How Mortal is Big Law?

Monday, January 4th, 2016 at 10:13

Despite all the theories put forward, the forensic evidence adduced, the conspiracies mounted, Jack the Ripper wasn’t caught and so didn’t meet his just deserts. It keeps retired coppers and others in business however. The fate of Big Law is similar.

Today an article in the Financial Times (accessible here) proudly proclaimed “dominant New York corporate law firms increase market share.” This links to a post I wrote last year, “Death of Big Law Announced Prematurely…” There has been so much fatalistic talk about the demise or collapse or unsustainability of Big Law that it ought to be six feet under but it isn’t.

My evidence for the continued longevity of big law firms depends on a particular category of work, mergers and acquisitions (M&A). M&A is big ticket work–the deals are large and the fees generated are huge. And M&A deals create so much work it doesn’t stop when the deal is “completed”. For law firms there’s considerable follow-on work out of each deal. In 2015 M&A surpassed the $5 trillion mark, many of which were mega-deals.

I analysed the structure of Big Law at a conference in St Gallen last year where I argued the segmentation of the legal market, globally, was now so extreme that the position of the dominant law firms could be unassailable. The key firms occupying the legal stratosphere are Skadden Arps, Cravath Swaine and Moore, and Wachtell Lipton. Their respective deal values are:

Skadden                          $1.4tn       (25%)
Cravath                           $888.4bn  (18.7%)
Wachtell                         $760bn

A Citibank law firm adviser said:

“Consider the megadeals that have just been announced in the last few weeks and the timeframe — it’s going to take these firms well into 2016. And if you consider any antitrust issues, any regulatory oversight needed, that could also further lengthen the time of the work that’s going to be involved. The corporate advisory work that stems from those deals, and the boost from solidifying client relationships, should also help them get hired for future matters.”

Of the top 10 law firms doing big M&A work nine are based in New York and the only London firm is Freshfields at number 9 which worked on the Royal Dutch Shell-BG Group and ABInBev-SABMiller mergers.

The legal market is highly stratified and parts of it are highly successful and appear impregnable to the threats articulated by Susskind, Beaton, or MacEwan. Does this mean the doomsayers are wrong? There is something about their respective analyses that seems to dent their conclusion that Big Law is on a downward trajectory. The picture is far more complex than we have allowed for.

Elite law firms have been resolutely placed in the same category as other professional service firms and despite some big insolvencies law firms have been resilient. The big New York and London law firms occupy a unique category. They fit the “winner takes all” category defined by McKinsey some years ago. They mostly focus on their core strengths, promote clear and strong brands, and are venerated by CEOs and general counsel.

I’m not going to predict the imminent death of Big Law since it proves its resilience (for more than a hundred years). The numbers will be winnowed no doubt as there are too many fungible law firms which take the middle ground, scrabbling for the same work. Some will reinvent themselves into New Law but most will continue the same. The result is the stratification of law firms will become even more embedded. It’s rather like the decline of the middle class in America while the 1 percent grows richer.

Why there are no foreign lawyers in India…

Friday, October 30th, 2015 at 16:37

 

I’ve put up a new version of my paper on foreign lawyers and law firms in India, which sounds like there are and there aren’t.

It’s on SSRN.

 

The Law of Legal Services

Wednesday, October 7th, 2015 at 15:49

(thanks to pinoycivilservant)

The market for legal services has changed enormously in the last several years. Regulation, organisation, online delivery and more have altered so as to make the English legal market quite different from most others. I’m not tracing the history of these changes in this post as a large part of this blog has already done this.

Whereas students of change like me avidly follow what’s happening through articles, the trade press and conferences and the like, working lawyers are often bemused by the changes taking place around them. For them the regulatory landscape is transformed.

The recent publication of John Gould’s book The Law of Legal Services (Jordan Publishing; 673pp) will be a mixed relief. The size of the book denotes the growing complexity of legal regulation while simultaneously telling the reader that all she will need to know about the subject.

Gould and his contributors are comprehensive. They start with the regulatory framework, using the Legal Services Act 2007 as the starting point which is followed by the regulators and codes and compliance (chapters 1-3).

