The very largest corporate law firms are wedded to an unsustainable business model designed around support for their own massive overheads, one of the US’s leading general counsel has warned, predicting more collapses like that of US firm Dewey LeBoeuf.
Michael Trotter, now with US firm Taylor English’s corporate & business practice group, says the ‘New York model’ is threatened by inaccurate assumptions about highly-leveraged legal teams and profitability.
‘There is no correlation between the size or leverage of the [top 200 US] firms and their average profits per partner,’ Trotter says in Declining Prospects: how extraordinary competition and compensation are changing America’s major law firms.
High rewards themselves are a problem, Trotter says, creating an over-supply that market conditions cannot support. Trotter notes ‘resistance to increasing costs’, with clients opting to do more work in-house.
One result has been dramatic law firm failures such as the collapse earlier this year of Dewey LeBoeuf. The firm, Trotter claims, ‘was caught short by fundamental changes in the dynamics and economics of the top end of the legal profession’.
Trotter predicts more failures among leading corporate firms. ‘It appears inevitable,’ he concludes, that these features at the top end of the market ‘will over time cause many other major business practice firms to succumb to Dewey’s fate’.
See Book Reviews