The Dirt Lawyer's Blog Archive

This has been one of the top stories at the New York Times website for a few days now. I can give you my opinions, which you can also call a condensed version of the story. Not enough transactional work to keep people busy. Ebb and flow. This happened in the 90s, too, people. Granted these layoffs are bigger, but that's because BigLaw is bigger. Salaries got out of control. I was a beneficiary of this, admittedly. Firms are rolling back these increases a bit and I htink that is a good thing for them. (Don't even get me started about how I think we should close about 2/3 of our law schools.) To pay for everything, billable rates have become insane. Work that is not "bet the company" work going to people like me. Would you rather pay BigLaw rates for a routine deal or pay me a fraction of that for the same work? (I am busy enough to tell you what I think clients are saying.) In some cases, greed. Per partner profits have become -- for better or worse -- the me...

There's a lot going on both in dirt and in my profession. Here's a quick summary of what I have been thinking about and reading: In the "It's about time" department : many law firms are cutting way back on summer associates, retooling the programs from cocktail parties to work and even reevaluating the necessity of them altogether. I actually worked hard as a summer associate, but I wonder aloud whether we should to to an articling/apprenticeship system (a la medical residency) where law grads are low-paid interns at firms for a year before taking the bar -- and if they cannot find an articling position then they cannot take the bar. I always felt the second year law student thing was not a great way of evaluating talent. WTF is going on with GGP stock? Up big yesterday, up again so far today...and the company is acting like Sergeant Schultz . Some harsh but perhaps accurate advice for laid off associates who are not networking and developing business: get o...

I still like this idea , that of good lawyers practicing largely without offices, staff and associates and keeping what they earn. It is largely what I do now, albeit without partners anymore. But Virtual Law Partners has the kind of business model I like. And it is one I might consider down the road myself if they'll have me. (The story also has a bit to say about layoffs, outsourcing and other factors causing turmoil in the legal market.) The WaPo headline notwithstanding, I don't think it is entirely accurate to say that the recession is driving lawyers into this kind of practice. Yes, it allows people like me to cut rates and yet keep more money because of low overhead. In part, yes, it is a function of good lawyers being "fed up with the traditional business model that required it to annually increase rates and billable hours to finance ballooning profits and overhead." Billing rates at many firms are simply out of control. Call it Wal-Mart discounting if...

I know everyone and his or her mother has already commented on the layoffs at many firms yesterday. This is something we haven't seen since the early 90s and even then probably not on this scale. Nonetheless, to close out the week I do have a few comments on the situation. (There is also a good summary here that contains many of these ideas.) The layoffs had to happen not only because of a lack of work but also because of a lack of normal attrition in a down market. Of course, the fact that some law firm managers plan on and expect 25% attrition is entirely another problem. We've let our profession become a business driven by profit and loss. Because of the business model, some move around like nomads either because of it and/or because they know they are almost as fungible as associates. I'm not sure we can close Pandora's Box, but it is food for thought. First year associates are, by and large, overpaid and useless. I know. I used to be one. And now, of co...

That is what the LA Times says it is for lawyers. And it is for some - mortgage fraud, bankruptcy and all that. And perhaps the bailout will create opportunities that lawyers will have to helo their clients wade through. Of course, this is being written as two major California law firms (Thelen and Heller) have dissolved in the last few weeks. Don't tell all the laid off lawyers we're in a boom time. They and support staff are in many cases having a tough go of it. Larry Bodine, citing a Hildebrand International report, agrees . The word is that 2009 will be a tough year for lawyers, not a boom time. More layoffs are expected, profits will be flat or down. And I'll bet a nickel you will see several more major firms dissolve. There''s always opportnuity out there for a good lawyer. And sometimes a downturn in one sector of the business means an uptick in others. But I just don't see this as a boom time.

Above the Law is reporting that Katten Muchin Rosenman and Sonnenschein Nath & Rosenthal are letting go more staff, including associates. While these firms are national now, they are best known as Chicago law firms. This is not the first round at Sonnenschein either, if I recall correctly. I have worked with both of these firms in the past (and interviewed many years ago at SNR). I don't know how many dirt lawyers were impacted, but both shops are well known for having first-rate real estate practices. If you are a young lawyer reading this (and I know a good number of you do), take heed. Without portable business, you are a fungible billing unit at BigLaw. And I don't mean that as a slam on Katten or Sonnenschein, either. That's the business model of law firms in 2008. It is much more that way than it was in 1993. And at least firms are not calling these layoffs "performance-based" like they did in the early 1990s. What is the lesson? Well, you ...

The ABA released a report yesterday stating that legal malpractice claims for the period 2004-2007 are up four percentage points compared to the period 2000-2003. I haven't read the survey, but I found this quote troublesome and perhaps just wrong: As real estate values have fallen across the country, more individuals and businesses are suing their lawyers for bad results, according to panelists who discussed the findings of the 2004-2007 claims study during the conference’s opening plenary. I don't get it. Of those years, only 2007 was really down. 2004 and 2005 were gangbuster crazy. And that's why I think you see the uptick in claims. Here's the rationale. SO many deals were being done that for many it was impossible to keep up. So you cut corners. And those lawyers (and title companies) who did paid or are paying the price in litigation. Here's more: According to panelists, claims resulting from alleged errors in real estate transactions range from confli...

