Blogs

The following is a compilation of recent news in the legal industry and legal marketing/business development profession. LMA does not fact-check this content and accepts no liability for content contained herein; original publishers are noted at the top of each brief. LMA weclomes members and industry practitioners to share their news and commentary through this resource. To contribute to the LMA Intelligence Briefings, send your briefs, along with a link to the full article, to LMA Headquarters in care of Sara Giacalone.

Headlines

Facing the Alternative: How Does a Flat Fee System Really Work?
Law Firms Get Into the Social Media Game
How Should Law Firms Approach Social Media
This Time It's Personal
Law Firm Nears Deal in Age Suit
Summer Associate Hiring Lackluster as New Norm Sets In
E-Discovery Trends to Watch in 2012
Legal Marketing: A New Big Bang?
Knowledge Management: Problem or Resolution?
With All the Buzz Around UK Firms' Tie-ups, Will US Firms Head Down Under Anytime Soon?
Next Pension Clash: Law Firms
Revenue Increase May Not be for Everyone in Legal Industry


Facing the Alternative: How Does a Flat Fee System Really Work?
ABA Journal (03/01/12) Zahorsky, Rachel M.
The same fears and concerns—namely diminished profit margins and budget difficulties—often plague outside counsel when it comes to changing billing practices at a law firm. The secret to creative fee schemes lies in trust, sharing, and statistics. In 2004 global industrial conglomerate Tyco International Ltd. opened itself up to placing its entire product liability docket with a single firm, based on that firm's proposal of a new and different model for litigation work. More than 20 firms responded to the challenge, some of which had been longtime service providers to the company. Today, Kansas City, Mo.-based litigation boutique Shook Hardy & Bacon is Tyco’s sole legal services provider for product liability, automobile and general liability matters. In situations where local counsel is needed, the law firm determines who to bring on board and manages the entire legal team. According to Shook Hardy, more than 30 percent of its revenue comes from alternative fee arrangements now, and that number continues to grow. Increased collaboration and trust between the firm and its potential client from the initial fee pitch and negotiation process through the close of a matter are the crux of its success. The transformation to single or limited legal providers may not be a major trend, but it is a step more large corporations are considering. It is also a policy that demands faith and trust on both sides of the equation -- clients must trust enough to give information to their outside counsel, and law firms must invest more time and effort to build that trust. Incentives that incorporate rewards for charging less than proposed budgets and sharing unforeseen costs also foster good will between clients and lawyers. At Tyco, converting from relationships with more than 160 firms to one primary case manager meant a steep learning curve. Shook Hardy has employed a model that includes a heavy focus on effective staffing and case-management techniques that meet client objectives such as budget and shareholder interests, as well as successful legal representation. Under a collar arrangement to the program’s budget and fees, the firm retains a portion of the projected fees as a bonus when it comes in under budget. It also is responsible for a portion of overages before a shared-cost safety valve kicks in. To boost effectiveness, the firm routinely captures case updates in a centralized knowledge management system, and it logs and analyzes real-time financial and billing data to track detailed expenses.
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Law Firms Get Into the Social Media Game
Washington Post (03/01/11) Ho, Catherine
Law firms have largely resisted investing in social media and networking until recently. Leaders at several top 100 firms report first-time hirings of full-time social medial specialists to manage their firms' LinkedIn, YouTube, Twitter, and other social media profiles. Other firms are making a concerted effort to prioritize media outreach as part of their marketing campaigns. Currently, 20 percent of law firms have a full-time social media specialist on staff, and about 40 percent report that blogging and social networking initiatives have helped the firm acquire new work, according to an ALM Legal Intelligence report that surveyed 179 attorneys, managing partners, and marketing directors. Firms “no longer think it’s a fad, and are trying to embrace it and utilize it in the way other businesses are,” said Sabrina McGowan, public relations manager at McKenna Long & Aldridge who oversees the firm’s Twitter account and works with attorneys to tweak keywords in LinkedIn profiles and blogs to increase the chances of landing top spots in search engine results. The efforts are brining some success. One litigator at Dechert recently signed a new client days after a LinkedIn request from a former colleague, now an in-house lawyer, prompted him to pitch to that company’s general counsel. Eric Paley, an employment lawyer at Nixon Peabody, scooped up employee benefits work from a multimedia firm after an acquaintance in his LinkedIn network referred him to the company’s assistant general counsel.
