Are Clients Squeezing Big Law into Small Law?

Partners leaving big firms to go out on their own isn’t new, but it seems to be picking up. A growing reason is that clients have become more careful about spending. And lawyers can lower their rates after leaving BigLaw.

Clients have clamored in recent years for reduced rates, fewer associates assigned to cases and alternative billing arrangements.

"Some make a point of objecting to junior associates on the bill," Joshua Stein, a former real estate partner at Latham & Watkins, who left last month to start his own practice, told Slate for a story headlined “Leaving big law behind.”

"In the context of [my practice], those issues won't exist and, so far, what I've seen is that it's appealing to clients."

And in a recent Crain’s New York Business story along the same lines, headlined “Partners flee big law firms to go their own way,” there was this: “Clients no longer feel their day-to-day needs justify paying the $800- or $900-per-hour rates of a partner at a large firm,” says Joseph Gioconda, who left a partnership at DLA Piper last December to found the Gioconda Law Group, an intellectual property boutique that specializes in protecting corporate brands and trademarks.

Giocanda’s new firm gets a third of its income from billable hours, at $450 to $550 per hour, another third from flat-rate fees and a third from contingency arrangements.

In the past. lawyers have left BigLaw to make bigger money, because they can then eat more of what they kill; for pride of ownership in a practice that is more closely their own; for more tailored selection of clients and issues; for less bother with extra duties such as cross-selling for other lawyers in far-flung offices whom they hardly know; and for lifestyle matters.

But now, the external economics—what clients want and demand—might be holding as much or more sway.

Crain’s New York reports that more than half of 231 corporations polled last fall by Hildebrandt International—many of them Fortune 500 companies—negotiated with outside counsel on nonhourly billing arrangements, and nearly two-thirds of the companies said they were implementing a rate freeze on outside legal fees.
This, according to Crain’s, leads to lawyers leaving big firms to open boutiques. The article lists some recent moves in New York City:
• White-collar defense partner Daniel Horwitz, who was co-counsel last year for fraudster Bernard Madoff and defended David Letterman against an extortion attempt by a CBS producer, left Dickstein Shapiro in June to join the 11-lawyer firm Lankler & Carragher.

• Patent attorney John Desmarais, a top partner at Kirkland & Ellis for 15 years, left in June to start his own firm, Desmarais.

• Six partners from LeClairRyan's Securities and Exchange Commission enforcement group bolted, taking 10 lawyers with them, to form specialty boutique Murphy & McGonigle this summer.

• The chair and vice chair of Sonnenschein Nath & Rosenthal's Internet practice, Marc Zwillinger and Christian Genetski, left the firm in February to form boutique Zwillinger Genetski.

• Andrew Sandler, former head of the consumer financial services practice at Skadden Arps Slate Meagher & Flom, left last spring with 14 colleagues to form BuckleySandler.


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