Harvard and Milbank

The push for higher-quality.

2009/2010/2011 BigLaw Class Years: The Gilded Ones?

Look around your law school campus and you will see the carnage left behind by the financial crisis. Classes of 2009/2010/2011 are left jobless and debt ridden. Among the detritus scattered around campus, however, there are the lucky few who have successfully secured gainful employment at some of the nation’s premier firms. It is my belief that these “survivors” of sorts are poised to have the most market (and hence financial) leverage in the medium- and long-term. There are two phenomena that support my assertion: 1) the seemingly unmovable law firm profit model; and 2) demographic destiny.

First, to quote Mark Twain, the reports of the BigLaw model’s death are greatly exaggerated. While some firms have moved away from traditional lock-step compensation systems and have outsourced the more mundane portions of their work, the fundamental premise of their business depends on starting large classes of associates at the bottom of the pyramid and slowly winnowing them out either via voluntary or forced attrition before they reach the top layers. Many of the survivors of this process who end up at the top of this pyramid are compensated with a consecrated slice of the partnership pie. So how does this ancient and seemingly indestructible profit model help the lucky few who landed summer associate positions? Simple. Supply and demand.

These lucky few will ultimately succumb to the same pressures experienced by any other BigLaw class year. Some will leave for government, some for mid-size/small law, and some will just leave the law period. This inevitable thinning of the 2009/2010/2011 class years will create an abnormally small layer in the BigLaw pyramid relative to the size of the firms’ respective partnerships. Ultimately, when the economy turns around (yes, one day it will be better; even the Great Depression came to an end after all), BigLaw will have more work than mid-level associates to do it. The result of this excess work and limited supply of experienced attorneys means that there could very well be a financial war between firms for mid-level attorneys. BigLaw firms will be unable to fill these voids in their ranks with attorneys from small/mid-sized law firms and the government because they will simply not have the requisite experience to do the work.

Second, viewing the future with more of a long-term lens, old partners, particularly baby boomers, have to retire at some point. Whether by “age-out” clauses in partnership agreements or simply by partners deciding that they have hit the end of the line, there is a large generation of law firm partners who will be heading for greener pastures in the next decade or so. The generations immediately behind them, particularly Generation X and the Millennials, are quite a bit smaller than their baby boomer predecessors. Come time for partnership promotions, there might very well be a shortfall in available talent to take up the reins of the firm; particularly, a shortfall in talent around the time the 2009/2010/2011 classes are up for partner. Those who make through the eight to ten years of hoops stand (I think) a much improved chance for partner compared to their boomer and Generation X peers.

So what’s the conclusion? Those in the Classes of 2009/2010/2011 who are/were able to obtain a BigLaw position may have some serious market power behind them in the medium- and long-term. So long as these individuals can wade through the next two to three years of economic waters, they stand an excellent chance to develop a skill set that will be in high demand during the medium term (i.e., during their mid-level years) due to limited supply. Further, any members of these Classes who manage to survive eight to ten years in their firms also stand an excellent chance of making partner due to demographic pressures on the boomers.

Obviously this is all just speculation. Should the overall size of BigLaw shrink my predictions will not hold. However, given the ever increasing levels of regulation coming out of Washington, I believe that there may just be an enormous opportunity for these lucky few.

Big Law, Nevada-style--An Electoral Showdown?

The Nevada desert is a brutal, unforgiving place. It's like 1,000,000 degrees, and there is no shade (save for the REALLY spiny tree/cacti things). And, it looks like it may be heating up real soon: according to the Las Vegas Sun, it is looking likely to be a two-pony race for the Governor's Mansion in 2010, with two of the biggest law firms in the State training the favorites. (Side note: what kind of paper is this? Everything in Vegas should have betting lines attached!)

Open Thread - Law Firm Compensation (Revisited)

Several months ago, we opened a thread putting forth a commenter's proposal for changes to law firm compensation that would help firms "cut costs and still harbor and nurture their talent." While the proposal was most readily criticized for its initial pay-scale ranging between 90 and 135k, a pay cut to that level may be on the horizon--albeit in a considerably different manner than that suggested by our commenter.

