The Firms

December 4, 2009 3:28 PM

Where Do We Go from Here?

Posted by D.M. Levine

The times certainly are a-changin’. LexisNexis legal services hosted a panel discussion Thursday night on the question on every lawyer's mind these days: what will become of the legal industry?

The discussion, entitled "Evolution or Revolution: The Future of the Law Firm Business Model" was moderated by Darryl Cross, vice president of client profitability at LexisNexis and included panelists from various sides of the legal profession.

The debate was part of LexisNexis's release of a survey of legal professionals on the future of the legal services industry. The study found that 71 percent of corporate counsel believe law firms are not doing enough to respond to current financial pressures and that 57 percent of them believe the billable hour will be replaced by alternative billing arrangements. It also found that 52 percent of private practice lawyers believe the recession will permanently change the way law is practiced.

“I don’t think we’ve seen a lot of dramatic forms of innovation of the business model in law firms,” said panelist Michael Walsh, president and CEO for U.S. Legal Markets at LexisNexis. But, Walsh added, “I believe the firms that don’t change their business models are not going to make it.”

Citigroup general counsel Michael Helfer echoed this point. “Both law firms and companies have recognized there’s a mutuality of interest in finding a solution to the problems we have,” he said. “There is a great advantage in having some turmoil right now, because we can actually take the gloves off and say 'How can we fix this thing?’”

So how do they fix this thing? Opinions varied wildly.

“We’ve seen a profoundly more open attitude within corporate law departments to alternative fee arrangements,” said Peter Kalis, chairman and global managing partner at K&L Gates, who estimated that 40 percent of his firm’s revenue now comes from such arrangements. “The client community’s openness to alternative fees, which is increasing daily, is going to cause more law firms to go in that direction.”

Qwest Communications general counsel Richard Baer had a different take. “Alternative fee arrangements have been a colossal train wreck for us,” he said, without expanding on the reasons. The biggest savings are going to come from technological advances like electronic discovery, he said. 

Another concern was the fact that law students often enter the workforce without the concrete skills to serve client needs--a particularly topical subject as firms shed first- and second-year associate positions at an unprecedented rate.

Panelist Thomas Sabatino, former general counsel at Schering-Plough, suggested that students undertake an internship program similar to doctors residency upon graduation from law school. Other panelists disagreed on the feasibility of the idea. “I'm indifferent about whether they learn that at a law firm or in school, as long as I don’t have to pay for it,” Citigroup’s Helfer said.

In the end, no one seemed to agree on anything except that radical change was necessary. “We’re a profession that, over the last hundred years, has not done anything differently and the only industry that is proud of that,” Qwest’s Baer said. “For us not to embrace change and innovation over the next eighteen months, over the next eighteen years, we are all going to fail.”

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