Jeff Foxworthy has a one liner in which he says that he has learned that diapers that say 5 to 10 pounds on the box really cannot hold much more than that. Dolly Parton jokes about putting her figure in those tight dresses is like putting 10 pounds of mud in a 5 pound bag. All of this humor, however, leaves one to ask just how big can Big Law get? I know the World is big, but come on! Growth for growth sake is not productive and it has serious consequences. I know. Res judicata (Latin for I have been there and done that).
I recently blogged about Big Law mergers in speculating that K & L Gates might be trying to become the Microsoft equivalent of law firms, and Big Law throwing out practice areas because the area is not as profitable as others. It all says to me that there are problems with the structure and concept of Big Law.
Baker & McKenzie is now (or is still) the largest law firm in the United States (and the World) with over 3,246 lawyers (not counting staff). There are a lot of firms that are not far behind. By my count the 10 largest law firms in the United States have over 16,418 lawyers (not counting staff).
Big Law does not represent consumers, generally. It does not represent small business, and often it does not represent medium size business. Big Law represents Big Business. So, Big Law is competing with more lawyers to cover a finite number of clients who can afford to pay the millions and millions of dollars Big Law requires to feed its ever increasing lawyers, staff and landlords.
And, all of this comes at at a time when civil lawsuits are falling in traditional areas. The trend of denying consumers rights to pursue companies has to have an impact. As an example, BusinessWeek reports Carol Butner, then a
partner handling mainly medical malpractice and product liability
defense cases at Fulbright & Jaworski in Houston, recalling how some
younger lawyers at her former Big Law firm cheering when tort reform was passed in Texas. She them had to ask: "Well guys, if nobody's going to
be filing lawsuits, what do you think you're going to be doing?" Butner obviously had to adjust. She is no longer with Fulbright and she now practices intellectual property litigation at McKool
What brings this up is a blog post by More Partner Income in which it covers just how jarring mergers and lateral hires can be on Big Law. As stated in the blog "lateral hires do little to benefit the existing partners in the firm. They create a bigger pie, but when the pie is divided, no one goes home with a bigger piece of that pie." The post also states that unless "a firm reaches a point of equilibrium in its size (something that isn’t easily achieved and doesn’t last), growth is necessary for sustainability."
It is the nature of the beast Big Law has created. You have to move talent into the partnership ranks. This can only be sustained by adding more associates to help support the increasing partner income. More partners and more associates require more staff, require more and larger computer and communication systems, require more office space (class "A" office space, of course), all of which require more and more clients willing to pay more and larger hourly rates. Some hourly fees are already reported to have reached $1,000.00 per hour. This can only be done by ever ballooning the Big Law firms larger and larger. But, when does this balloon pop? Just as the Big Bang Theory suggest as the universe expands rapidly, it will eventually lose momentum and collapse on itself. So too will Big Law firms?
Big Law could seemingly avoid this by going virtual, and outsourcing most of its partners, staff and office space. It could then simply contract with or associate with these talented lawyers and create temporary groups of well paid attorneys to handle particular litigation, contracts, negotiations, arbitration and mediations. The remaining partners would be the rainmakers, the business getters, the solicitors and the team builders. They would get the business, develop the teams, bring the teams together with technology, and manage the contact and output. Advertising agencies and other professions have been doing this well for years.
The point is, however, that Big Law appears to be growing for the sake of growth, based on the fear that it will implode if it does not grow. Like the fat guy that gets his gut out in front of himself, Big Law is running to catch up before it trips. Sometimes it merely stumbles and recovers, but sooner or later Big Law is bound to trip and fall flat on its face.
Undoubtedly, Big Law contributed to Enron, WorldCom, Adelphia, Tyco and others because these companies were feeding Big Law's growth and funding Jones, and they could not tell their Big Business clients what these clients did not want to hear for fear of losing many millions of dollars in income per year. In short, the need for growth and big money causes ethical dilemmas.
I have to fear that the Big Law structure for growth is all wrong. The question is when does the balloon bust? When does the diaper get too full? When does Big Law find out that it cannot put one more pound of mud in the five pound sack?
So, the question is how big can Big Law grow before it loses all hope of managing and funding (shall we say feeding) the giant beast it has created?
(By the way, based upon the prevailing hourly rates, somebody owes me a couple thousand dollars for this post).