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September 23, 2009 12:06 PM

Leaving the Big Firm and Lowering Rates: Is Success Really So Simple?

Posted by Zach Lowe

Big-firm partners dreaming of going out on their own might wonder if starting a successful firm is really as simple as charging clients lower rates. That seems to be the winning formula for three former Irell & Manella partners who left the firm in May to set up their own boutique along with six associates, according to this story in the The National Law Journal, an Am Law Daily sibling publication.

The partners--Richard Kendall, Laura Brill, and Robert Klieger--started Kendall Brill & Klieger partly because many of their clients at Irell were growing frustrated with the firm's high billing rates, the NLJ reports. So the three partners left and made a commitment to offering lower rates and more alternative fee arrangements to their Hollywood studio and media clients. 

The response? Every one of their major clients came with them, plus some new ones they picked up on their own, including MGM Studios, Electronic Arts and Best Buy. 

The general counsel at CBS Television explains his decision to move business from Irell to the new boutique this way: "We hire lawyers, not law firms. [Kendall's] ability to work within a different rate structure I think bodes well for additional matters coming his way." 

Other general counsel the NLJ interviewed expressed relief at being able to contact associates working on their cases more easily because there are only six associates at the new boutique and all of them are deeply involved in client matters. 

Will more partners at large law firms take the same leap of faith? Perhaps the Irell trio provides some inspiration. 

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More partners have and more partners will. Whether small firms like Kendall Brill are being created or partners are leaving Am Law 50 firms for smaller, lower-rate firms, this trend has been there for years. It just happens that today's economy has intensified the downward pressure that major clients are putting on rates. Thus, this type of partner defection has become much more frequent and visible.

This shows that lowering fees is a much simpler way to attract clients than trying to come up with exotic as alternative fee agreements which in reality are all about increasing lawyer income. I wonder if any of the $1,000 an hour law firms and the ACC will ever figure this one out.

As a General Counsel, these spin off firms with lower rates and alternative billing are what I look for. Paying exorbitant rates for endless hours billed by junior associates makes no sense. Nor does it make sense to pay a premium to a megafirm to cover the costs of its expensive office space and unproductive "prestige" branches.

We had similar results when we left our firms. Clients remained with us, and realized the benefits of dealing with the same attorneys at a smaller firm, with lower overhead, and more attention. At the same time, we have found that new clients, or rather potential clients, are more reluctant to retain a smaller firm, apparently clinging to the view that the bigger firm is "safer." It takes a bit of work to convince them otherwise.

The trend is not confined to US or UK, even in India partners or Sr. Associates have started using their personal connection with the firm's clients and setting up a separate practice to cater them.

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