A lawyer on a listserv I subscribe to asked a good question today that I had to answer: what happens if a contract contingency is not met? The buyer is refusing to close and the seller wants to take the earnest money. The answer? Of course, it depends. But you knew that. This is where good lawyering comes in. If you are the buyer, of course you want every chance to try to have wiggle room. But if you are the seller, you want to craft any contract contingencies as tightly as you can to curtail the buyer's ability to walk. Notices, efforts, deadlines...there are a lot of ways to do it. If you don't do this as a lawyer, then you could be allowing your buyer a rather lengthy free look at property with an easy out. Let me give one concrete example: let's say you have a financing contingency in the contract. How do you draft the timing of the contingency? If the buyer fails to give notice, does the contract terminate automatically or is the contingency automatically wai...

Dear Law.com: Tell me something I don't know . The "scoop?" National law firms have rushed into Chicago during the past decade, especially in the past three years, but many are finding now that their collective arrival is fueling intense competition to fill those offices with lawyers. I'd like to chalk it up to that old line from Meredith Willson's The Music Man : "But he doesn't know the territory!" Maybe so. But there's more. Everyone and their mother seems to have decided to open a Chicago office, either by starting fresh with a few partners, by poaching from another firm, or by acquiring another firm. But, except for the larger players, then they cannot seem to grow it with lateral partners. Some of it is just plain loyalty to an existing firm rather than jumping to a perceived greener pasture. Sometimes you have good talent but a lack of a book necessary for BigLaw. To be perfectly honest, I am in that category. I neither have nor, mo...

So Lehman filed but is now back at the table with Barclay's to sell significant assets to them, AIG might be next (a trillion dollars? ), the Fed meets today and may lower rates (100 bps = panic city?) and the market's in the tank. Oil prices? Down. What's up? The yen and the Euro. REITs also took it on the chin . GGP is especially being hit heavy. I've written before that GGP's not going anywhere, but in this market all bets are off. My ex-partner, an ex-Wall Streeter, told me it was "absolutely inconceivable" that Lehman would go bust. Simon, according to David Bodamer, might be being beaten up unfairly. The word on the street seems to be: perception trumps reality. Hank Greenberg on CNBC tells us that "it is in our national interest that AIG survive" and that it is a "national treasure." This is an open plea to the Fed to save it because he says the problem is only one of liquidity. He then tells us that an AIG bankrupt...

As a now solo practitioner, I am sometimes asked how I can handle complex real estate transactions by myself. The answer? The same way I did at BigLaw . It is easy! I was therefore happy to see this story about large and small firm "partnerships" for certain matters. I do wish they'd taken the next step, though. Sometimes large firms refer matters to me because I can handle price-pressured matters at a more reasonable cost while also maintaining high quality. I can do it because of low overhead. And when my clients have huge deals needing a large staff, I send it to some great shops where I have relationships. Other times firms refer work to me because they don't handle commercial real estate. So I am their guy, so to speak. Out of state? I've got that covered with a network of local counsel that I've developed over 15 years in the business. Non-transactional matters? No problem. I don't litigate, but I have friends who do, and I cannot tell you how m...

My partner resigned from our law firm Tuesday. It was the right thing for him to do and I am delighted for him, as he had an opportunity he simply could not pass up. Frank is a tremendous lawyer and person and I will miss working with him very much. While I am a bit overwhelmed about possibly becoming a solo practitioner, in an odd sense, I'm also somewhat relieved, and I'm not sure why. Unfortunately, no time is a good time for this, and that's not anyone's fault. I'm not exactly sure what I am going to do right now. I have several options that I need to weigh, and I'll keep you posted. But I promise I'll go back to writing about issues that you care about rather than my personal and my business life. After all, that's why you came here. If, however, you have thoughts or suggestions I'm always open to them.

Seen quotes like this lately? The lawyers of America have laid their heads together and drawn up a lot of proposed reforms--for other people. The unpleasant truth is that the American public feel that no class needs reforming more than lawyers, particularly many of the shining lights of the profession. The man in the street is disgusted with both the lawyers and the courts. Looks familiar, no? It comes from the September 15 issue of Forbes -- in 1923 , that is. I guess complaining about lawyers is timeless. Some of the biggest complaints come from major corporations, who pay huge bills to BigLaw to support seven-figure partner draws and $165k starting salaries. And yes, they pay to train the young-uns as a rule. The Association of Corporate Counsel claims it has a solution (via Portfolio ) that it will roll out next month, which appears to have much to do with sharing billable rates at law firms used as outside counsel. And other smart people (in this case, Larry Bodine ) are rep...