As legal consultant Jim Cotterman explains on the Altman Weil blog:

[A]ssociate compensation still appears out of line. The reductions announced so far are about half of what is probably required (i.e. going from $160,000 to $145,000 should probably go much further to $125,000 or even $100,000); thus resetting the wage scale by a decade. This is a painful reality and one that surely will fire up emotions. But the tide has changed; clients are moving quickly and assertively to reduce legal spend. This goes beyond alternative fee arrangements (AFAs). Costs of outside legal bills are going to come down, and from the early signs — down dramatically. Services will be competitively bid, outsourced, off shored, converged, internalized, re-engineered, and even forgone. Now add the AFAs to create greater certainty regarding total cost along with a healthy measure of risk transfer from the client to the law firm. All of this will bring the major line item in any law firm — the cost of people — under assault. This will affect total employment, wage scales and job expectations. The pace of the salary change is directly affected by the pace of change in what clients will pay for legal services.

Thoughts?

How to Restart Your Career in a Down Economy

From time to time, we receive e-mails notifying us of upcoming events. We always appreciate the information and are more than happy to pass along information that may be useful to our readers.

The Association of the Bar of the City of New York has informed of us of one event that sounds particularly intriguing. It, along with Vault.com, will host a day long program called “Getting Back in the Game: How to Restart Your Career in a Down Economy.” The Association explains that this program is “designed to assist job-seeking attorneys in learning how best to market themselves whether they are looking to go to a firm, start their own practice or are considering an alternative legal career.” We understand things aren't pretty our there in the legal world and commend the New York City Bar and Vault.com for putting together what looks to be a stellar event.

Speakers will include Patricia Hynes (President of the New York City Bar), Brian Dalton (Senior Law Editor of Vault.com), David Lat (founding editor of Above The Law), T.J. Duane (Principal of Lateral Link), a hiring partner and recruiting director from major international law firms, and many other notable members of the legal community.

When: Tuesday, June 16, 2009, 9:30 a.m. to 4:30 p.m.

Where: New York City Bar Association, 42 West 44th Street

Check out the Association's website for further information as registration (along with a registration fee) is required.

So, You Were Saying My Idea BigLaw Associates Could Start At 95k Was Absurd??

In light of this article from Law.com, I thought I'd bump one of BBL's first (and finest, IMO) contentious postings: BigLaw Compensation. Have at it BBL visitors-- could BigLaw compensation realistically go to 100k for First Year associates?

The Good Samaritan Effect

In light of our earlier open thread regarding changes in BigLaw compensation, we wanted to highlight a new emerging trend a reader alerted us to.  It appears that a few firms, instead of "[just] hand[ing] out severance package[s]," have given attorneys the option of working in public interest for lower salaries.  

As Stephanie Chen of CNN reports, many associates are jumping at this opportunity.  This seems like a fantastic idea to us.  We commend the initiative taken by firms that have encouraged associates to take on public interest work in any respect.

New York to 190K?

We are pleased to confirm reports that several New York law firms will be raising first year salaries to $190,000 per year. A spokesperson for one of the firms reports “the move is necessary to draw top law students to this expensive city.” We expect, however, that this change in salary will eventually permeate all major legal markets. It’s time for law students nationwide to rejoice. Take out a few more grand in student loans. Buy yourself some expensive clothes. Book an exotic vacation. Times are good!

Unless you’re drinking the (spiked) kool-aid, you know the preceding paragraph was entirely facetious; I apologize for toying with your emotions. The bottom line is this wouldn’t have seemed so far fetched a year or two ago. In fact, such news was even expected within our legal bubble. Try telling a first year today that firms are raising salaries and they’ll have you committed to a mental asylum faster than the next batch of associates are laid off.

Sure enough, while cleaning out my e-mail’s in-box, I came across a message that a friend and fellow law student sent me during my first semester of law school. He wrote, “Just so you know, we’re not doing this for naught,” and then linked to an article. Ah, to be a 1L again...it feels like a lifetime ago. I mean, I really had no recollection of this e-mail at all. And then I clicked the link: surprise, surprise! Optimism abounds! The article matter-of-factly asserts that “the question isn’t so much whether some New York City firms will up the ante again, but when” and explains that “[a]nother round of raises is inevitable.” Perhaps first semester of law school was another lifetime, metaphorically speaking, anyway.

I find it rather humorous (and a bit embarrassing) that the legal community legitimately believed that BigLaw salaries were going to rise to $190,000; that it was, in essence, a fait accompli. The economic recession that our nation is currently steeped in didn’t come out of nowhere. Granted, it wasn’t reasonable to expect a financial collapse of such epic proportions, but the market wasn’t exactly stable either.

