2009 – A Year of Opportunity for Contract Attorneys

On February 2, 2009, two leading advisors to top law firms, Hildebrandt International and Citi Private Bank, released a client advisory opinion (“Advisory Opinion”), predictably predicting more economic struggles for large firms in 2009. However, the Advisory Opinion also states that there will be certain practice areas that will increase in activity in the coming year. Although this is good news for attorneys in general, it is particularly good news for contract attorneys. As that opinion advises, law firms should use the economic downturn as an opportunity to change their business model in several ways, including hiring more contract attorneys to handle increased work flow. This may provide contract attorneys with more work and opportunity than they have had in the past few decades.

Although the economic downturn has caused less demand for legal services by law firm’s corporate clients, the Advisory Opinion predicts an increase in activity in certain practice areas throughout 2009 and 2010. First, there will most likely be a growth in litigation as a result of the current financial crisis. There also should be an increase in mergers and acquisition activity as strong, financially sound corporations acquire their weaker competitors. The American Recovery and Reinvestment Act and the predicted changes in the regulation of the US capital markets should bring additional, significant legal work. Naturally, more bankruptcy work is emerging as a result of the economic downturn. Experts believe that when economic recovery finally begins, it will be led by the legal market because legal work is a necessary first step for most significant commercial activity. 

The predicted increase in activity may provide opportunity for contract attorneys if law firms decide to follow the advice of the Advisory Opinion and that of others in the legal market, by changing their current business model. Many firms have a high headcount paired with a low demand for services, causing smaller law firm profits. A firm may counteract this trend by changing its business model, to ensure that their population is in line with client demand. In order to achieve this goal, the Advisory Opinion, in part, suggests that law firms move away from lockstep compensation and increase incentives for associate performance; terminate attorneys that underperform, including partners; and hire more contract attorneys to assist in the work created by an increase in activity in the previously-mentioned practice areas. 

When the practice of hiring contract attorneys first emerged, they were typically hired by law firms for specific projects that were substantive in nature. At Special Counsel, we call these  “knowledge worker” placements. The remainder of the firm’s legal work was handled by its partners and associates and included document review and due diligence projects. In time, corporate clients were less willing to pay associate rates for such review projects. As a result, the numbers of contract attorneys hired for these projects rose dramatically, eventually surpassing the number of knowledge worker placements. According to the Advisory Opinion, and by examining our own trends, the strategic use and hiring of contract attorneys for document review projects is certain to continue as it has proven to be extremely cost-effective for the law firm’s corporate clients.

The rate of hiring knowledge worker placements may soon increase as well. As suggested, the best future model for law firms may be to have fewer partners and associates and more contract attorneys to work on specific substantive projects. If firms decide to follow this model, yet work increases in the predicted practice areas, law firms will ultimately hire contract attorneys with the requisite background for substantive projects more frequently then ever before.

Although law firms will continue to experience some financial struggles in 2009, there will most likely be an increased work flow in several practice areas. This prediction is good news for contract attorneys in particular. They will not only continue to have the opportunity to work on document review and due diligence projects, but also, if law firms heed the Hildebrandt/Citi advisory opinion by changing their current business model, contract attorneys will have an increased and perhaps unprecedented opportunity to work on substantive projects as well.