Thankfully, the tsunami that claimed so many BigLaw casualties in 2009 and 2010 is increasingly a distant memory as the waters of 2011 have remained relatively tranquil. We are certainly not only leaner and more efficient but also more circumspect as we venture further into the heart of 2011, major American and British firms focusing more of their attention outward and exploring opportunities especially in the emerging foreign markets of the so-called BRIC countries – namely Brazil, Russia, India and China. Francis B. Burch, Jr., global chairman of DLA Piper explained: “If you look at where the large multinationals and the most attractive emerging technology companies are generating their revenue and their net income and where they expect to see the most growth, it’s in the BRIC countries.”
But the most captivating drama of first quarter 2011 came from the halls of Howrey, whose exodus of partners everyone except apparently Howrey management itself understood would quickly snowball into the firm’s demise. Indeed, while Howrey spokeman Robert Ruyak assured the captivated public that the departures were merely part of a plan to make Howrey stronger, the emperor’s new clothes did not fool such luminaries as John Quinn, who, soon after Vice Chairman Henry Bunsow took himself along with his reported $20 M. book of business to Dewey, tersely tweeted, “I really doubt [Ruyak’s] explanation.”
Howrey’s struggles notwithstanding, as soon the gates of 2011 sprung open firms began reporting better than expected 2010 financials. Fried Frank, Paul Weiss, Wilmer, Patton Boggs, Akin Gump, MoFo, Patterson Belknap, K&L Gates, Gibson Dunn and Cahill all reported 2010 revenue increases, the latter three posting the best results in terms of gross revenue in their respective histories. Nonetheless, with other major firms posting revenue declines including Shearman & Sterling, White & Case, Cadwalader, Schulte, Dechert, Weil, and Dorsey, clients continued to exercise their leverage by securing alternative fee arrangements which assured savings from the billable hour method – one major survey finding that 29 percent of in-house counsel reported an increase in their use of such arrangements in 2010. American Corporate Counsel Association General Counsel Susan Hackett summed up the alternative-fee phenomenon thus: “My big worry in 2010 was that lawyers would all revert back to their comfort zone after they put a Band-Aid on the wound caused by the recession. But they’ve drunk the Kool-Aid.”
Perhaps coincidentally, BigLaw competitors began breathing easier as reports indicated that for the first time since the onset of the Great Recession, demand for legal services rose during Q4 2010. And maybe equally hopeful to latch onto the positive momentum elsewhere, Howrey’s management declared itself optimistic, insisting that its hemorrhaging was merely part of a conscious design to become more efficient: “Our clients understand what we are doing as most of them have had to do the same thing,” Ruyak wrote. “Downsizing is hard and it is painful… Please remember that our glass is much more than half full. We have excellent clients, first-rate lawyers and staff and we compete successfully in the three practice areas where we focus. None of that has changed. What has changed is our headcount – nothing else. We are simply a smaller, more efficient firm…”
By March 15, Howrey’s decision to dissolve had become common knowledge, most pundits attributing their demise precisely to their failure to diversify beyond those three core practice areas to which Mr. Ruyak referred. In contrast, at about the same time another major survey verified that the U.S. legal sector’s fortunes generally were improving, a total of 60 percent of large firms posting revenue increases in 2010 over 2009 levels and the sector reporting revenue increases in Q1 2011 of over three percent. Legal sector jobs were rebounding as well, 1500 additional people being employed in April 2011 over the same time the previous year and the demand for legal services in the first quarter of 2011 up 2.1 percent over that in Q1 2010.
We respectfully pay homage to the memory of Howrey, who joins other recently departed giants including Heller, Thacher, Thelen, McKee and Wolf in the graveyard of BigLaw.