Friday, May 22, 2015

The Future of Respectability for Lawyers (Part 3)

In my first post of this series, I asked whether business leaders had unknowingly provided the legal industry with a long-term solution to declining interest in the legal profession and potential waning influence.  I suggested that business leaders may be the driving force that ends up saving the legal profession, and its "respectability".  In my second post, I discussed the current state of in-house attorneys.  In this post, I would like to look at the current state of private firms as it relates to the in-house attorney discussion.  My view is that the competitive marketplace reactions of a growing number of firms are partially contributing to the dimming of their own future prospects.  Firms will need to evolve rather quickly; how they can, I’ll discuss in a future post.  However, because of the firms’ relatively weaker position compared to corporations, many firms are in very precarious circumstances.

In this interim period between past firm dominance and the future corporate acceptance of Professors Bird and Orozco’s “corporate legal strategy” (in which attorneys are fully accepted and integrated as part of business teams in corporations, resulting in greater legal opportunities), firms are struggling.   From my discussions with attorneys, I have learned that many private firms are beginning to intentionally screen out attorneys that even appear to be on a path to in-house corporate life in the future.  They feel less inclined to provide expensive training for someone that has (in their perception) little intention of making a career of private practice, especially their private practice.  This diminishes the number of opportunities for new lawyers.  Firms have a harder time training the new lawyers they have, because much of the basic business work is now taken up by in-house counsel.  Corporations, for their part, have exacerbated the lack of work for new associates by using their increased influence and wealth to insist that only the most senior firm attorneys handle their corporate work—perhaps shortsightedly robbing firms of talent continuity that has historically benefitted the corporations in the end.  Expensive summer clerkships and recruiting drives have all but disappeared. 

Additionally, firms have become focused on hiring attorneys with portable business for the “quick hit” of income and are less concerned about hiring new law graduates.  This cannibalization of mature legal talent has always occurred, but it now seems to be a much greater part of firm business plans. It has resulted in some lawyers commoditizing themselves, rather than some of their clients doing so, perhaps further weakening the profession's "respectability".  Of course, because the legal industry is currently well staffed, this “horse-trading” approach will work for the present.  However, it will eventually be unsustainable—as lawyers retire, there will be fewer talented lawyers to replace them or have the capacity to buy out retiring partners’ percentages.  Of those, even fewer still will invite the rigors of private practice if the rewards diminish.

I, for one, am not a complete believer in the “end of Big Law”, or any size "Law", for that matter.  (The late Professor Larry Ribstein discussed the subject here--disappointingly, he only briefly touched on the in-house counsel effect, and instead, focused on the firms themselves.)  However, I do believe in the necessary evolution of “All Law”—where the legal industry (firm, in-house, and academia) evolves to a point of natural and mutual support which benefits society as a whole (creating greater “respectability” for all lawyers)—and businesses will initially play a dominant role.  How will businesses do so?  More soon in a post coming your way!

--Marcos Antonio Mendoza

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Thanks for another interesting post Marcos.

I'd like to push back a bit on this statement: "I have learned that many private firms are beginning to intentionally screen out attorneys that even appear to be on a path to in-house corporate life in the future."

Perhaps things have changed since I was in practice about five years ago, but both of my law firms celebrated when their attorneys went in-house. We literally had big going away parties, which those leaving for other law firms did not typically get.

The law firms threw these going away parties for attorneys going in-house because they knew those attorneys would be making decisions about hiring outside counsel. If the departing attorney was going to an existing client, that might cement and expand a relationship. If the departing attorney was going to a non-client, it might open the door for new business.

If times have changed, and firms are now screening out attorneys who may head in-house, then I think that is a poor strategy. Many of my former colleagues went in-house and the ones who left on good terms brought their former firms a good bit of business.

Posted by: Haskell Murray | May 22, 2015 5:03:39 AM

Haskell, thanks for the thoughts! I’d like to hear any others. I think I was referring more to firms that don’t want to use firm capital training up a lawyer for 2-4 years, only to have them head to a corporation. Such lawyers probably wouldn’t have the corporate pull to direct business, and probably didn’t have time to develop deep personal ties. In the case of senior attorneys leaving, I agree with your firm’s approach—they could immediately become valuable allies, and at least are not going to a direct competitor. As the legal environment evolves, and if corporations do their part (which I’ll talk about soon), more firms will likely become more flexible in their attitudes in such situations, taking the long view. But firms will want to see more immediate returns on their training investments in younger lawyers. Right now, they often aren’t seeing any return at all in such situations! (At least, as has been related to me.) Great comment.

