After nearly two years of a bruising recession, America’s legal profession has had to do something for the first time in decades: change.
New hiring practices, new billing arrangements, and new business models are posing challenges to the nation’s law firms.
Still, Americans need lawyers—lots of them—whether it’s a corporation requiring a team of litigators to defend against a product liability suit or a parent seeking counsel for a custody battle.
With that in mind, U.S.News & World Report and Best Lawyers have joined to launch the inaugural edition of Best Law Firms, a comprehensive listing of nearly 9,000 law firms grouped by legal practice area and geographic location. They range from the mammoth legal powerhouses in Manhattan to a solo practitioner in Memphis. The tiered rankings are drawn from thousands of practice-area evaluations by clients and lawyers alike and are available at usnews.com/bestlawfirms.
The rankings appear at a time of turmoil for the nation’s largest law firms as they respond to pricing and value pressures from their biggest clients, such as Amy Schulman, general counsel at pharmaceutical giant Pfizer Inc.
Flat fees. Schulman is fighting a decades-long status quo: the billable hour. In March 2009, she introduced the Pfizer Legal Alliance, a group of 18 law firms that get the company’s work annually in “buckets.” The firms are paid flat yearly fees and strive for incentives such as bonuses and additional work, given if they add value and collaborate. Too often, Schulman had found, the billable hour—the industry’s standard measure of compensation—sparked a perverse and inefficient relationship between lawyers and their corporate clients.
“This is a chance to reset that relationship,” she says. “Most people that understand the model really embrace it as a call back to a different era when lawyers and clients had a much more collaborative, trusting, long-term relationship.”
Schulman is just one of many key players in a changing legal landscape, which attorneys, consultants, and scholars agree is an intricate convergence of recessionary forces, empowered clients, and systemic shifts.
“For a while, the question was, ‘How fast are things going down?’ ” says William Perlstein, co-managing partner at WilmerHale. “Things are clearly stabilized, but they’ve changed.”
The billable hour, long the bane of industry critics, was a focus through the recession, as clients like Schulman were desperate to halt yearly increases in legal fees in favor of more certain figures. In fact, pricing and fee structures were rated the most pressing issue facing the industry by 71 percent of corporate counsel and 60 percent of private practice attorneys surveyed in late 2009, according to the LexisNexis “State of the Legal Industry” report.
The focus on alternative fee arrangements can be misleading, experts say.
Lawyers “are not saying, ‘Can we find a way of billing that means we are going to be less profitable?’ ” says Richard Susskind, author of The End of Lawyers? (2008). Clients, he adds, “are realizing that it’s all just fancy footwork.”
Though lawyers say there is often a disconnect between what clients expect to save with alternative fees and the reality, many agree that billing matters little in high-stakes cases.
“Clients really want to have—and are willing to pay for—true expertise,” says Charles Douglas, a partner at Sidley Austin. “That means you have to have people who really have the experience . . . and that means they’re more senior.”
This has been bad news for young lawyers, who saw a markedly worse job climate through the recession. Across the country, summer associate programs shrank or disappeared. An estimated 3,200 to 3,700 offers to the class of 2009—about half of all jobs promised by large law firms—were deferred at least six months, according to NALP, the Association for Legal Career Professionals. Hundreds of associates were laid off.
Corrected on 9/16/2010: An earlier version of this story incorrectly identified Indiana University.