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Sunday, November 11, 2012

Legal Market Woes

Brian Tamanaha

A survey of 182 law firms by Citibank's Law Firm Group produced discouraging findings:
Results from the first nine months of 2012 are in, and it appears increasingly likely that the legal industry will fall short of 2011's low single-digit profit growth.

Not only did third-quarter revenue and demand growth slow from the first half of the year, demand actually posted a slight decline (-0.1 percent) compared to the third quarter of 2011, which marked the beginning of the current prolonged period of soft demand. Although expense growth also slowed during the third quarter of 2012, it continued to outpace revenue growth; in fact, the gap between the two widened, putting a further squeeze on profit margins.
There are additional ominous findings, including a slowdown in collections and deterioration of productivity. Early 2013 looks to be much the same.

Legal educators take note. Law school deans and admissions officers have been telling prospective law students that this is a great time to go to law school because applications are down. One dean who makes this pitch supports it with a note of optimism: "We cannot tell the future. Bad job markets have dramatically improved in the past."

This is the worst market for legal employment in at least four decades--with no sign of a turn-around on the horizon. Under these circumstances, to even suggest the possibility of "dramatic improvement" goes beyond wishful thinking to appeal to unreason.

Comments:

When deciding what business expenses to cut in an economic depression, legal services (especially the high priced big city variety) are near the top of the list.

Half the attorneys in my rural mountain county went out of business since 2008.

I cling to viability by remaining solo and doing everything myself.

Things are only going to get worse with the tidal wave of delayed regulations coming our way over the next four years.

I hope my firm makes it.
 

Calls pointing out that the current legal market is bad are very easy and and the descriptive statistics from NALP point to this year being the same, but I have not seen anyone make a useful model for explaining the legal market, much less predicting its future.

I think it is a disservice to the discussion to point to "signs" that the market will move one direction or another.
 

Pricing matters.

My wife recently had to deal with a wrongful termination suit...quoted rates: $525/hour, which she was able to negotiate down only because during her initial consultation, the partner told her $425/hour.

We eventually went with them, but I had to correct several of their errors in the final settlement offer.
 

I feel for you, fraud guy. My own experience was with a divorce lawyer who, in an uncontested divorce, billed me for the time of the most expensive guy in the firm, who supposedly was photocopying the legal boiler plate at a rate of a page every fifteen minutes.

Too bad he didn't have a secretary, who knew how to use a document feeder; I might not have been financially ruined by the bill.

Cry me a storm about how bad the legal profession has it. I think the nation could scarcely survive the legal profession manufacturing any more jobs for itself.
 

This comment has been removed by the author.
 

I should recommend your blog post about I withdraw my prediction that David Petraeus might well be the next President to my friends.

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