What triggered this unrealistic assumption that salaries would rise (and rise, and rise, and rise….)? Perhaps the belief that salaries would increase stems from a sense of entitlement. Maybe the belief was caused by the insurmountable debt of law students. I can’t say for sure one way or another, but I have a hunch. In the sage words of Billy Joel, I—like everyone else in the legal world—“go to extremes.” Maybe it’s part of the law school mentality.

When times are good, the legal community basks in its greatness and expects there to be a never ending pool of wealth. Our unwarranted optimism is surpassed by only Wall Street. But, when things take a turn for the worst, the legal community is also only surpassed by Wall Street with the pessimism and panic that ensues. There just “ain’t no in between.”

So what can we learn from this? I think that, just as the contention that firms would raise salaries to 190K was unnecessarily optimistic, the word on the street that BigLaw is dying is unnecessarily pessimistic. Let’s face it: the legal community doesn’t handle highs and lows very well. Make sure to remember this before making any drastic decisions about your future in the profession.

Open Thread: Student Debt Solutions

It's hard to feel optimistic about our country's economic future these days, and it is increasingly apparent that the legal industry is no more immune to America's new reality than anyone else. With the prospects for high paying legal employment (seemingly) dwindling by the day (see AboveTheLaw if you're in the mood to be depressed), it seems evident we need to come up with innovative solutions for dealing with student loan debt. Most law students, after all, have loan debt in excess of $150,000--the repayment of which will begin only a few short months after graduation. How can those of us who graduate without a job, or are deferred (perhaps perpetually) from our start date reasonably be expected to pay off our debt?

One solution I've come across is the "Cancel Student Loan Debt" movement on Facebook. The group, which has already attracted over 100,000 people, advocates canceling student debt to stimulate the economy:

Forgiving student loan debt would have an IMMEDIATE stimulating effect on the economy. Responsible people who did nothing other than pursue a higher education would have hundreds, if not thousands of extra dollars per month to spend, fueling the economy NOW. Those extra dollars being pumped into the economy would have a multiplying effect, unlike many of the provisions of the new stimulus package. As a result, tax revenues would go up, the credit markets will unfreeze and jobs will be created. Consumer spending accounts for over two thirds of the entire U.S. economy and in recent months, consumer spending has declined at alarming, unprecedented rates. Therefore, it stands to reason that the fastest way to revive our ailing economy is to do something drastic to get consumers to spend.

Several major news outlets have already reported on this interesting idea. But surely there are other plausible solutions that could both improve our economic woes and help students who are, regrettably, bound to face student debt struggles.

I invite our readers to share their solutions...

The Fixation on Prestige

“Are you not ashamed of caring so much for the making of money and for fame and prestige, when you neither think nor care about wisdom and truth and the improvement of your soul?” Socrates

Why do you want to be a lawyer? This was the (predictably obvious) question posed to me at a pre-law seminar as a freshman in college. One student raised her hand and proclaimed that she wished to enter the legal profession because she wanted to change the world. How idealistic! I raised my hand and stood to attention. Confidently, and without thinking twice, I stated that I planned on becoming an attorney because I desired the prestige and the money. From the looks of others in the audience, it was the answer they had in mind too, but were ashamed to admit.

I’d like to think my answer was that of an immature eighteen year old, and, to an extent, it was. I ultimately chose to attend law school because I believed I’d be challenged intellectually and have the opportunity to study interesting issues and concepts. I am no longer eighteen and clearly there’s more to life than prestige.

If I keep telling myself that, maybe I can will myself into believing it?

But while I wish the prestige fixation was a lost vestige of the past, I've come to learn that law student’s prestige-focus is second-to-none (ok, maybe Anne Coulter gives us competition, but still…). As I have addressed earlier, (most) prospective law students desire to attend the most prestigious institution possible. For many, acceptance to the illusive “T14” consumes their existence. Undoubtedly, these students are eagerly anticipating the newest edition of U.S. News and World Report’s graduate school rankings. I can picture it now: incoming first years having panic attacks because the law school at which they deposited drops in the rankings.

It doesn’t end there. The next goal for law students is to place on the most prestigious law journal possible. Following that, of course, is fall recruitment. Law students nationwide compare their offers. For all too many, the most important indicator of a prospective employer’s worthiness is their vault ranking or “selectivity.”