Following codes is misconduct and its treatments. There are the types of misconduct–unauthorised practice, overcharging, confidentiality, for example. The ways they are dealt with varies by regulator but each is explained. The last chapter in this section discusses tribunals and the range of sanctions available (chapters 4-6).

The next set of chapters (7-10) are focused on the lawyer-client relationship: the contract, fiduciary duties, lawyers’ negligence and compensation. A thorough reading of these ought to prevent any malfeasance by lawyers as there are many examples and cases that indicate both good and bad practice.

The final chapters (11-13) deal with the business of lawyering, which is something lawyers need a good grasp of as regulators are now in the business of monitoring the business aspect since they may have to wind down failing practices.

Lawyers and those working in legal services have a wide range of organisational forms open to them, whether it be partnership or an Alternative Business Structure. For example, we have Gateley’s, a law firm partnership, that is now a publicly floated company, LegalZoom, an online deliverer of legal services which is an ABS, as is Riverview, another law business. (I’ve covered these elsewhere.)

Given this complexity, even though it is not explicitly stated, the consumer of legal services is the centre of the market. It could be a consumer who needs small business advice, property conveyancing, an international takeover, or someone who wants unbundled legal services (i.e. not the whole package but just part). Lawyers’ responsibilities and accountabilities therefore must align themselves with clients’/consumers’ needs.

This is primarily a book for legal practitioners rather than academics (although they will find it useful as a reference text). It is to be supported by a publisher’s website that will upload updates and links to other materials. Practitioners probably should buy a copy or at least know where a library with a copy is located nearby. The law of lawyering now has a reliable and comprehensive repository.

 

How do you feel about the future of the legal profession?

Thursday, September 24th, 2015 at 12:07

 

(thanks to globallegalpost)

Following the brouhaha of Jonathan Sumption’s remarks on equality and diversity in the legal profession and especially the higher judiciary–just be patient and wait 50 years–it’s time to find out what people think about their futures. For those of you interested in following up the debate on Sumption, it’s worth reading Steven Vaughan’s astute response.

The Legal Week Turning Points hub for future lawyers has commissioned a survey which you can complete here. It has questions on diversity and more. The more who complete it the better.

I hope this is the beginning of more sustained research along the lines of the Harvard Law School Career Study.

 

Solicitors from Hell Don’t Go Away….

Friday, September 18th, 2015 at 13:14

Four years ago I came out of the BBC after a heated radio discussion with the former CEO of the Law Society, Des Hudson, about the website Solicitors from Hell. He was furious with the website for defaming lawyers while I said it’s a manifestation of a feeling among the public that you should tackle: don’t shoot the messenger.

Of course they shot him (Kordowski). The court imposed damages, injunctions and closure. But I pointed out to Des, this is the internet. Solicitors from Hell will pop up elsewhere outside the UK jurisdiction and you won’t be able to do anything about it. Mirrors, dear boy, mirrors….

In a judgment by Mr Justice Warby in the Queen’s Bench Division, the boutique law firm, Brett Wilson, sought and obtained summary judgment against Solicitors from Hell (solicitorsfromhelluk.com) in its latest manifestation this September–damages and an injunction.

I’m not going to rehash the case except to say the judge declared the words used had a defamatory tendency. See paragraph 25 of the judgment. But much of what the judge said referred to bringing unknown defendants to court. The problem being that no one could discover who the operators of this website were. No one ever replied to the plaintiffs’ communications.

WHOIS searches revealed the owner to be Anonymous Speech, a proxy registrant, and appeals to them brought no response. There were two physical addresses, one in Tokyo and another in Panama. The claims were brought against “Persons Unknown”. And successfully so.

Yet Solicitors from Hell is still there. And it’s there in more than one manifestation. There are solicitors fromhelluk.com, solicitorsfromhell.com, as well as cowboysolicitors.com.

I’m not sure what Brett Wilson or the courts think they’ve gained by this. Brett Wilson has a moment’s publicity via the Law Society Gazette saying they were defamed, which will be forgotten, in a flash; a claim for damages that will never be enforced; an injunction that is virtually unenforceable; against the continuation of a newly-publicised website far from the reach of the courts.

This is a losing battle for the legal profession. In fact it’s a bit like wars in the Middle East. It doesn’t matter how much you bomb them, they ain’t going away. Constructive engagement is the only way to go.