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Is Law Firm Downsizing Impacting Corporate Clients?

Despite the fact that most law firms are laying off associates because business is down, could they be taking cuts too far? In other words, is there a chance that the massive layoffs could be harming service to clients? That's one of the questions posed to Mary Clark, vice president of law and deputy general counsel of LexisNexis, in an interview with The Metropolitan Corporate Counsel.

Asked whether law departments are experiencing disruption from firms going out of business or law firm staff layoffs, Clark responded:

Corporate counsel rely on their firms to be effectively staffed to represent them, and, of course, law firms are impacted by the tough economy, just as corporate law departments have been. We're seeing law firms take some pretty unprecedented steps to respond to economic conditions, and many of the things firms are doing to resolve their own financial woes are very creative. If law firms are cutting staff or practice areas, counsel may have no choice but to look elsewhere, which is not necessarily what they prefer to do. General counsel like to work with firms who know their industries and their organizations and cultures. If law firms go away or eliminate practice groups, this certainly does create another strain on corporate law departments.

Clark offers some other observations on law firm activity in the economic downturn. For example (and somewhat counterintuitively), Clark notes that with cutbacks in-house, corporate counsel are outsourcing "commoditized work." But most big law firms have no interest in commodity work, even now, saying that it's not "the kind of work that's of value" to the firm. As a result, law departments are devising ways to package commodity work along with higher-stakes work to make it more attractive to firms.

As for alternative billing, Clark isn't seeing much on that end either. She explains:

There are firms willing to take on work at a lower hourly rate, for example, but they remain tied to the hourly rate model; they're not necessarily willing to move to alternative fees. Other firms are much more creative in trying to give a project price or a capped fee.

But then I also have heard about firms that are still sending out their annual rate increase letters and it makes one wonder what exactly these firms are thinking.

To be honest, after reading the entire interview with Clark, I have to wonder what firms are thinking as well. With revenues down, you'd think that firms would be eager to restructure their offerings to lure corporate clients. Instead, as Clark describes, it's the in-house departments that are chasing down firms, trying to sell them on doing commodity work with all kinds of incentives, when it's the law firms in need of business that should be coming up with proposals. Likewise, with corporate clients desperate for alternative billing, why aren't law firms offering it?

After reading Clark's interview, I sensed that there's still a good deal of frustration amongst corporate counsel with large firms even in a buyer's market. So why are in-house counsel still hanging on to unresponsive firms instead of jumping ship? Post your thoughts below.

Posted by Carolyn Elefant on May 4, 2009 at 04:47 PM | Permalink | Comments (2)


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