Surely, a law student can relax after he or she has locked up a position at a prominent high-paying law firm. Right? You’ve done it! You’re (finally) a success! Think again. The question turns to what position you have on your respective journal’s editorial staff, and, then, (perhaps) to whether you have a prestigious clerkship lined up for post-graduation. Even those who don’t really want to clerk—who aren’t even interested in clerking at all—may choose to clerk. I guess I can’t blame them: it’s “prestigious” (although, in today's economy, risky). But when does this obsession with prestige end? And what’s the source of the law student’s infatuation with prestige?

I don’t have the answers to these central questions, but I do think that I have finally overcome my own prestige-obsession. This isn’t to say that I won’t continue to slosh through the morass of prestige with my peers. I almost certainly will—but, hopefully, for the right reasons: I’ll do what I do because I believe it will make me the best attorney rather than for its own, intrinsically “prestigious” sake.

Open Thread - Law Firm Compensation

In response to an earlier article, a commenter had an interesting proposal for "Big Law" compensation:

Here's what my proposal to the ABA would be: Find a way to create a mandate of a 90/110/135 scale for each of the V100 firms. After 3 years, the firm and the experienced attorney can negotiate on a personal basis, such that the compensation package would reflect what the attorney actually brings and would bring to the firm. In return, the BigLaw firms would be able to cut costs and still harbor and nurture their talent.

Putting the specific numbers the commenter suggests, which are on the low end, this proposal actually makes a lot of sense as a way for firms to protect their interests while avoiding mass layoffs in this economic climate. And there are other conceivable benefits, too.

Would you be in favor of such a policy? Be sure to specify whether you are a law student, current associate or otherwise.

Decisions Looming for Future 1Ls

Commenters on this blog, as well as others, have expressed their amazement that anybody would choose to attend law school in this economic downturn. Some have gone so far as to say that anybody incurring debt in this economy is a “damned fool”. One thing is for sure: attending law school today is a riskier proposition than ever before.

Even in a stable economy, deciding whether to attend law school is difficult. One cannot possibly choose to subject themselves to three years of rigorous study, and the debt that comes with it, without serious contemplation. It has been two years since I chose to apply, and, although I am as pleased as ever with my choice, it goes without saying that the legal market has been dramatically altered since I sent in my applications.

Unlike others, I don't think anyone who truly wishes to study law should be swayed away from doing so based on the state of the economy. Sure, there is currently much uncertainty in the legal market, but this "uncertainty" pervades almost all professions. Spending the next three years of your life growing intellectually, while building your resume, is definitely not a bad route to take.

The major question, however, shifts to which law school a prospective student should attend. I received contradictory advice while I pondered which school was right for me. Some adamantly told me to attend the highest ranked school possible. Others, with equal vigor, explained that I should ignore the rankings altogether and consider only the schools that provided the most significant scholarships.

Although the prestige-scholarship dichotomy was difficult for those who, like myself, entered law school in a (seemingly) more secure economic environment, the choice looms larger than ever for future 1Ls. Is it more important that they receive their JD from the most prestigious institution possible, no matter how much debt they may incur? As the competition for jobs increases, prospective law students and future attorneys would be wise to get whatever advantage possible. The name of one’s school, unfortunately, may play the decisive role in determining future employment.

However, with the questionable future of the legal market, it may be wise to avoid debt at all costs. Apparently, even Harvard Law students were struggling to lock down a summer associate position this year due to the economy. No matter how prestigious your law school is, future employment in the legal profession is, by no means, a guarantee. Should a law student risk amassing debt when they may be struggling to secure employment after graduation?

I don't propose to have the answer. The fact of the matter is that future law students have difficult decisions to make. The question is no longer whether to get the fillet mignon or lobster as a summer associate—the age of entitlement is, and must be, dead. Thus, the decision for pre-law students about whether to stay out of debt at the expense of prestige is more pressing than ever before. My advice? I say forget the prestige, accept your scholarships, and work hard to prove to employers that you deserve a chance. Don't be afraid of a challenge.

On a "Medical-Based" approach to legal education

We need innovative solutions to some of the emerging problems facing the legal industry.  I sat down and began to think of a way that legal education may be able to adapt and better serve the needs of law firms, other legal employers, and students themselves.  A good model after which the legal educational system could be framed (at least in theory) is the medical school model.  I often sit through class and wonder why theoretical matters are emphasized ad nauseam in various legal courses.  Granted, I think that it is worthwhile to understand (at least to an extent) the underlying policies behind the law; this is particularly true in courses where policy forms the fundamental basis of the rules.  But this only extends to a point, and it must be remembered that, in order to be marketable, students need to understand how to apply the law coherently and logically.

