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Dewey & LeBoeuf Crisis Mirrors Legal Industry’s Woes

By PETER LATTMAN
 
The New York Times
April 26, 2012

Michael H. Trotter, a corporate lawyer in Atlanta, says there has been a fundamental change in his profession.

The crisis confronting the law firm Dewey & LeBoeuf has stunned the legal profession. About 70 of Dewey’s 300 partners have left since January after their salaries were slashed because of the firm’s weak financial performance.

Dewey’s woes hardly surprise Michael H. Trotter, a partner at Taylor English Duma in Atlanta who, in addition to a five-decade career as a corporate lawyer, has written two books about the economics and management of law firms.

After graduating from Harvard Law School in 1962, Mr. Trotter began his career as an associate at the predecessor firm to Alston & Bird. His first book, “Profit and the Practice of Law” (University of Georgia Press, 1997), chronicled the growth and changes in the field from 1960 to 1995. His latest, “Declining Prospects,” will be released next month by Create Space, a self-publishing program owned by Amazon.com.

In an interview, Mr. Trotter, 75, discussed the Dewey case and the broader problems facing many of the country’s largest law firms.

Q.

The publication of “Declining Prospects” comes at a moment when Dewey faces the risk of collapse. The turmoil at the firm appears to be a manifestation of a lot of the issues that you discuss in your book.

A.

I don’t think Dewey’s problems are just a matter of a management mistake here or there but instead reflect a change in the fundamental competitive environment in the legal services industry. Many of the larger firms that serve major business clients are caught up in these changes. We’ve already seen several go under, and I think we’ll see quite a few more over the next few years.

Q.

What has changed?

A.

There are now far more capable lawyers and law firms than there is work for them to do. The financial costs of legal services have gotten so high that most clients are determined to reduce them. Many legal services have become commodities that can be supplied by a large number of firms with sufficient quality to meet the needs of most clients in most situations, and corporate general counsel now know that they can get what they need at a lower cost if they force the major firms to compete for the work.

Q.

One reason for Dewey’s trouble is that it poached lawyers from rival firms by offering them multiyear, multimillion-dollar guaranteed contracts.

A.

That’s a very risky strategy. For one thing, people don’t always produce what they promise; often the clients that they currently have move with them, so to give anyone a guaranteed contract based on their past success is basically a mistake. Imagine the environment where profits are dropping and there are some partners getting the full amount they were guaranteed and you’re getting half of what you expected. It generates a lot of hard feelings.

Q.

A few chapters of your latest book are devoted to the working conditions at big law firms. You describe a grim environment.

A.

Law firms expect associates to put in 1,800 to 2,000 billable hours, and at some firms it’s up to 2,500. That’s 50 hours a week, 50 weeks a year. And that’s just the billable time. Every lawyer has to make an investment every day of time that’s not billable. You have to study and learn, improve your skills, administer to your practice. If you’re working 50 hours a week of billable time, you’re probably working 65 to 70 hours of total time. So the burden is tremendous. Now, with the Internet and cellphones, you’re in demand possibly every hour of every day of every week.

Q.

But haven’t these issues been around for years? Big law firms became big businesses a long time ago, and some will say you’re just an out-of-touch, bow-tie-wearing Southern lawyer romanticizing the practice and yearning for the days of Atticus Finch.

A.

I’m mostly reporting the feeling and attitudes that are widespread in the profession rather than my own views. The American Bar Association has concluded that lawyers at every level are unhappy with the transformation of the profession to a business and were leaving the profession in droves. And many are unhappy with their careers and their lives. I’m not against lawyers having profitable careers; I’ve had one myself. What “Declining Prospects” says is that our capitalistic system will adjust economic imbalances and develop more cost-effective ways of delivering legal services.

Q.

What does the practice of corporate law look like five years from now?

A.

We will continue to see the growth and importance of corporate law departments. The firms that are doing the commodity work, the fairly standardized stuff that any one of a number of firms could do, are going to see more of their work move in-house. It’s estimated that the full cost of using outside counsel is 35 to 50 percent higher than the cost of doing their own legal work. And there are advantages in terms of controlling their time, making the in-house services more effective. That means the leverage that law firms have utilized to generate profits will go down and they aren’t going to need as many associates.

Q.

Would you encourage your grandchildren to go to law school?

A.

I would not. It’s extraordinarily competitive. We are turning out 45,000 or so law school graduates a year. The quality is very high, and there aren’t jobs for them. Roughly half the lawyers in the country are sole practitioners. Seventy percent practice in firms with fewer than 20 lawyers, and for the most part they do not have the very high levels of income enjoyed by the major firms. Making a go requires three years of your life and $150,000 for a legal education. If you get a job at an elite firm, the odds of becoming a partner are probably less than 10 percent. So, it’s a very rough row to hoe, and much of the work that’s done is not challenging and interesting work.

Q.

After 50 years of practice, you have a rather dim view of your profession.

A.

My generation has been able to ride the wave of change and stay ahead of it, which has enabled me and many others to enjoy our careers. For some time now and into the future, I fear it will be much more difficult for most major business practice lawyers to maintain the high levels of compensation they have enjoyed without further sacrificing the quality of their lives and the satisfaction that they derive from the practice of law. Indeed, the danger is that compensation will decline but the present rigors of law practice will remain unabated or increase.