See here and here in the WSJ for more on the Cadwalader layoffs. I guess this is what happens when a law firm is run like a corporation and not a partnership. The telling comment to me is this: The firm chased commercial mortgaged-back securities work when the practice was hot, adding a fleet of young lawyers to its structured-finance and real-estate practices to meet demand. Now, with that spigot turned off, one could argue that the firm is simply behaving rationally, cutting its unnecessary overhead. "There was a bubble, we rode that bubble, it contracted, and we adjusted," says W. Christopher White, the firm's chairman. "Even knowing what I know now, I wouldn't have changed a thing." I admire White for his brutal honesty and cojones . Young lawyers better realize that this is not the profession I entered into fifteen years ago, for better or worse. (Worse, in my opinion.) Will the firm go away? Beats me. Some say it is a matter of time but I dis...

This story may give you a clue. Some California real estate lawyers, especially on the residential development side, are not fully utilized, so they are using the time to work on restructurings, risk management and other related projects. The major California dirt boutiques mentioned in the story (interestingly filed under "small firms"...LOL) all say they are doing all right, and that while they may take some flat revenues or per partner profit hits, there are no plans to pull a Cadwalader. Heck, Allen Matkins is even larger by 15 lawyers! As I have said before, this is a smart strategy. In the 1990s there was a dearth of junior real estate talent because no one joined the field for several years running. By maintaining numbers and not going nuts with growth and layoffs, there's more stability. In short, these firms learned what some firms (you know who they are!) did not learn in the last layoff debacle or two.

Apparently another 96 lawyers are being let go at Cadwalader today, meaning the total loss count this year is, if I can count, in excess of 130 people. CWT is well known as one the major, major players in the CMBS market. I've worked with all three of their US offices (NY, DC and Charlotte), usually on the same deal. For whatever reason, CWT had this thing about running deals from multiple offices when I was borrower's counsel. While I found the CWT people professional and thorough almost to a fault, my clients were sometimes unhappy, especially when the lender's counsel's bill (which the borrower pays) came out. We used to try to predict the amount as a little game. At least one client, as I recall, was so irked that it resolved to ask their lenders in the future to find other, more cost-effective firms to run the deals. And in the climate that was a few years back the lenders usually complied, moving the legal work to other firms -- sometimes outside New York --...

I got a kick out of this story on lawyer frustration and how to strive to be "above average." Apparently, lawyers are part of an " unintended byproduct of a profession that confines its lawyers to prisons of bureaucracy, internal politics, dysfunctional interpersonal relationships, inefficient systems and ineffective leadership. It is heartbreaking to see people who expect so much from themselves and others toiling in environments that perpetuate underachievement." I'm lucky. Even when I was in a big firm I didn't have too much of that, and now I am free to be as good as I want to be. David Freeman makes some excellent points, the best of which is to Demand a maniacal focus on the client. I've been doing that as long as I can remember, so this is no big deal for me. It is nice to see it reinforced from time to time though. Sometimes it is hard to get over the fact that it isn't about you, it is about the client. Your success is often in tande...

An interesting (possible) incongruity I am finding: Half of GCs surveyed are planning to do more work in house and cut back on law firm usage (one big reason -- the cost of hiring BigLaw firms to do less than bet-the-company work). Yet, notwithstanding this, smaller firms that could perhaps compete on this front are still merging into BigLaw. On the heels of Welsh & Katz (a fine IP firm) announcing its merger with Husch Blackwell Sanders (itself a recent merger!), now we have the first-rate mid-sized Schwartz Cooper dissolving , with almost all of its lawyers moving to Detroit-based Dykema. In turn, Dykema got its start in Chicago in 2004 by merging with Rooks Pitts, also a well-known mid-sized firm. So, is this economies of scale? A fear that you have to grow to compete? How will clients react? Schwartz Cooper was well-known for its work for LaSalle Bank (now B of A); did that play into it as well? I'm going to have to make a phone call or two. One last thought: just a...

Super-blogger Susan Carter Liebel had a good post yesterday about solo practitioners and small law firms winning not on price but on value provided to their clients. She cites a story from The Complete Lawyer by Marcie Shunk captioned " Welcome to the Age of the Smaller Firm ." The thesis of this article? Small law firms are the real wave of the future. That's all fine and dandy, until you read on. Susan's post is spot on, as is the general concept of the Shunk post, but I do have to take some definitional exception to the term "small firm." It seems to me that, according to this story, anything outside the AmLaw 200 is considered a small firm. Huh? These are all super firms that are mentioned here. But I would not call them small by any means. Oppenmheimer, Wolff & Donnelly has 107 lawyers by my count. Keesal Young? 70. Bartlit Beck? 65. Jones Walker? Around 230! There are plenty of real small firm lawyers that are doing first-rate work....

Someone near and dear to me asked me to draft an office lease for some property that person owns. I received a hand written, one page term sheet with a base rent figure. What freaked me out until I read it more carefully was the treatment of gross and net items in the lease. Those of you in the know (probably all of you if you are bothering to read this far) are aware of leases such as bond leases, net or triple net leases, gross leases, modified gross or plus-E leases, and the like. (You can find what I think is a good recent summary written by Michael Mandel here . New York is a whole ballgame of its own sometimes, especially dealing with the form Manhattan leases with their crazy long riders.) All I was reminded of was this: you cannot just draft blindly and assume every deal is the same. And the terms I mentioned above, while very, very helpful, are not always precise. (It reminds me of my first plus-E lease in Texas.) For instance, I am drafting a so-called "gross...