ChessLaw | LawDictionary.com
FreeMPRE.com | FreeBarReview.com | BuyingPower.com | LawTV
Manhattan Law School | Law Firm 250 | EnPassant.com | TVToday.com
Law School 100 | Law Central | BarPlus Bar Review | ExpertWitnesses.com
That's the message a swath of cost-slashing corporate America is giving the nation's law firms, which for decades have essentially passed along the cost of training their youngest, greenest lawyers to their clients in the form of big hourly bills.
Not anymore. In the wake of the financial meltdown and resulting recession, companies have started pushing back.
"Training someone on putting together an asset-purchase agreement shouldn't be done on our nickel," said David Brill, the general counsel of American Stock Transfer & Trust Co., a stock-transfer agent based in Brooklyn, N.Y. "Younger attorneys can be fine on less complicated matters, but we draw the line at anything with any complexity."
Call it the "first-year dilemma." By the time many young lawyers start work at law firms, they have done quite a lot. Their backgrounds typically include three years of law studies, work as summer interns, and time devoted to studying for and taking the bar exam. Many have even spent a year or two helping a judge research and draft legal opinions.
But lawyers said there is still a gulf between a newly minted lawyer and one who can provide value to a client. Among the skills often absent are a comfort and confidence with clients, a sophisticated knowledge of the business world, and many nuts and bolts, such as how to prepare a witness for a deposition or the precise terms that, say, need to be included in a particular kind of loan agreement.
Law firms often treat the first two years of an attorney's career as a sort of apprenticeship, albeit a well-paid one: the yearly salaries at many of the nation's largest law firms start at $160,000.
Traditionally, law firms have recouped costs of young attorneys by giving them simple jobs—research, proofreading or culling important documents from boxes of paperwork—and passing the costs along to clients in the form of hours billed at $200 or $300 a pop.
But many companies are now refusing to pay those kinds of bills. According to a September survey for The Wall Street Journal by the Association of Corporate Counsel, a bar association for in-house lawyers, more than 20% of the 366 in-house legal departments that responded are refusing to pay for the work of first- or second-year attorneys, in at least some matters. Almost half of the companies, which have annual revenues ranging from $25 million or less to more than $4 billion, said they put those policies in place during the past two years, and the trend appears to be growing.
John Albright, the chief legal officer for the market-research firm SymphonyIRI Group Inc., said the firm about 18 months ago adopted an informal policy of hiring only experienced attorneys. First-year associates are suited for some tasks, such as reviewing documents, but in most instances, they present "efficiency and value concerns," he said, adding that his policy stemmed from a combination of "the reality of the constraints on law-department budgets and the higher first-year rates."
Of course, the more menial tasks still need to get done. But many corporate legal departments are either farming them to their own employees or giving them to so-called contract attorneys, lower-cost outside lawyers who work independently from the large law-firm ecosystem.
"The savings with contract attorneys can be huge," said David Nation, the general counsel at software maker Bentley Systems Inc., outside Philadelphia. He said that on several large litigation matters in recent years, the company had used contract lawyers instead of young law-firm associates to handle the paper-intensive and costly "discovery" phase of the cases. "Instead of paying $200-$300 an hour, we were paying $60 or $70. And the quality has been uniformly outstanding," he said.
Many in-house lawyers are choosing less-draconian measures with their law firms. "To say across the board that you won't pay for first years doesn't seem like smart policy. There are some jobs that can be done and done well by new lawyers," said Lawrence Keane, the general counsel of the National Shooting Sports Foundation.
Mr. Keane said the first-year issue—paying bloated fees for routine tasks —can be a problem. But he prefers to address it by staying in close touch with the more senior lawyers he has hired. "I go through our bills line by line," he said. "If you know exactly what's going on, then you know exactly when you need to pick up the phone and put your foot down," he added.
Leaders at law firms said they are mindful of their clients' concerns. And many say they have launched—or broadened—their own training programs. But they haven't yet solved the dilemma.
The trend hasn't yet dramatically driven down first-year salaries. While some law firms reduced pay immediately after the 2008 financial collapse, most have held salaries steady. Nor have the recent client demands shifted the firms' hiring or billing practices. At least not yet.
But R. Bruce McLean, the chairman of Washington, D.C.,-based Akin Gump Strauss Hauer & Feld LLP, said that if the trend continues, firms will have to find a new solution, perhaps a new billing model or intensive training programs similar to those in the U.K., where prospective solicitors take a one-year course on legal practice followed by an apprenticeship.
Many general counsels staff their in-house legal departments with law-firm attorneys with five or six years of experience. So the companies are ultimately the ones reaping the benefit of the early training, according to Akin's Mr. McLean. "The interesting paradox in all this is that most corporations do not hire inexperienced lawyers" to work in their legal departments, he said.
Peter Kalis, the chairman of K&L Gates LLP, said that when the issue arises with clients, he tells them "it's their dollar, and they're free to do with it as they wish." But he said he also tells them to "step back," and take a longer view. "It's a bargain made throughout the generations that has served democracy and capitalism well."