Monthly Archives: November 2011

Update on Brazil: Protectionism Gains Favor

Posted on November 29, 2011 by | 1 Comment

Last month we wrote about the importance of Brazil to many international law firms and why the country has much to offer these firms and their corporate clients.  We also discussed challenges in the Brazilian market, in particular, the limitations on foreign firms preventing them from practicing locally, which is why many firms have entered the market through an association with a Brazilian law firm.  These types of associations might now be in jeopardy according to a recent vote by the Brazilian Bar Association (OAB).

Latin Lawyer (subscription required), is reporting that at the OAB national conference last week, “Brazilian lawyers have voted in favour of maintaining the strict regulation against any type of formal alliance with international firms.”  Three motions passed unanimously in favor of the strict interpretation of the OAB rule which regulates international associations. 

 [The] three motions were: that according to Brazilian rules, it is not permitted to have any type of association between individual lawyers or law firms, and consultants or groups of consultants in foreign law; that looser partnerships between local and international lawyers, to share experience and to serve clients within a global context, are permitted; and that also allowed are associations which are scientific or cultural in nature.

According to the rules of the conference, the OAB’s Federal Council must now form a commission to consider the motions passed.  The OAB will meet in December, according to Cezar Britto, the president of the OAB’s Commission on International Relations, “to regulate and discipline existing cross-border associations, and to give more clarity to the rules.”

 Posted by Marianne Purzycki

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We’ll be back next week!

Posted on November 23, 2011 by | Leave a comment

The blog will return next week, as well as Hildebrandt Headlines which is on hiatus because of the holiday.  All of us here at the Hildebrandt Institute wish our readers a Happy Thanksgiving!

Posted by Marianne Purzycki

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Are Law Schools “Allergic to the Practical”?

Posted on November 23, 2011 by | 1 Comment

We’ve written before about legal education reform as well as the “first-year dilemma,” the thorny issue of how to train new associates to become good lawyers while clients are objecting to those same associates staffing their matters for as much as $300 an hour.  All of which is really asking, “Why don’t they teach this stuff in law schools?”

A front-page article in this week’s Sunday New York Times has raised the question again, but shines some light on a couple of additional points.  The author, David Segal, writes that “Law schools have long emphasized the theoretical over the useful” and that “[p]rofessors are rewarded for chin-stroking scholarship.”  While many schools have used legal clinics as a way to provide practical training, the nuts-and-bolts practice of law is something that many law school professors know little about. 

“The fundamental issue is that law schools are producing people who are not capable of being counselors,” says Jeffrey W. Carr, the general counsel of FMC Technologies, a Houston company that makes oil drilling equipment. “They are lawyers in the sense that they have law degrees, but they aren’t ready to be a provider of services.”

Segal argues that the upper echelon of the legal academy is valued more for its volume of law review articles than real world experience.  There are more than 600 law reviews in the U.S., a number that has doubled since 1985, and they publish about 10,000 articles per year, few of which are considered noteworthy and citable.

Law school hiring also plays an important role, with schools chasing “superstars” that are often former Supreme Court clerks or candidates with both a J.D. and a Ph.D. in another discipline, such as economics.  And having no experience actually practicing law is perceived as an attractive quality.  Segal writes:

This might seem a paradox — experienced people need not apply — but the academy views seasoned pros with a certain suspicion. In fact, a number of veterans of legal practice who failed to land tenure-track jobs say that experience was a stigma they could not beat.

So what does this mean for recent graduates, many of whom have spent up to $150,000 to get their degree?  The legal landscape has changed in the last few years and there is not going to be a return to business as usual.  It’s a buyer’s market and the market is awash in JDs.  Big Law associate positions are fewer than they were a few years ago, while there appears to be increased demand for contract and staff attorneys.  To be successful, according to Segal, law school graduates will need “entrepreneurial skills, management ability and some expertise in landing clients. They will need to know less about Contracts and more about contracts.”

