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Happy Days Are Here
Again
All indicators are positive for law firms — but the rules of the game are changing
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Business New Haven
5/4/1999
By: Debra Drexler
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In the business of practicing law these days, all indicators are positive.
In the big-firm environment - and particularly in the premier Connecticut-based firms like Day Berry Howard and Cummings & Lockwood - hiring as well as salary figures have increased significantly. And even in smaller firms, the subject of technology is discussed in immediate terms.
Intellectual property law as a practice area continues to be one of the fastest growing, and the use of computers and other emerging technological resources which aid in management of the law firm as well as those providing support in substantive practice areas and litigation tools has exploded.
At this point, even the most conservative group in the legal milieu, the judiciary - both state and federal courts in Connecticut - are getting on-line.
Connecticut's large law firms have recently seen business increases not experienced since the boom years of the 1980s. According to statistics from the Connecticut Law Tribune for 1997, revenue per lawyer and profits per partner at the state's largest firms ranged from $155,000 (the low number in the latter category) to $360,000 (the high number in the former category). And if this year's hiring trends are any indication, 1998 numbers will reflect a banner year in all respects.
Big-firm hiring practices have recently heated up not only in terms of “first year hires” (i.e., associates just graduated from law school), but even more so in the lateral market. Lateral hires are generally defined as attorneys with three or more years of experience at the law firm which hired them as “first-years,” and even partners dissatisfied with the manner in which the firm is handling their specific practice area.
Previously, such lawyers were viewed with a jaundiced eye, somewhat like how a non-lawyer might view last week's leftovers in the fridge. While this restrictive sentiment may have had some validity prior to the most recent recession, the pattern of overhiring - whether in anticipation of new business which failed to materialize or existing business which retrenched along with the economy - left in limbo large numbers of associates, not to mention a few partners, with top-rate credentials, billed-hours statistics or rainmaking reputations, and work product.
Still smarting from the extent to which they were affected by those economic trends, local law firms large and mid-sized hired relatively few first-year associates in the early 1990s. As a result, many had insufficient numbers of experienced attorneys in-house to meet the demand for their services in business areas currently expanding, such as health-care regulation and intellectual property.
One way in which such firms have met the demand is by recruiting lawyers with the needed skills from other law firms - typically in the range of three or more years out of school right up to the partner level. Between the removal of “lateral stigma,” and the need for attorneys who can hit the ground running, laterals have become perhaps the hottest product in the Connecticut law firm hiring market.
And, while Connecticut does not compete with the New York big-firm market and its current $100,000-plus salary levels for first-year associates, Nutmeg State firms have been forced to reconsider their caution in increasing salaries only a token amount between 1996 and 1997.
While some of the firms contacted had not yet made final decisions regarding first-year salaries at press time, all indicated that an increase was certain. With few exceptions, firms paid a differential to those first year associates in their Stamford offices, in the hopes that this will keep them from heeding New York's siren (read, big bucks) call. And all firms providing numbers showed more generous increases this year than last (see chart).
That is not to say, however, that the corporate clients who represent the bulk of large-firm business are willing to return to earlier modes of doing business. Outside counsel has in recent years seen previously unheard-of modifications in acceptable structures and amounts of legal fees.
“Unlimited corporate budgets simply don't exist anymore”, says Andrea Obsten, president of Andrea Obsten Marketing Communications, who has worked with large and small law firms and even Connecticut Legal Services. Alternatives to hourly rates, which have come to be viewed as providing an incentive to generate huge fees and even at best are seen as inefficient, “are now the exception rather than the rule,” Obsten says.
“Concepts such as partnering with a corporation, value-assessed fees and blended hourly rates are here to stay,” she explains. “Responsiveness to the client's needs is the current focus - whether in the form of reducing legal fees or having an expert in the client's legal area available to answer questions in the office from 9 to 5 every day.”
In fact, the concept of “managing” legal fees has become accepted enough to spawn a new twist to an old profession - auditing - and to generate at least one computer program which analyzes invoices from law and other outside professional firms to determine whether the services are billed in accordance with the fee agreement.
Of greater interest to lawyers than this type of software, however, are computer programs designed to assist the law firm in substantive areas of law and managing the business of practicing law.
If there is a legal specialty in existence which does not already have a software program which assists the lawyer in every stage of its practice area, chances are that it's being developed as you read this. According to Tony Nuzzo, incoming president of the New Haven County Bar Association and chair of its technology committee, “It's the small [less than five lawyers] law firm that is most likely to have state-of-the-art computer systems.”
Because of the relatively low cost of upgrading smaller systems, such firms are amenable to change and receive the benefits of service improvements. However, “When you have a firm of 40-odd computer-using people, including lawyers, paralegals and support staff, and the basic cost is $2,000 per unit,” Nuzzo says, “and then you add on software, training costs and down-time for transitioning the new system, every upgrade becomes significant and often prohibitive from a cost perspective.”
Fast approaching, though, is the day when lawyers - particularly litigators - will either be on-line or off-limits.
“Both the state and the federal court systems are moving toward virtually total computerization, sooner than is generally thought,” Nuzzo says. “As new courthouses are built, they are wired for the eventuality. The planning involved at even the early stages of the process will assure that the various systems will utilize the same or compatible hardware.”
In his capacity as a member of the group coordinating such matters between the U.S. District Court Electronic Filing Committee and the state's Judicial Department Task Force on Technology, Nuzzo is in a position to know. Although the state court system is fully committed to automation, the $10 million appropriated by the General Assembly represents less than one-quarter of the $45 million estimated to be necessary for the first stage of the judicial branch system.
While case management - the first stage - is now limping along with Band-Aids, Nuzzo anticipates that “The whole system, from case management to video conferencing and beyond, will be a reality within the next three to four years.”
Area law schools reflect the economic upturn as well. Current job-placement percentages of 1997 graduates from the law schools at the University of Connecticut, Yale and Quinnipiac number 92.5, 97.1 and 91.5, respectively.
At UConn's law school, plans are currently underway for a focus on the areas of intellectual-property law and health-care law, the latter as it relates to health-care delivery and regulation of that industry.
Further, UConn Dean Hugh MacGill anticipates that the aging of the population, along with current mergers (such as Citicorp and Travelers) which have blurred traditional business distinctions will result in a need for lawyers trained in several areas of law. With regard to the former, the law school is now seeking to recruit someone with expertise in health-care law and policy who will act as a liaison between the law school and UConn's school of medicine.
Happily, the upturn in business has not resulted in any real changes in either the type or number of disciplinary actions against lawyers. According to Dan Horwitch, counsel to the Statewide Grievance Committee, “The numbers and types [of complaints] have remained relatively stable over the past four to five years. While we have no hard data to justify it, we like to think that attorneys are learning from the mistakes of their less-fortunate colleagues.”
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