harvard presentation on the evolution of biglaw and the rise of alternative law firm models
DESCRIPTION
Presentation given at Harvard Law School on the evolution of big law and the traditional law firm, and the rise of alternative law firm models.TRANSCRIPT
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Convergence: Growing dissatisfaction with Biglaw and the Rise of the Alternatives
Presented at Harvard Law School
by Michael B. Moradzadeh and Yaacov Silberman
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BIG LAW: TIME FOR CHANGE?
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HOW DID WE GET HERE?
Cravath System of early 1900s
Specialization leads to assembly by 1950s
American lawyer rankings start in July 1987
Rise of Megafirms in late 1990s in
reaction to globalization and limited liability
Economic Crash of 2008
Ongoing changes in technology and society
Billing by hour starts to take over in 1960s
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CRAVATH SYSTEM
In early 1900s, Paul Cravath turned the affiliation of partners with
apprenticeships model into an up-or-out salaried model with strong
management, specialization, and hierarchy. Associates who survived
became partners. This created a pyramid structure.
Senior Associate
Senior Partner
Junior Partner
Senior Associate
Junior Associate Junior Associate Junior Associate Junior Associate
Mid-Level Associate Mid-Level AssociateMid-Level Associate
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Changes in society and business models from the 1920s,
and hyper-specialization resulting from Cravath System,
eventually brought the assembly line to law firms.
ASSEMBLY LINE
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Before 1960s, elite law firms would send a bill for “services rendered”.
Clients began to demand clearer metrics, so law firms start billing by the hour.
In 1960s attorneys at elite firms were expected to bill about 1300 hours a year.
BILLABLE HOUR
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AMERICAN LAWYER RANKINGS
In July 1987, American
Lawyer Magazine starts
ranking law firms by
profits and revenue.
Result: obsession with profits per partner and revenue. Leads to larger firm, more
leveraging, longer partner-track, higher billable rates, de-equitized partners, more lateral
movements, more mergers, higher pay for rain makers, and higher billing requirements.
Often to overall detriment of firm.
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LIMITED LIABILITY PARTNERSHIPS
In 1992, only two states allowed LLPs, by 1996 over
forty states had adopted LLP statutes by the time LLPs
were added to the Uniform Partnership Act in 1996
21992
401996
Limited Liability Partnerships allowed for greater
risk when bringing in lateral partners. This led to
more movement of lateral partners.
Partnership structure is often short-term focused.
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MEGAFIRMS
In response to globalization, Limited Liability Partnerships (1992)
and AmLaw revenue rankings, law firms compete for size, starting
in late 1990s. Desire to be everywhere their clients were.
Result: higher conflicts, more bureaucracy, increased leverage.
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ECONOMIC CRASH
Overleveraged firms with large employee and real estate
Overhead, and high salaries promised to rainmakers, show vulnerability to
economic downturns, especially in 2001 and 2008.
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RISE OF ALTERNATIVE MODELS
(2000) (2001) (2004)
(2008) (2008) (2008) (2008) (2008)
(2010) (2010)
Clerky
(2013)(2011)
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WHAT PROBLEMS ARE WE TRYING TO SOLVE?
COST QUALITY LIFESTYLE
Too high
Unpredictable/O
paque
Poor Incentives
High leverage
Associates
learning on the job
Growing dissatisfaction
of attorneys in Big Firm
practice
Is there an alternative to
"Soul Crushing" work?
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WHY NOW?Convergence of changes in
TECHNOLOGY, CULTURE and the
ECONOMY
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THE ECONOMY HAS PLAYED A HUGE ROLE
Corporate legal departments are under
tremendous pressure to manage costs and justify
expenditures
Old model was squarely CYA
With increased focus on costs, alternatives to
Big Law (including in-house, solos, etc.) are
seen as increasingly legitimate options
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CHANGES IN TECHNOLOGY
Disruptive Technology lowers the barrier to entry
enabling startups to compete with Big Law.
OLD REQUIREMENTS NEW MODEL
Real Estate
Technology
Infrastructure
Human capital
(admin)
Expensive
Research Tools
Cloud computing
Subscription model
Self Administration
Increased
competition from
resource providers
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EXAMPLE: RIMON
Quartet
Firm-Wide Attorney
Meetings
Managers
Partners
Associates
TRADITIONAL MODEL
Product produced by Associates
STRUCTURE TECHNOLOGY
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CHARACTERISTICS OF
ALTERNATIVE LEGAL
SERVICES MODELS
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ALTERNATIVE FEE ARRANGEMENTS
Try to reward good work, not inefficiency!
Flat/Fixed
Fees
Partial
Contingency
Pooling
clients
Increased
focus on
project
management
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DISTRIBUTED MODEL/ONLINE DELIVERY OF SERVICES
Palo Alto
Chicago
Seattle
Tel Aviv
Washington D.C.
New York Tyson’s Corner
Orange County
San Francisco
San Diego
Los Angeles
New Orleans
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SEGMENTATION OF MARKET AND ASSIGNMENT OF WORK BASED ON RELATIVE IMPORTANCE
Would you have an aerospace engineer
repair your Vespa?
1
Bet the
Company
2
Important
3
Routine
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EXPERIENCE
from some of the top law firms
in their respective fields.
10 YEARS
OF LEGAL EXPERIENCE
All of Rimon’s
partners have at least
Recognized by Best Lawyers of America and
SuperLawyers
Hold JDs, PhDs, LLMs, and MBAs from the best
universities in the United States and abroad
All attorneys working on every matter are highly
specialized in their respective field
Former partners at global law firms,
executives at global corporations, and
professors in business, law and science
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SAMPLE OF REPRESENTATIVE CLIENTS
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Big Law is not dead
Most prestigious firms
will continue to thrive
Innovation will need
to occur at all levels
CONCLUSION
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THANK YOU