their own choice. However, some of the midsize firms continue to hire young lawyers as opposed to laterals because, as one managing partner put it, “There’s a deep talent pool and it’s a buyer’s market.”

Succession planning. This involves much more than transitioning clients. Many factors must also be addressed, including retirement funding, mandatory retirement, firm infrastructure, compensation and grooming future firm and practice leaders. (Editor’s note: Stay tuned – the March issue of Bar News will include a supplement with articles on succession planning and other retirement topics.)

STILL NOT HOT

Alternative fee arrangements. While many clients exert pressure for something other than hourly fees, what they are really seeking is transparency: What will the total legal bill amount to? Fixed fees are obviously one approach but so are hourly fees with a cap or a base fee with a bonus or “kicker” based on results. In other words, the billable hour is not dead.

Overall outlook

Much better than the pessimistic pundits are predicting. Between retirements and reduced hiring of law school graduates, the oversupply of lawyers will work its way down. But if you look at the total market for legal services and not just the number of lawyers, there will be further growth as new laws and regulations are passed and more non-lawyers and entities exist to provide them.

Robert W. Denney is President of Robert Denney Associates, Inc., which provides strategic management and marketing counsel to law firms, companies and nonprofit organizations throughout the United States. The complete version of this article, and information about his firm’s services may be viewed at www.robertdenney.com.

If you are in doubt about the status of any meeting, please call the Bar Center at 603-224-6942 before you head out.

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