At least plausibly, they get this crucial skill by outlining, reading cases, discussing the gleaned concepts in class, and by simply taking exams.  As it stands now, however, all of this is still done within a paradigm of theory, and there are not many opportunities for law students to, while in the course of their studies, gain practical knowledge--the kind they need to actually thrive in the workplace.  Legal clinics exist, but in most cases, are not mandatory.  And if you've ever tried to get into a clinic, at least at a few schools, you might know just how difficult it is.

A good initial idea would be to keep the first year curriculum much the same as it is now, but to provide different "hands-on" opportunities to apply the concepts learned in class.  For example, students in a civil procedure course could be required to participate in bi-semester externships focused on brief writing.  Further, perhaps the entire third year could be spent in clinical programs that would include rotations between different practice areas so that a student could gain a feel for the area of law he or she is interested in.  Washington & Lee Law School has adopted such a program.  As they state:

The new third year at W&L is entirely based on learning through engagement - combining practicum courses, practice simulations, client interactions, the formation of professional identity and the cultivation of practice skills. Third year students will now move beyond the learning process of the first and second years of law school to prepare for the transition to professional practice.

Students will build on the lessons and law of the first and second year curriculum to pursue a mix of courses that engage them in lawyering, legal clinics and externships. This emphasis on lawyering and expressing professional judgment will serve as a true capstone for a W&L legal education, producing future lawyers that will be ready for practice from day one.

This program would make the third year of law school somewhat tantamount to the residency requirement for physicians, only in the variant described in this post, it would include the ability to rotate.  By producing attorneys who are skilled upon entering the workforce, training would no longer be the employer's sole responsibility.  Hours would be better spent, and clients better served if law schools across the nation were to adopt an approach similar to Washington & Lee's, and provide tomorrow's lawyers with skills they actually need to thrive.

Thoughts?

Will you clerk in this economy?

Between the four or so letters I have received from my law school urging me to clerk after graduation, I have come to understand that clerking for a judge is a great (presumably, pre-firm) opportunity. Clerkships, I am told, are "to lawyers what post graduate fellowships are to doctors." Okay, fine. Like many of my peers, I was interested in clerking before the heavy sell; I was fortunate enough to have a great 1L summer working in a judge's chambers, and I saw firsthand just how valuable the experience is.

But the benefits of clerkships extend beyond the intangible experience everyone raves of. Indeed, as it stands today, most firms pay qualifying one-year clerks a $50,000 bonus along with class standing. While this monetary benefit is not enough to "make up" for the money lost spending a year working for a judge instead of a firm, it is a benefit that many undoubtedly consider when weighing whether to pursue a clerkship or not.

Let me be clear at the outset that I am not aware of any firm that has modified its policies with respect to judicial clerks. However, given the events discussed earlier, it seems conceivable—although, perhaps unlikely—that the market may change the way law firms treat judicial clerks.

There are, of course, compelling reasons for firms to do everything in their power to maintain the status quo. First, as noted, the experience is very valuable. It hones legal writing and reasoning ability immeasurably and thus brings associates to the firm who are better able to contribute. Second, clients love to have former clerks working for them; the positions are competitive, prestigious and former clerks have an "inside knowledge" of the judicial process.

Yet, with firms laying off by the dozen and swelled profits drying up, can anyone comfortably state that clerks will continue to receive BigLaw's "most favored associate" status? Probably not. In fact, it is entirely conceivable that clerking could pose an affirmative disadvantage for students with respect to firm employment: offers can be revoked, bar expenses unpaid…the potentially adverse consequences of choosing to clerk rather than go straight to a firm are plentiful.

I know I will still pursue a clerkship regardless of how the economy shapes the legal market in the next few months, but I am inclined to think that many who would otherwise want to clerk would be driven away by a change in the market. In these uncertain times, it is only natural to anticipate some degree of change in the priorities of ambitious law students.

Am I wrong to assume as much?

Open Thread - Black Thursday

Feel free to comment generally on today's news of massive law firm layoffs.  Thoughts? Apprehensions? Suggestions for the future of the profession?