Midsized Firms Move In On Large Law

November 11, 2013

Losing moneyWe are in an era of extreme dynamism for law firms. Due to client concerns about cost, industry changes and technological evolution, the ways in which firms practice law are not what they were even just five years ago.

As such, the legal realm reacted with interest to an article that ran in the Washington Post last week on a notable manifestation of these changes — an apparent trend of midsized firms taking an increasing portion of business that, in the past, had gone to larger law firms.

The article covered a study of 2 million legal invoices that pertained to 30,000 matters, cumulatively representing $10 billion in legal fees.

Looking deeper into the article, several of the findings are in keeping with concepts that have been discussed in the past, but others provide new information. Here is a look at three of the article’s most interesting points and what they say about the changing way business is flowing to large and midsized firms:

  • Litigation Aversion: Over the past three years, the share of litigation work going to midsized firms went up 22 percent to reach 41 percent, while the share going to large law firms went down 19 percent to reach 32 percent.
    • What does it mean? Nobody wants to see the inside of a courtroom anymore. Trials are too expensive, too risky and too drawn-out. Previously, clients’ cost-avoidance has shown itself in an increasing desire for settlement and summary judgment motions. Now, it seems like they are willing to go with smaller, perhaps less blue-chip firms. This is further demonstration that clients want more value for their carefully allocated legal dollar.
  • The appeal of alternative: Midsized firms offered alternative fee arrangements in about 6 percent of 2012 cases, the article reports, while large law firms offered them in only 3 percent. That makes midsized firms more appealing to some clients than large firms.
    • What does it mean? That the era of the non-itemized “for services rendered” bill is over. Until now, clients have seemed comfortable pushing their existing large law firms to provide more efficiency in service and specificity in billing. But, perhaps it has now gotten to a point where these desires (and the apparent inability of large law firms to meet them) are prompting clients to do the once unthinkable — switch firms.
  • Interest in more offerings: Even though the study confirms that midsize firms are taking business from large firms, this does not seem to be the case with small firms. The article poses that this may be because they are too specialized. “Boutique” firms handle a limited roster of legal issues and apparently do not provide comprehensive-enough service to attract large law firms’ former clients.
    • What does it mean? Until very recently, expertise and focus were significant selling points for attorneys. Today, however, there is at least anecdotal evidence that clients are comfortable with a more generalist approach to practice. Why? Directing as many legal matters as possible to one place saves times, money and effort – maybe at the cost of getting the absolute elite in terms of counsel, but that seems to be a tradeoff they are willing to make.