It is hard to imagine a better line of work than being an attorney at a corporate law firm in the years leading up to the early 2000s. Yes, the demands of the job were high, but so were its rewards. Firms could expect to be paid handsomely for their efforts, and there was little fear that the pipeline of work would run dry.
The Great Recession impacted nearly every industry in the U.S., but the legal profession took particularly heavy blows. Bankruptcies, partner defections, and wholesale restructurings of age-old firms vastly altered the legal profession as compared to the landscape attorneys knew a decade ago.
During the past decade, as many as a dozen major firms with more than 1,000 partners between them collapsed entirely due to market pressures and financial miscues, according to various reports. Among them was Dewey & LeBoeuf, a global corporate law firm that was the product of a 2007 merger between two storied New York firms, each a century old. When Dewey & LeBoeuf filed for bankruptcy in 2012, it was the largest failure of a law firm in U.S. history.
“1975 to 2005 was the golden age of the American law firm,” says J.B. Ruhl, David Daniels Allen Distinguished Professor of Law at Vanderbilt.
He should know. Before entering academia Ruhl was a partner in the Austin, Texas, office of Fulbright & Jaworksi, one of the largest law firms in the U.S., during the 1980s and ’90s. He recalls an “endless supply of work” in those years. Between the booming economy and the opaque nature of legal expenses, legal spending drew less scrutiny than other items in corporate budgets.
“Law firms rarely got pushback on billable rates or cost,” Ruhl says.
But that all came to an unceremonious end with the financial crisis seven years ago. The warning signs began appearing before that, but it took the economic downturn of 2008 to bring them into sharp, startling focus.
“To a certain extent, there used to be this magical quality to law,” says Chris Guthrie, dean of Vanderbilt Law School and John Wade–Kent Syverud Professor of Law. “There were these licensed professionals with a set of knowledge and skills that nonlawyers didn’t really understand. But during the past few years, there’s been a demystification in some sense.”
Ruhl adds, “Some commentators call this the ‘new normal.’ I call it the ‘post-normal.’ We don’t know what the new normal is yet for law firms, but we know there’s no going back to how it was.”
‘MORE BUSINESS THAN LAW’
For those firms that survived the Great Recession, the outlook has been worrisome ever since. American Lawyer, which tracks data at the biggest law firms, found that annual business spending on legal services rose from $159.4 billion in 2004 to $168.7 billion in 2013. While that may sound positive, the numbers are deceiving. When adjusted for inflation over the same period, 2013 revenue was $118.3 billion, marking a decline of more than 25 percent.
In short, corporations have had no choice but to make their legal spending more strategic, slashing expenses where possible. As Ruhl puts it, “2008 forced the corporate general counsel to behave like the rest of the C-suite.”
As a result, today’s general counsels are less concerned with obtaining legal results at all costs and more with providing value for their companies. “For every bill I look at every single month, for every single vendor, the question is, does this reflect the value I received?” says Julie Ortmeier, JD’98, vice president, general counsel and secretary for Carfax, a Web-based company that provides vehicle history reports. “The billable hours don’t indicate value at all. The firm that I hire really needs to help me reach a business result, and that business result is not 1,000 hours.”
The increased focus on value has many companies looking to keep more legal work in-house, where it’s easier to control costs. Ortmeier says it is “really easy to justify hiring an in-house attorney” when outside firms tend to charge several hundred dollars an hour. Further, beyond the dollars and cents, “you tend to get a better work product at the end of the day because the in-house attorney knows the client better.” When companies do hire outside counsel, they tend to look for national or global experts in a particular area.
This shift within the industry has substantially changed the traditional career path for young attorneys at law firms. Typically, seven to 10 years into their careers, attorneys are either promoted to partner or, if not, they are usually expected to look for work elsewhere. In the years before 2008, the path to making partner was clearly marked: Young lawyers “could show up, do high-quality legal work, put in the hours, and make equity partner,” Ruhl says.
But that’s no longer the case. Succeeding at a law firm today is more about forging an entrepreneurial, business-oriented path than simply executing good legal work, says Andy Bayman, JD’89, a partner at King & Spalding, an Atlanta-based firm founded 130 years ago.
He explains that increasing pressure is on younger lawyers not only to provide good service for the firm’s clients, but also to bring new clients in the door, a responsibility that formerly had been borne by the partners.
“Many people lament that lawyering today is more business than law,” Bayman says, “but it is what it is. If you want to survive, you have to adapt to it.”
‘EXPLOSION OF STARTUPS’
Traditional players in the legal industry continue to face significant challenges in adapting to the new terrain. But at the same time, the shifting landscape has created substantial opportunities for new kinds of players—especially those with a technology focus.
Companies in need of legal services increasingly are turning to technology to help keep their costs down. The clearest example is in document review. In the early stages of litigation or a transaction, an enormous number of documents often needs to be reviewed to glean relevant information. In years past, young associates cut their teeth on these document review projects, physically traveling to a warehouse and reviewing boxes full of documents by hand.
Early “e-discovery” platforms revolutionized this process by allowing documents to be scanned and stored electronically for remote review by attorneys. Subsequent iterations of these platforms included sophisticated search features, making wading through reams of documents much quicker and less expensive. Today many e-discovery vendors have moved from just offering a platform to actually doing the document review themselves, hiring teams of staff attorneys and offering companies a turnkey document-review service at rates that often are much lower than those of law firm associates.
