Litigation Will Lead the Legal Profession Out of the Recession in 2009

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By Larry Bodine, Esq., a business development advisor based in Glen Ellyn, IL, and Tucson, AZ. With the Apollo Business Development Program, he has helped law firms nationwide get new clients and generate millions of dollars of new revenue. He can be reached at 630.942.0977 and www.larrybodine.com.

Two research reports confirm that litigation will be the area of practice that leads the legal profession out of the recession.

A copy of the "BTI Premium Practices Forecast, Survey of Corporate Legal Spending 2009" can be purchased at http://tinyurl.com/5jdq2a

• The BTI Consulting Group of Boston reached this conclusion in its "BTI Premium Practices Forecast, Survey of Corporate Legal Spending 2009" stating, “Litigation stands alone as the sole practice area positioned for a net increase in client spending. 40.4% of clients expect to boost litigation dollars in 2009. This showing bodes well for law firms, given that corporate counsel historically underestimate spending surges in litigation.” 
• Smock Sterling management consultants of Chicago state, “A litigation boom is widely forecast” in their new monograph “We Are Optimists – We See the Cup at Least Half Full.” 

The recession has rocked the legal profession hard, leading to gloomy reports like Law.com’s “The Layoff List” which as of January 19, 2009 listed 55 major law firms that had shed staff, associates and partners.  Two firms completely vanished – Thelen Reid, a 400-lawyer firm dissolved on December 1, 2008; and Heller Ehrman, a 650-lawyer firm shut down on September 26, 2008.

Smock Sterling’s view

“We wish all our clients and friends the best of luck and fortune in dealing with these difficult times. Remember, that glass is at least half full.”

“In its recent 2008 litigation supplement, The American Lawyer identified at least eight litigation sub-specialties likely to grow substantially in the context of the current market environment.” They included, among others:

• Bankruptcy litigation
• Antitrust litigation
• Securities litigation
• Labor and employment disputes
• Intellectual property litigation

“Smock Sterling is currently undertaking a large scale research project on the future of litigation on behalf of a major defense bar professional association. While the details of that research will be communicated by our client, we can confirm the findings of The American Lawyer litigation supplement. Virtually every lawyer, judge and industry expert we have interviewed anticipates significant growth in litigation over the next few years – in the face of the economic downturn.”

“As is the case relative to the economic downturn, many clients and friends have told us that they believe the election of Barack Obama will be good for litigators. Some anticipate increases in corporate investigations and white collar prosecutions. Others anticipate more litigation around employment law, antitrust disputes, and the other areas noted above. Some simply consider the Democrats to be sympathetic to the plaintiff’s bar – and believe that will lead to a fresh round of product liability and tort cases.”

BTI Consulting’s findings

Litigation, a marquee practice for many law firms, delivers the highest growth prospects for 2009, according to BTI’s report. Outpacing the overall market growth rate by nearly three times, BTI projects litigation to grow by 5.4% in the upcoming year -- modest, yet higher than other practice areas.

Litigation accounts for nearly 25% of the outside counsel legal market:

• It is the single largest market segment for outside counsel services.
• It captures more than 2 ½ times the spending dollars of any other practice area.

The litigation market includes serial and routine matters and is particularly driven by product liability, antitrust, commercial and employee-related issues, according to BTI.

• Clients cite resolving their litigation dockets as a top goal in 2009 driving high growth.
• Although matters may appear to span multiple practices (employment, environmental, etc.), dollars stem from one dedicated litigation budget.

Within litigation the highest growth, premium fee practices are IP litigation, class actions and bet-the-company cases.

• 30.3% of legal budgets are earmarked for litigation – this is nearly 2.5 times the size of the next largest budget area.
• 40.4% of clients intend to increase Litigation budgets in 2009. Driving industries include:
  • Pharmaceuticals
  • Manufacturing
  • Energy

BTI expects increased demands in litigation to present opportunities for law firms from lead counsel to local representation.

Strategies to drive success in litigation

According to BTI Consulting, savvy law firms position themselves to take advantage of growth opportunities in litigation by:

• Providing proactive assessments of when to settle -- 85.4% of large corporate legal departments conduct early case assessments.  Law firms should volunteer time (or try offering a fixed fee) to get involved in this process to maximize value and your chances of winning the work.
• Reviewing and analyzing how companies set their litigation reserve -- there is no better way to become familiar with a client's entire litigation portfolio.  Law firms should offer ideas and solutions for how to prevent similar cases for an added boost to value ratings.
• Engaging in discussions about alternative fee arrangements. Litigation has nearly three times more matters transacted under alternative fees than any other practice area.
• Assisting legal teams in setting procedures and protocols for document retention and e-discovery -- assign an e-discovery expert to work with clients. Law firms should bring in technology expertise to ease conversations with your clients' internal IT department.  Document retention is one of the four  top priorities shared by corporate counsel
• Providing accurate, reliable budgets and periodic updates of how actual billings stack up -- keeping clients in the loop will help prevent unexpected surprises -- and get you paid more quickly.

Other do’s and don’ts

Smock Sterling offered their own set of tips for the recession:

• Do not fire all the marketing and business development people – if they are good, they will help shore up the revenue side and, if they are not good, they should be replaced.
• Do continue to plan strategically and execute the agreed upon strategic plan at the firm, practice and individual level – avoid a panicked rush to put everything on hold.
• Do develop and offer alternative fee structures that meet clients’ needs and fit your firm’s economics (n.b., a “discount” is not an alternative fee approach).