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How Should Law Firms Approach Social Media
Law Practice Magazine (02/01/12) Vol. 38, No. 1, Chester, Simon; Del Gobbo, Daniel
Law firms have struggled to create a social-media policy, often with a lack of understanding of the tools or their potential. Engagement in social media, however, is now unavoidable if a firm is to stay competitive. Firms should develop a policy that encourages the innovative use of social media; this should include a committee of lawyers, senior managers, IT experts, marketers, and members of Gen Y. Lawyers who are unfamiliar with social-media tools should receive tutorials from new associates recently out of law school. Firms should learn how to guard against overexposure online, how to maximize security, and which type of social media to use. A firm's policy may be a list of general principles for the use of Web-based technologies, or a set of rigid and prescriptive rules for engaging in social media, but most firms may want to aim for something between these two. A policy should be flexible and allow for future changes. Each technology should have general guidelines for what information lawyers may share online, focusing on professionalism and ethics. By including marketing staff, lawyers can receive help in effective communication skills for social media. Firms may want to set up Google Alerts or RSS feeds to summarize their online activities, which can help prepare for questions from clients who may become concerned about what they read. Lawyers should develop a schedule for their use of social media, such as a blog post every weekday morning or a certain number of Twitter posts each day, and should develop creative ways to generate readership and followers.
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This Time It's Personal
American Lawyer (02/12) Li, Victor
Attorney movement in 2010 was relatively calm, but in 2011 many partners returned to the lateral market. In the 12-month period ending September 30, 2011, over 2,400 partners left or joined AM Law 200 firms, a 22 percent increase over 2010. Last year's lateral movement figures was consistent with the annual average of 2,458 partner moves from 2005 to 2009, and was higher than lateral movement in 2007, when only 2,423 partners moved. While 2010's low numbers was partially due to economic uncertainty, 2011's growth does not mean that stronger times are completely back. Consultants note that both transactions work and litigation struggled in 2011. In many cases the increase in lateral hiring was due to cherry-picking. In the struggling economy, many firms are looking to expand market share and increase profits by poaching top performers from competitors. Cross-border transactions lawyers, particularly specialists on Latin American and China, are in high demand. Without a quick economic rebound in view, and competition between law firms staying strong, the talent battles of 2011 could turn particularly vicious. Jerome Kowalski, a law firm consultant and managing partner at Kowalski & Associates, says that 2012 could be one of the biggest years for lateral movement in recent history. ""Firms lose a bunch of partners, revenue dips, and the managing partner says, 'We have to tighten our belts,' and partners with portable business leave. That's how firms unwind," says Kowalski.
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Law Firm Nears Deal in Age Suit
Wall Street Journal (03/08/12) P. B3; Palazzolo, Joe
Law firm Kelley Drye & Warren LLP may soon reach a settlement with the Equal Employment Opportunity Commission (EEOC) over an age discrimination case. At present, many law firms have policies in place intended to encourage older partners to retire, partly to ensure space for younger partners. The EEOC brought the age-bias case in 2010 on behalf of Eugene D'Ablemont, a labor lawyer who asserted that the firm's policy of "de-equitizing" partners at age 70 violates the federal Age Discrimination in Employment Act. When the lawsuit was filed, D'Ablemont was practicing as a "life partner" while receiving a pension and an annual bonus that ranged from $25,000 to $75,000. He said the bonus equals between one-seventh and one-twentieth of what he estimates he would have earned if he had remained an equity partner. In court papers, the firm called into question D'Ablemont's work ethic and accused him of demanding tens of thousands of dollars of free legal services from the firm's lawyers for himself and his family. The law firm eliminated its mandatory retirement policy in 2010. A 2007 survey by Altman Weil Inc. found that half of U.S. law firms with more than 50 lawyers had mandatory retirement policies.