But now, Guthrie says, “There has been this explosion of startups, niche players, e-discovery shops, consulting firms and the like that aren’t technically ‘practicing law,’ but are engaged in support behaviors that limit the need for the practice of the law.” He notes these startups are benefiting from significant investments, often by Silicon Valley venture capitalists.
Guthrie has watched this trend unfold during the past decade. “It used to be the case that law was a pretty insular industry,” he says. “There was not a lot around it that was competing directly.”
A 2012 report published by Transparency Market Research reflects the explosive growth in the litigation support market, both in the U.S. and globally. The U.S. e-discovery market was valued at about $3 billion in 2010 and is expected to more than double to $7.2 billion by 2017.
Undeniably, e-discovery vendors have become a major player in the legal industry, says Marc Jenkins, JD’03, associate general counsel and executive vice president of knowledge strategy at Cicayda, an e-discovery and litigation support company in Nashville. Jenkins has seen disruptive legal technology from all angles: Years ago, while practicing at a boutique law firm, one of his major clients purchased a contract management system that eliminated the need for contract administration tasks—about half the work Jenkins did for the client.
While many lawyers would view this as a setback, Jenkins used the experience as an opportunity to adapt. He dove headfirst into the world of legal technology, became an expert in how technology can aid both providers and consumers of legal services, and ultimately joined Cicayda, which provides technological services and applications to streamline work for legal professionals.
‘FIRST INNING OF CHANGE’
Daniel Reed, JD’94, is another Vanderbilt alumnus who has built a successful career at the intersection of law and technology. Reed is CEO of UnitedLex, a global consulting and legal services firm that offers comprehensive technological solutions for law firms, corporations and law schools.
Reed believes the technological revolution in law is only just beginning. “If this is a baseball game,” he says, “we are probably still in the first inning of change.”
In addition to its more than 100 software developers who design custom applications for clients, UnitedLex employs more than 2,000 attorneys to provide services like patent prosecution, contract support (from negotiation to monitoring performance), document review, data management and cybersecurity risk management.
Jenkins feels likewise. He predicts two more big developments will arrive in the near future: first, a variety of TurboTax-style interactive computer software to handle repetitive, routine legal issues, such as the drafting of wills, in different areas of law currently underserved by the legal industry and, second, data analysis tools that can aggregate and summarize litigation information in much the same way a lawyer would, but at a much lower cost.
Jenkins stresses, however, that the future he predicts is not free of lawyers. Rather, it’s one in which the role of lawyers will be augmented to include an understanding of the systems that can aid their work.
While technological advances in the legal industry have been, and will continue to be, disruptive, they are not without their benefits. Dean Guthrie observes that ordinary citizens are “potentially going to have an opportunity to get meaningful legal services in a much more reasonably priced way.”
For example, he says, “It’s very daunting for an ordinary middle-class person to think about going to a lawyer and having the end-of-life documents drafted that we all should have.” Services like LegalZoom now make that as easy as filing an electronic tax return.
Jenkins and Ruhl both point out that this increase in the accessibility of legal services is a tremendous business opportunity for entrepreneurial lawyers. Because “the vast majority of people with a legal problem in this country do not hire a lawyer,” Jenkins explains, there are “huge untapped markets” for legal services.
‘A REAL RESPONSE TO THE MARKET’
Although the profession is going through undeniable changes, Guthrie stresses that a Vanderbilt legal education remains a good investment. “Thinking, problem solving and process skills are still just as relevant in today’s legal marketplace as they were in the past—and will remain so in the future,” he says. “With that said, we’ve undertaken some creative initiatives to equip our students with additional skills to help them succeed after graduation.”
The Program on Law and Innovation, directed by Ruhl, is a cluster of coursework designed to prepare students for particular opportunities in today’s market. Currently, four core courses are part of the program: e-discovery, legal project management, law and technology, and legal futurism, also known as “Law 2050.”
The Law and Technology course, taught by Jenkins, provides students with a unique opportunity to create their own legal technology. Groups of students are paired with Nashville-area nonprofits, and together they work to identify a basic, recurring legal issue facing the organizations. The students then devise a decision-tree–based legal application to help the nonprofit address that issue. The idea, Jenkins says, is to teach students “not just to think like a lawyer, but to think like an engineer and an entrepreneur.”
Ruhl teaches Law 2050, which challenges students to anticipate future technological and business developments and predict how the legal system will respond to them. Bayman, who has served as a panelist for Law 2050, describes the Law and Innovation program as “a real response to what is going on in the market” unlike anything he’s seen elsewhere.
In addition to the Law and Innovation program, the law school has partnered with Reed’s UnitedLex to launch a legal residency program for select graduates. The innovative two-year program will provide participating graduates with full-time employment and extensive on-the-job training. The program also has the potential to generate revenue for Vanderbilt Law School to support student scholarships and services.
“The most exciting time to be in any area is when disruption is occurring,” Reed says. “It is a huge opportunity. But you have to be willing to go out and grab it.”
Vanderbilt Law is on the forefront, preparing its students to do just that.