Posted by Marianne Purzycki

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Law Firm Mergers Update: 2011 to Finish Strong

Posted on November 18, 2011 by | 2 Comments

 As we reported back in September, the Hildebrandt Institute tracked nine completed mergers involving U.S. firms in the third quarter of 2011, bringing the total for the first three-quarters of the year to 31 – a 55% increase over the same time period in 2010.

And it looks like 2011 is also going to finish on a strong note.  Our tracking to date indicates 11 mergers to be completed in the last quarter of the year, bringing the current total for 2011 to 42 mergers. This is significantly higher than the 27 mergers of 2010, but certainly not back to the pre-economic crisis glory days, which routinely saw 50+ mergers a year. 

Similar to what we have seen all year, a number of the combinations are regional in nature, such as the recently announced merger between 300-lawyer Taft Stettinius & Hollister, based in Cincinnati, with Columbus, Ohio’s 30-lawyer Chester Willcox & Saxbe (effective Jan. 2), and Jones Walker’s combination with Mississippi’s Watkins Ludlam which went live on November 5. 

In addition, five mergers have been announced that will be completed in early 2012. The largest combination is between Faegre & Benson and Baker & Daniels, which will begin operating as Faegre Baker Daniels on January 1 with a total of 815 lawyers and consultants.

The big news, however, is still around significant tie-ups outside the U.S., in particular, cross-border mergers, which continue to be fueled by strategies focused on energy and natural resources.  Norton Rose Group will combine with Canadian law firm Macleod Dixon on January 1, creating an international legal practice with more than 2,900 lawyers, including more than 200 energy lawyers and more than 200 mining lawyers worldwide.  In addition, the U.K.’s Ashurst and Australia’s Blake Dawson announced plans to combine their businesses in Asia by March 2012 with a full merger, conditional on a further vote of the partnerships, by 2014. 

We’ll give a full report in our MergerWatch update at the end of year.

Posted by Marianne Purzycki

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Client Satisfaction Up in the U.K.; U.S.-based Firms Lead Rankings

Posted on November 18, 2011 by | Leave a comment

Client satisfaction is up among the 1,069 companies surveyed by Legal Week Intelligence for the eighth annual Client Satisfaction Report.  The companies, which include 78% of FTSE 100, reported the highest levels of satisfaction with the quality of legal advice, service delivery and responsiveness.  Respondents reported the lowest levels of satisfaction with cost and billing practices, reflecting what appears to be a trend toward increased pricing pressure in the legal industry.

The survey ranks major law firms operating in the U.K. based on criteria that also include use of IT and knowledge management, personal and partner relationships.  Interestingly, two U.S.-based firms topped the satisfaction rankings despite the focus on U.K. companies – Weil Gotshal & Manges and Reed Smith earned average scores of 8.6 and 8.41 out of 10, respectively.  The third highest ranked firm, Hogan Lovells, also has strong U.S. roots.  The top group was rounded out by U.K. firms Linklaters, Ashurst, Norton Rose and Clifford Chance.

Although Legal Week is not currently reporting the scores for all firms (the full report will be released in December), it appears that average scores for this top group are tightly clustered.    And both Weil Gotshal and Reed Smith have significant U.K. presences – London is Weil Gotshal’s second-largest office, and Reed Smith’s largest market presence is in London.  So the story here may be less about the prominence of U.S. firms and more about the decreasing relevance of national origin for certain global firms in major markets.

Posted by Emily Fisher

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Turkey in the spotlight

Posted on November 15, 2011 by | 2 Comments

For the past few weeks, the Hildebrandt Institute Blog has been taking a closer look at certain emerging markets and their impact on the global legal industry. Previously, we looked at the market indicators driving law firms to Brazil the increasing significance of Asia in law firm growth strategies, and the competition for top legal talent in Hong Kong.  Today, we turn our attention to Turkey and the economic drivers which are attracting a growing number of international firms.

