Survival tips for law firms: Discount fees, cuddle up to clients

NEW ORLEANS — So, how will the law firm of the future survive? Here are a few tips: Be willing to discount fees or use "success fees," and embrace other other creative arrangements over large hourly billing rates. Also, step up diversity initiatives and work hard at deepening relationships with clients.

That was the opinion of a panel speaking on the issue of "The Law Firm of the Future — Who Will be the New Winners and New Losers" last week at the DRI conference in New Orleans.

More than 1,200 defense lawyers attended the conference, one of the largest gatherings of lawyers held annually.

While the biggest crowds gathered to hear the headline speakers — former House Speaker Newt Gingrich, Newsweek contributing editor Eleanor Clift and NPR's Juan Williams — the session on law firms of the future drew an estimated 600 lawyers.

The law firms that survive during these trying economic times are the ones that are willing to discount rates, said panelists, which included Bruce MacEwen, a New York-based law firm consultant; Sheryl Willert of Williams Kastner in Seattle; Patricia Diaz Dennis, senior vice president and assistant general counsel of AT&T; and Raymond Williams of DLA Piper's Philadelphia office.

"We are facing pressure on rates," said MacEwen, who said one company fired its law firm after it became public that firm was charging $1,000-an-hour rates.

Other cost-cutting trends he has observed include major law firms training lawyers in India, where labor is cheaper, including Clifford Chance and Baker & McKenzie; Fortune 500 companies appointing task forces to do line-by-line examination of legal bills; and highly-itemized billing.

Diaz Dennis noted that AT&T sent out a letter to all its outside law firms two years ago advising them that their budget had to be cut.

"The ones that stepped up to the plate and offered to share that pain with us are the ones who are still working with us," she said.

Willert said she is increasingly offering clients the option to pay "success fees" — bonuses upon winning a case — instead of straight hourly fees.

Some panelists advocated a return to the days of "retainer" fees, whereby lawyers are paid an upfront retainer for legal advice, as opposed to the current law firm model in which companies are billed for every hour of service and law firms are under pressure to bill.

"Nowadays I'm under pressure to put dollars in my pocket so I'll be an expert on everything," Willert said.

Midsize firms have an advantage over larger firms in pricing and should exploit that, said panel moderator Henry Sneath of the 11-lawyer Picadio Sneath Miller & Norton of Pittsburgh.

"Small firms can promise partner level attention that large firms can't," Sneath said, adding that he refuses, however, to just be "window dressing" as local counsel for a large firm.

Diaz Dennis said AT&T is not adverse to hiring smaller law firms "when we get to know them. They deliver high quality services."

Also continuing to be a key factor to law firms is diversity of outside lawyers. In 2004, Fortune 500 companies such as Wal-Mart Stores Inc. signed a vow promising to increase the diversity of their lawyers and to fire firms that did not meet certain diversity criteria.

Next month, the Minority Corporate Counsel Association will reveal in a long-awaited report on how the companies have fared — and whether they will actually fire poor-performing law firms.

The difficulty is in defining diversity, said Williams. Between age, gender, geography, sexual orientation, disability, race, religion, "we're all diverse," he said.

"If you go into a room and it's all male lawyers, you want to see a female," he said. "If you go into a room and it's all black lawyers, you want to see a white lawyer."

Willert encouraged law firms to also consider law schools when thinking about diversity of applicants, noting that Harvard and Yale aren't the only law schools to produce "excellent" attorneys.

Panelists also were unanimous in recommending that lawyers develop deeper relationships with clients by taking the time to visit them at their offices — without the meter running — to ascertain their needs.

"It will pay off in spades," MacEwen said. "You can't just come into your office and answer the phone in this environment. You have to provide impeccable service."

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