On an intuitive level, the intense reluctance of BigLaw firms to move away from or to even tinker with the Cravath system makes perfect sense. For the longest time, it has produced large incomes and huge profits margins for decades, keeping both firm partners and associates happy with their individual slices of the financial pie. Furthermore, merely thirty or forty years ago, the vast majority of firms that would eventually become the American Lawyers' top two hundred firms (Am Law 200) were, in fact, "white shoe" firms within an overwhelmingly regional corporate legal market.[1] In particular, places like Cleveland, Detroit, Pittsburgh and St. Louis, which would now be considered third-tier legal markets at best, garnered a surprising share of elite law school graduates. For example, in the early 1960s, sociologist Jack Ladinsky found that 73% of the Detroit lawyers working in law firms went to one of five national law schools: Harvard, Yale, Columbia, Chicago, or the University of Michigan.[2]
As these regional law firms morphed and merged into the Am Law 200, the firm partners remained increasingly psychologically wedded and attuned to their own perceptions of "eliteness" and prestige. In the ensuing salary wars that eventually drove expectations to the six-figure range, these firms slavishly held the line and paid the prevailing rate despite economic sense rather than take the risk of signaling to the market that the firm had become "second rate."[3] As law firms began merging and as already large firms began consuming smaller ones to build various practice areas, the partnership structure which relies upon having enough associates creating enough billable hours simply had to hire more and more associates. However, expansion of associate numbers only worked as long as legal work continued to grow in demand and it was difficult for firms to justify making such large outlays. This is where contract and staff attorneys stepped in:
[F]irms may stress that profit does not drive the use of contract attorneys, but the profits are there anyway particularly when the contract attorney costs so much less to the firm than the salaried attorney. Rarely are these 'bargains' passed off to the clients in the form of lower bills. Instead, law firms capitalize on these advantages, charging their clients regular associate rates and profiting on the margin.[4]
On the client side, corporations have stretched their operations across the globe and with communication technology progressing enough so that the barriers to a global labor market are markedly reduced, legal services can almost be farmed out anywhere in the world. In summary, it becomes easy to see why staff attorneys are in so high demand when the legal labor market dynamic is such that firms want all the cheap legal talent that they can get. At the same time, clients push for lower billing rates since they are secure in the knowledge that they can always find more affordable legal talent somewhere else in the world or at least from a different law firm that is utilizing those sources of cheaper legal workers.
In sum, the BigLaw prototype of the apprentice rising through the ranks of the law firm and making partner after enough years in the trenches is unrealistic and untenable. And if anything, the increased interest and use of staff attorneys in various capacities[5] is just one of the ways that law firms have found convenient to use in order to forestall the collapse of the Cravath model. If one trend were to be blamed for why this model became less and less sustainable over time, it is the increasing globalization not only of the legal profession, but also of the clients that the firms work for:
Clients and professionals have become more demanding and competition is getting tougher. The rising salaries, the longer hours, the increased attrition rates, the failure of firms to retain minorities to partnership - all of these trends emerged in part because the modern [firm is] no longer insulated from the free market forces. Modern professionals are demanding family-friendly policies, increased diversity, and a greater sense of sustainability in the workplace.[6]
The gradual demise of the Cravath model may bring to an end the many traditions that once held [the firms] together. However, just because the members of today's [firms] are no longer bound by the same sense of professionalism does not mean that their industries are broken. Today, the two most important forces acting in that market are the corporate clients of these firms and the elite professional whom the firms hope to recruit. Each of these groups can and will continue to leverage their power to bring change to the various professions. Transparency regarding firm practices, aided by new information tools such as the Internet, allows both professional and clients to select among firms, and in so doing to apply market-based pressure for reform.[7]
Any discussion of modern BigLaw trends would be incomplete without a discussion of how race plays into it, so BBLP's upcoming posts will address the role of race in who ends up making it to the ranks of staff attorney and who ends up making it to the ranks of staff attorney and who ends up in the basement with the contractors.
[1] Bill Henderson, How the "Cravath System" Created the Bi-Modal Distribution, Empirical Legal Studies, http://www.elsblog.org/the_empirical_legal_studi/2008/07/how-the-cravath.html (last visited Apr. 2, 2010).
[2] Ladinsky, Careers of Lawyers, Law Practice, and Legal Institutions, 28 Am. Sociology Rev. 47, 49 (1963).
[3] Henderson, supra note 41.
[4] Marci Wilson, Great Deal for Whom? Contract Lawyer Rates May Mean Windfall Profits for Some Commodity Practices, Of Counsel, May 15, 2000, at 2.
[5] Amanda Royal, Orrick Breaks Lockstep In Response to Clients' Cost Concerns, Law.com, July 2, 2009, http://www.law.com/jsp/law/LawArticleFriendly.jsp?id=1202431956146 (last visited Apr. 8, 2010) ("Orrick will also boost the ranks of staff attorneys at its Wheeling, W.Va., facility. Those attorneys will have such titles as 'career attorney.' Their roles will include project managers, document reviewers, compliance specialists and other routine work.")
[6] Silveira, supra note 38.
[7] Silveira, supra note 38.
Building a Better Legal Profession (BBLP) is an organization based at Stanford Law School. BBLP is a national grassroots movement that seeks market-based workplace reforms in large private law firms. For more information, visit BBLP's Web site at www.betterlegalprofession.org.
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