Several economic factors are contributing to an increased interest in Turkey by international law firms. Unlike a number of its European neighbors, Turkey fared reasonably well during the global economic crisis with the country’s banking system managing to avoid a government-funded bailout. After negative growth in 2009, the economy bounced back well in 2010, recording the third-fastest growth rate among G20 countries last year, with an impressive 9% rise in GDP.

Growing interest by foreign firms

In 2009, there were just five foreign law firms operating in the market (White & Case, SNR Denton, Gide Loyrette Nouel , Salans and Curtis, Mallet-Prevost) with White & Case by far the most prominent. The US firm has affiliations with two market-leading local firms: Akol Avukatlik Bürosu in Istanbul, and Çakmak Avukatlik Bürosu in Ankara.

This has more than doubled in the past 12-18 months. 2010 and early 2011 saw the arrival of four new foreign firms: two global powerhouses, DLA Piper and Clifford Chance, who continued their investment in emerging market economies, as well as a number of Central & Eastern Europe-based firms, including Kinstellar (Linklaters’ CEE spin-off) and Austria’s Schoenherr.

Three further firms have recently announced their entry into the market; German firm Graf von Westphalen, the U.S.’s Chadbourne & Parke and most recently, Baker & McKenzie. It formed an exclusive relationship with leading Turkish law firm Esin Attorney Partnership, as well as opening its own foreign office in Istanbul (in Esin’s office space).

The moves have been in response to growing client interest and activity in Turkey, with Baker & McKenzie’s EMEA Chair, Koen Vanhaerents, stating “It has become increasingly clear that Turkey is rapidly growing in importance for our clients”.

Although the presence on the ground of these newly entered firms remains relatively small, a number of the associations formed have the potential to have a strong market impact. Other firms are expected to follow suit, with the CMS alliance recently announcing that it was looking to add a Turkish member to its exclusive alliance network. Continue reading →

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Are Law Firms Squandering Women Lawyers?

Posted on November 11, 2011 by | Leave a comment

New data from the National Association of Women Lawyers (NAWL) and the Hildebrandt Institute indicates that law firms may be missing the opportunity to take advantage of the talent and experience of their women lawyers.

According to NAWL’s Sixth Annual National Survey on Retention and Promotion of Women in Law Firms, a study of women lawyers in the AmLaw 200, women continue to be overrepresented in non-partner-track positions:

Women represent 55% of staff attorneys, the highest percentage of women lawyers in any law firm position; significantly, a large percentage of lawyers holding these positions graduated from law school between 10 and 20 years ago.  A similar phenomenon occurs at the counsel level, where women lawyers comprise 34% of these positions in firms.  In many firms, lawyers in the counsel position view it as the stepping stone between associate and promotion to partner.  However, only a minority of firms indicated that most of their counsel are eligible to become partners.

NAWL’s full report can be found here (PDF).

The Hildebrandt Institute has made similar findings in the Large Law Firm Staffing Survey, conducted for the first time in 2011 through collaboration with Georgetown University Law Center and the Professional Development Consortium.  Preliminary analysis of the Staffing Survey reveals that women comprise 55% of staffing attorneys at respondent firms, 40% of counsel, and 67% of career attorneys.  For purposes of the survey, “career attorneys” were defined as attorneys with a specific skill set or specialization that the firm consistently needs but on which the firm does not want partner-track associates to concentrate.

These numbers are troubling for groups like NAWL, which seek to increase the representation of women in law firm leadership positions.  While women appear to be overrepresented in these non-partner-track positions, they continue to be underrepresented in equity partnership ranks – NAWL reports that women account for barely 15% of equity partners.  And progress on that front is slow to nonexistent: “that level of equity partnership has been fixed at the same level for 20 years.”

When addressing statistics like this, focus is often placed on the effect the situation has on women lawyers, but law firms are losing out too.  The women moving into these non-partner-track roles are often high-achieving, well-educated lawyers with years of experience.  That experience has been earned through a combination of their own hard work and their law firm’s training.  But their expertise goes with them to the pink ghettos of staff, career, and counsel attorney ranks, where true professional development and leadership opportunities are uncommon.  In the process, women and their law firms both miss out.