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Summer Associate Hiring Lackluster as New Norm Sets In
National Law Journal (03/07/12) Sloan, Karen
The National Association for Law Placement reports that on-campus recruiting increased slightly at law schools last fall, but that did not translate into major summer clerk hiring gains. The average summer associate class size remained at eight—the same as 2011's historic low—while the median class size grew by just one summer clerk, from four last year to five this year. Summer associate offer rates rose from 40.6% in fall 2010 to 46.4% in 2011 for students interviewed by firms, though that gain is much smaller than the 60% offer rate in 2007. Relatively small summer associate classes indicate that firms do not plan to increase new associate hiring through at least 2013, since firms attempt to project their hiring needs nearly two years in advance. NALP executive director Jim Leipold predicts this year's recruiting landscape may become common in the future. "This is not a hot recruiting market, but this sort of modest growth may well represent the best we can hope for with year-on-year comparisons going forward," he says. "I would anticipate volatility in the recruiting market for some time. For instance, 2012 is off to a slow start economically for law firms, and we may see that reflected in the recruiting numbers this August."
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E-Discovery Trends to Watch in 2012
Executive Counsel (03/01/2012) P. 24; Jensen, Kurt
Higher standards on best practices for disclosure, reasonable document review and privilege waivers, as well increasingly exacting standards for defensibility, will be among the e-discovery trends to watch in 2012. While the bench will look to raise the bar on compliance, FRE 502 and FRCP 45 are harbingers of the renewed focus that federal and legislative authorities will place on consistent rules and standards for e-discovery. Clients will continue to press the e-discovery industry on its pricing model, and vendors will respond with alternative fee arrangements and flexible pricing structures. Law firms and companies will focus more on leveraging and re-purposing the intellectual capital generated by attorney review across multiple matters. They will look to repositories and master databases to preserve privilege determinations and responsive documents, and to leverage review decisions for subsequent matters. The move to leverage knowledge will reduce the total number of documents reviewed and help create a wide-ranging consistency and defensibility. Law firms and enterprises will reemphasize the role of people in the e-discovery process as they try to strike a balance between predicting and controlling costs, and reducing risks. Building a strong foundation for both current and subsequent matters will be at the core of many of the changes that we will see this year.
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Legal Marketing: A New Big Bang?
PSMG Magazine (02/12) P. 28; Newman, Daryl
Man Bites Dog senior account director Daryl Newman writes that a new legal communications strategy is required because of the need for law firms to differentiate themselves amid the legal sector's growing polarization. He stresses that a reliance of technical commentary that targets in-house counsel will no longer be sufficient, as corporate clients struggle with challenges of growing complexity in the macro business environment. "Legal marketing needs to move beyond demonstrating neutral technical expertise and start promoting the ability to create value to senior corporate decision-makers," Newman says. Arguing that the only source of differentiation will be creative ideas, Newman emphasizes the need for "bold, thought-provoking communications." He says creatively conceived thought leadership can be a critical market differentiator as well as an effective tool for generating leads. "Backed by robust research to prove a compelling business hypothesis, intelligently designed thought leadership can raise the profile of a firm's brand or create a direct call to action for a particular practice area," Newman writes. He also reports that smart law firms are recognizing the need for bolder communications, and are recruiting marketers from adjacent professional services industries such as management consulting and accounting to bring such expertise. These new hires will face an uphill battle, but Newman says "this initial spike in lateral marketing hires to the legal sector may be the sign of law firms beginning to embrace thought leadership and looking to genuinely differentiate themselves from the crowd."
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Knowledge Management: Problem or Resolution?
Law Technology News (02/13/12) Schoch, Teresa Pritchard
Some organizations may find it difficult to define knowledge management (KM) and create an information management plan. KM is essentially the systematic and collective creation, sharing and application of knowledge to achieve an organization's goals. People, technologies, and processes typically comprise the key parts of knowledge management. Experts describe tacit information as unexpressed knowledge that people have, while explicit information is knowledge that has been expressed in oral or written form. Knowledge creation is perceived as the conversion of tacit information to explicit and back again, and is also closely associated with records management. To determine the kinds of documents that should be included in a KM system, a committee could be formed that represents all practice areas. Thereafter, the decision of whether a document should be part of the KM system should be made at the time of the document's creation. Prompts should exist in the records management system to alert users to ensure that the goals of both records and knowledge management are achieved. Organizations also need to determine if the KM system will allow designated individuals to include whatever documents they want or if items will be reviewed before they are added. Firms may also consider developing a taxonomy to ensure easy access to documents or using full-text retrieval software.
