Lawyers often enter the profession because it's a safe bet, and they're paid handsomely to be risk-averse. But increasingly, Big Law partners like Marc Zwillinger and Christian Genetski—who started their Internet-focused firm in March and have since doubled the client roster—reach the pinnacle of success only to leave it behind.
After a career of being coddled—and drained—by esteemed institutions, these high-achieving lawyers, hardly naturals for entrepreneurship, find themselves choked, financially and otherwise, at the top of the heap. As the Big Law model—in which the nation's largest law firms turn the top law students into billable-hour-crazed associates and, sometimes, partners—evolves to accommodate global entities, companies below the $100 million-revenue level that can't or don't want to pay Big Law rates are being squeezed. And this presents a window for partners, fed up with the Big Law model, to strike out on their own.
The field is rife with upheaval. With firm revenue tight, mergers and restructuring have chipped away at Big Law, leaving the nation's 1.2 million lawyers not only less work but also less autonomy. With recession-weary clients outsourcing to India and onshoring in Ohio the picture is even grimmer. Even the "billable hour," once a stalwart, is looking shaky. Meanwhile, the proliferation of boutiques, alternative models and the dying generic, full-service firm means that Big Law increasingly caters to a niche group, albeit one that generates massive profits: multinationals, stakeholders of major real estate and financial transactions, and corporations defending massive lawsuits that require teams of associates. "As the platforms of large international law firms become more refined, there's less room for everybody," said Peter Zeughauser of the Zeughauser Group, a legal consulting firm.
Partners who ditch overcomplicated Big Law practices for nimble, flexible shops that facilitate simpler client relationships are like other denizens of the little-guy economy. They want more autonomy, less bureaucracy, and a better quality of life. But the shifts also come down to money. Big Law takes about two-thirds of a partner's business; e.g., if a partner brings in $9 million in revenue a year, the firm skims $6 million off the top. Some might call that highway robbery, but a firm is, in certain ways, a team effort. (The idea—and it's an ideal that firms rarely abide by these days—is that the firm will support attorneys if they have lean years.) Revenue pressure is real and has forced firms to raise rates, which irks some partners. Certain clients, already spooked by the size of their legal bills, balk at being billed $1,000 an hour, especially when a partner is redoing the work of an associate who bills at half that rate (or more), but does not offer half the value.
Another reason partners want to move on is that Big Law makes big bucks—up to $1.3 million per year for a sixth-year associate who bills $650 an hour at one firm that shall remain nameless—on the inexperience of young lawyers. "Some make a point of objecting to junior associates on the bill," said Joshua Stein, a former real estate partner at Latham & Watkins who left last month to start his own practice. "In the context of [my practice], those issues won't exist and, so far, what I've seen is that it's appealing to clients."
It's hard for non-lawyers to grasp, but, in many instances, Big Law work does not even provide associates with any tangible skills—and it's hard for partners to bill their clients high fees for less than stellar work. Working on a large case can be a lot like putting together a 3,000-piece puzzle. The first-year associate holds onto one tiny, possibly bent, piece of cardboard that fits in the middle somewhere and the eighth-year associate maybe has a few corners or, if he's lucky, some completed sections. "Firms think they give associates really good training, but you can find yourself an eighth-year associate with no skills," said Jeffrey Ifrah, a former white-collar defense partner at Greenberg Traurig who started his own firm in the fall and has since hired five associates. "I don't want to charge my clients a fortune for associates who don't know anything," he said.
Billing is what ultimately breaks the backs of a lot of partners, pushing them to start their own firms. Zwillinger and Genetski, formerly of Sonnenschein, Nath & Rosenthal and who recently hired former Yahoo associate general counsel Elizabeth Banker, offer flat fees and monthly "all you can eat" retainer fees, with an asterisk—no litigation. Half of their work is done on an hourly basis with caps. They will guarantee that a matter won't go over $20,000, for example, and everyone bills at one rate. "It's like Sarbanes-Oxley. We have no reporting requirements," said Zwillinger, adding that, while his previous firm allowed alternative billing methods, they were measured against what would be generated in a billable hour.
Cash isn't the only reason more partners that attract clients in the $100 million-and-below sweet spot will leave. Being a Big Law partner comes with a host of responsibilities that don't necessarily yield more money, clients, or perks—unless you count camaraderie, commiseration, and, yes, tickets.
Partners are expected to cross-sell clients if there's an issue in a practice area where the partner has no expertise. It can be awkward. A partner might collaborate with a lawyer in the Houston or Miami office that isn't necessarily best suited for the job. Or partners and associates in a group may be so busy that they don't give the inherited client the attention he or she deserves—and the work suffers.
Business conflicts also encourage partners to go out on their own. Firms get so big that conflicts become unmanageable and partners turn down business because it might offend a high-revenue-generating client. "There's a secret chamber of partners that make these decisions that have no basis in logic," said Ifrah. While working on a large securities fraud case in California, he needed to subpoena banks, but the firm considered it adverse to potential future banking clients.
Ultimately, while Big Law is definitely not dead, the increasingly diverse models ensure an end to the days when clocking time as a Big Law partner is the best measure of success in the legal profession. Of course, with the changing definition of the firm, time in that world is changing, too.
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