Posted by Emily Fisher

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Hong Kong: A War for Talent?

Posted on November 11, 2011 by | 5 Comments

For the past few weeks, the Hildebrandt Institute Blog has been taking a closer look at certain emerging markets and their impact on the global legal industry. Previously, we looked at the market indicators driving law firms to Brazil and the increasing significance of Asia in law firm growth strategies.   Today, we focus in on one of Asia’s hottest markets, Hong Kong.  Stay tuned next week when we turn our attention to Turkey.

Continuing a trend that began in 2005 with Skadden Arps, a number of elite U.S. firms that had previously been practicing only U.S. law in their Hong Kong offices, have recently launched local Hong Kong law practices.  In the past two years, the list of AmLaw 100 firms adding Hong Kong practices has included Cleary Gottlieb, Davis Polk, Milbank Tweed, Shearman & Sterling, Simpson Thacher, Sullivan & Cromwell and Weil Gotshal.  In August, Kirkland & Ellis announced that it was hiring seven partners to launch a full-service Asia transactional and Hong Kong law practice, followed by an announcement last week that two corporate partners will be joining Gibson Dunn’s Hong Kong office, as the firm ramps up to offer a local law capability there.

The move of many of these firms into local Hong Kong law practices reflects the continuing development of the Chinese economy and also recognizes the importance of Hong Kong as a major capital markets venue.   While advising on U.S. securities law had been lucrative in the past, firms have feared losing work to competitors that could provide dual capabilities.  A local practice can be particularly advantageous to firms competing for IPO work where competition can be fierce, especially for offerings which are targeting U.S. institutional investors.  Many U.S. firms saw clients turning to U.K. or Hong Kong firms for “one-stop shopping” in order to provide the necessary Hong Kong law advice on IPO matters. 

“US firms were missing out on work by not doing Hong Kong law,” Davis Polk’s [Paul] Chow [corporate partner in Hong Kong] observes. “For instance, US law firms tend to write the prospectuses for an IPO and undertake US law work, but would have to hand the Hong Kong law aspect over to a UK or Hong Kong practice. Once the company had listed it would more often turn to the Hong Kong practice for further work, so the relationship would be lost [for the US firm].”

Asian issuers have accounted for 65% of global proceeds from IPOs over the last five years, according to Ernst & Young.  And while acknowledging that third quarter 2011 activity fell worldwide in both number and deal value from the second quarter, Asia continues to dominate IPO activity, accounting for 57% of the 284 deals and valued at $28.5 billion.  China tops the region with 90 deals which raised $11.4 billion, accounting for one-third of the offerings.  And the trend going forward remains positive. 

“Asia will continue to lead global IPO activity as domestic and foreign IPO pipeline builds,” Keith Pogson, a managing partner at Ernst and Young said in a [recent] report. “As soon as the market stabilizes, we will start seeing a big wave of IPOs, as there is currently a record amount of about 3,000 companies in the pipeline globally.”

What this means for law firms in the region is plenty of work and a war for talent.  Many of the U.S. firms entering the local market have done so by bringing on prominent lateral hires from other international, in particular U.K., law firms which have long dominated the market.  While this heavy recruitment is expected to slow, some commentators feel that a “major shift” in the Hong Kong legal market is underway, with the dominance of the U.K. magic circle firms no longer assured.  However, in terms of size, the leading U.K. firms in the jurisdiction are still much bigger than their American counterparts.  Robert Sawhney, a Hong Kong-based legal consultant at SRC Associates recently noted, “[i]n terms of pure lawyer numbers the US firms still have a much smaller presence than the UK firms’, hiring only one or two partners who can practise local law.”

While the market is clearly more competitive now, it is also clear that there is still plenty of deal work to go around.  But the difference now is that no one type of firm has a monopoly on offering Hong Kong legal advice.  As Peter Charlton, Clifford Chance’s Asia head says, “It’s probably the most level playing field in the world now.  It’s all about experience, what you can do, and price.”