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With All the Buzz Around UK Firms' Tie-ups, Will US Firms Head Down Under Anytime Soon?
Legal Week (United Kingdom) (03/02/12) Seah, Jessica
The recent wave of tie-ups between Australian law firms and foreign practices looks set to continue, but U.S. firms have been largely absent from the deal-making that has taken place since the beginning of 2010. The growing trade flow between Australia and Asia, especially China, has led many of the leading law firms in London to expand into Australia, and now a major Chinese practice, King & Wood, has followed suit. A number of U.S. firms are already in the market, such as Skadden Arps Slate Meagher & Flom, and Adrian Deitz, a Sydney-based partner at Skadden, believes mining and resource work is unattractive to U.S. firms from a pricing standpoint because of the level of competition, and questions whether there is enough work to go around. Wall Street giants like Skadden and Sullivan & Cromwell focus on U.S. capital work on behalf of Australian corporations. Not all U.S. firms are passing on the resource boom in Australia; in August, Squire Sanders opened its first Australian office in Perth, the country's mining capital, and Chicago-based Mayer Brown is said to be discussing a deal with Allens Arthur Robinson (AAR). Two of the country's big six firms--Mallesons Stephen Jaques and Blake Dawson--have already agreed to deals, another--Freehills--is discussing one, AAR has declined to comment, and Clayton Utz and Minter Ellison say they would consider a tie-up. "Not a week goes by that we are not approached by an international firm," says John Weber, chief executive partner of Sydney-based Minter Ellison.
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Next Pension Clash: Law Firms
Wall Street Journal (03/05/12) Smith, Jennifer
At some top U.S. law firms, younger lawyers may be paying for retiring lawyers' deluxe pension plans that may reduce their own earnings for years. Most law firms with large pensions pay benefits as they go, out of current profits. Partners could be entitled to between 20 percent to 30 percent of their peak pay after retirement, and in some cases, for life. This could translate to payments of $400,000 to $600,000 a year per retired lawyer at the most profitable firms. While many firms are phasing out unfunded pension plans, the rest are paying as the corporate legal industry struggles to increase earnings as they are pressured to lower billing rates. Some managing partners say that generous pensions help build loyalty and retention. These plans reflect similar issues in the United States, with benefits becoming reduced or unsustainable with the shaky economy. Law firm consultant Peter Giuliani has estimated that the current pension liability at a typical large New York firm could amount to $200 million if the firm made the total payout at once. While some firms are trimming their plans by reducing benefit amounts or lowering caps to a certain percentage of profits, it can be difficult to remove the practice of unfunded pension plans altogether.
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Revenue Increase May Not be for Everyone in Legal Industry
Pittsburgh Post-Gazette (PA) (03/12/12) Passarella, Gina
Today's market model for legal services has some firms doing things very well at the expense of others, which has some firms looking for ways to increase profitability without expecting to raise revenue. Fox Rothschild has bucked the trend in Pennsylvania by showing revenue increases each year since the recession hit in 2007. Managing partner Mark L. Silow said most of the firm's growth in the last few years has come from expanding its offices outside of the Delaware Valley. Firms can either organically get new clients or grow by laterals -- attorneys already employed by other firms. Silow said his focus is increasingly on growing profits based on the same revenue, not just through general cost control but also through alternative hiring. The firm might look to use more nonpartner-track associates, along with assessing how it can handle matters more efficiently and cost effectively. According to David Gaulin, co-chairman of PricewaterhouseCoopers' law firm services practice, firms must create deeper relationships with their clients that go beyond just providing legal services and include business advisory roles. He said firms also have to better connect with the client.
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