Posted by: Marcos Antonio Mendoza | May 22, 2015 5:37:18 AM

Yes, I think my firms were taking a longer term view. Sure, a lawyer with two years experience probably isn't going to be directing a lot of business immediately, but they might become GC someday.

Also, sometimes GCs listen to their junior attorneys...and ask which partners the junior attorneys worked for are the best, which have certain expertise, etc.

It is definitely possible, however, that law firms are now focusing on immediate returns.

Posted by: Haskell Murray | May 22, 2015 6:21:34 AM

Haskell—you bring up some interesting points! Thanks for starting the discussion; I hope more are willing to comment on their experiences in this area.

Posted by: Marcos Antonio Mendoza | May 22, 2015 7:16:03 AM

Maybe the world has changed since my days in private practice and in-house, but my recollection is the same as Haskell Murray's: Firms were happy to place associates in-house, viewing that alumni network as a key firm asset. The ability to place lawyers into an attractive in-house position is part of the hiring pitch, too, since firms plan, as law students know so well, on making very few partners out of each class. Just look at the books of alumni published annually by the big firms and at the conferences and workshops that big firms have for their clients, to which their alumni (future clients) are often invited. Maybe it's different for smaller firms, I don't know.

Posted by: Douglas Levene | May 22, 2015 11:38:05 AM

Douglas—thanks for your thoughts as well. It may well be a factor of firm size, geography, or simply a rapidly evolving environment, especially since 2008. Hopefully, we’ll get some more input on this subject!

Posted by: Marcos Antonio Mendoza | May 22, 2015 12:18:04 PM

I agree with Haskell and Douglas. I left in house life in 2011 and my recollection was that a lawyer who went in house after having left the firm on good terms was considered to be a likely client and/or a referrer of business. I have friends who leave firms to go in house all the time and they are almost always universally celebrated. A number of firms are also seconding their lawyers to their in house clients to fill in when a lawyer takes leave, thus further cementing the relationship. As professors, we need to do more to prepare people to go in house. A number of our graduates may start working with small businesses as "general counsel" without any idea of the substantive knowledge or particularized skill sets that entails.

Posted by: MARCIA NARINE | May 22, 2015 12:44:16 PM

The question, as I understand it, is whether a firm will invest in hiring and training a new law school graduate who has designs on leaving the firm for an in-house position from the get-go. My gut tells me that firms can reasonably differ in this regard. Each has different demographics, and if it is planning properly for the future, it must respond to its own situation. That may be why commenters are seeing differences in this regard.

My Big Law experience from 15 years ago is certainly not representative. But folks we hired did not typically have the desire to leave early and go in-house. Of course, when people did leave to go in-house, it generally was celebrated for a host of reasons--not least among them being the person's proactive choice to pursue his or her passion. Of course, some also brought us work, and some gave referrals.

Like Marcos, I am interested in the experience of others in the field . . . .

Posted by: joanheminway | May 22, 2015 1:22:33 PM

An interesting exchange on twitter on this subject:
Thanks to Stefan for forwarding!

Marcia—thanks for your input. Certainly different from what I am hearing, but it doesn’t mean we both aren’t correct, depending on the various factors, as Joan mentions. I do think that if this is happening (the level of celebration on a wide scale) that is a good thing! It would benefit the acceptance by all the parties of, what I believe, is the next stage of this process—the further acceptance by businesses of attorneys on staff. If firms can be cooperative, as you and others have seen, then it will make this evolution occur more quickly than I might have first anticipated. And I further agree that professors need to do more, but there needs to be programmatic changes by all law schools to address the growing need for in-house counsels. Your scenario is very common—a sole general counsel at a small company that is often not well-equipped to deal with the issues that arise.

Joan—you are correct as to the framing of the discussion; and I enjoy hearing all of the comments, too! They are very helpful.

Posted by: Marcos Antonio Mendoza | May 22, 2015 1:39:51 PM

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