Next week, the Hildebrandt Institute and West LegalEdcenter will host a panel discussion as part of the 16th Annual Law Firm Leaders Forum, on competitive opportunities for law firms in emerging markets in Asia and South America.  You can learn more about the forum here. 

Posted by Marianne Purzycki

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Lawyers love iPads. Law firms are working on it.

Posted on November 10, 2011 by | 2 Comments

Today, Legal Week is reporting on the proliferation of mobile devices, particularly iPads and other tablet devices, at UK law firms.  According to DLA Piper International CIO Daniel Pollick, the adoption of new devices is being driven by lawyer demand:

Firms are under pressure from lawyers to use devices such as iPads and smart phones at work. These devices were never designed with enterprise in mind, so the big challenge is dealing with this consumer-driven demand without compromising IT security.

It is unsurprising that lawyers are the ones pushing to incorporate iPads and similar devices into their firm’s technology offerings.  Mobile devices are a perfect fit for busy professionals who are often working on the train or from airport waiting areas.  And tablets may be particularly appealing because they eliminate the inconvenience of reading or typing on a tiny screen while still offering the convenience and portability of a smart phone.

But Legal Week notes that the new technologies bring risk management concerns regarding the security of data.  Those same concerns once led law firms and other businesses to simply reject the iPhone as a Blackberry alternative.  But due in large part to the preferences of their attorneys, law firms are now accepting new technology as a business reality and taking the necessary precautions to safeguard their data.

However, those precautions may place a real burden on firms already contending with rising expenses.  At the Hildebrandt Institute’s 10th Annual CFO & COO forum last month, a panel of experts that included Peter Lesser (Director of Global Technology for Skadden Arps) and Kenneth Heaps (CIO at Latham & Watkins) discussed how firms can accommodate the devices their lawyers want to use while still ensuring that information is not accidentally exposed.  Some fixes, like requiring password protection for devices, are relatively simple and inexpensive.  Other can be more burdensome.  Lost or stolen devices can be wiped remotely, and many firms have policies in place that will do this automatically.  But the practice isn’t failproof – it won’t protect data accessed before the device is reported as missing.  And there are costs associated with replacing and restoring devices when these losses inevitably occur.

Striking the right balance may be challenging when partners and associates are clamoring to incorporate their newest gadget into their legal practice.  Law firms are working to oblige these demands, but the challenge of truly integrating the technology is still a work in progress.

Posted by Emily Fisher

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A New Blog Takes on Legal Education Reform

Posted on November 4, 2011 by | 1 Comment

The National Law Journal has launched a new blog, Law School Review, dedicated to discussing “the current state and future of legal education.”  Commentators include Brian Tamanaha of Washington University in St. Louis School of Law (who also writes about law school reform on the blog Balkinization), and Erwin Chemerinski of the University of California, Irvine School of law.  The blog is already tackling some of the hot button issues related to legal education, such as whether federal loans improve access to legal careers or merely drive up costs, and the American Bar Association’s role in governing law schools.

The discussion is necessarily dominated by the academy, as any real change in the legal education system will have to be carried out by the deans and professors who run U.S. law schools.  But Law School Review’s list of contributors also includes Kyle McEntree, a 2011 graduate of Vanderbuilt University Law School and the executive director of Law School Transparency, a nonprofit group that seeks to improve the way law schools report employment information and other statistics to potential students.  McEntree’s contributions are important to a conversation about legal education reform at a time when the costs of a J.D. are higher than ever.  The blog has also included input from guest writers, including recent law school graduates.

One perspective thus far missing from the dialogue at Law School Review is that of the private legal industry.  It would be interesting to hear from law firms, large and small, as well as corporate law departments, on the question of whether law schools are preparing students for their careers.  Given recent debates in the industry about training new lawyers, it seems an industry perspective is essential to any serious conversation on legal education reform.

Posted by Emily Fisher

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