TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Saturday, November 16, 2013

Demand for Legal Work Is Down 5% This Year, 6.4% in BigLaw

American Lawyer:  Demand for Legal Work Down 5 Percent This Year:

[D]emand for hours dropped by 5 percent from about 6.1 million in 2012 to 5.8 million in the first nine months this year. Total spending also decreased from $1.886 billion to $1.847 billion, a drop of about 2 percent. The biggest and smallest firms took the biggest hits. Among the Am Law 100—the nation’s top-grossing firms—hours were off by 6.4 percent and fees by 3.5 percent. Among firms outside the Am Law 200, hours were down by 5.7 percent and fees by 2.5 percent. The Am Law Second Hundred firms—those ranked 101-to-200 on gross revenues—showed the only increases. Their fees were up by 6.2 percent and their hours by 3.3 percent.


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Except for the “industries” represented by big law firms and 150 of the 200 US law schools most of the trends reported in the “sky is falling on lawyers and legal education” sites and in media reports represent positive developments for some lawyers and for the society generally. I know that might seem to be a strange or counter intuitive observation but that is only if you are viewing it from within the ranks of law schools and big law firms. There have been huge improvements in information access, efficiency, research, file sharing, investigative data bases, and case management technology that make a considerable proportion of the traditional labor intensive “scutwork” obsolete. This means fewer lawyers are required to achieve tasks and outcomes than ever before.

So a falling “demand” for legal services in the traditional context does not necessarily mean an actual drop in demand as opposed to a more efficient delivery of services at a more rapid rate. At the same time this has been occurring there has been a rapid increase in the use of paralegals who are quite capable of utilizing the newly available information systems and reduce the need for more expensive law school graduates. To this can be added the rise in sophisticated “service” companies and consultants who represent a kind of “Black Market” of providers of what traditionally have been thought of as monopolized legal services that are being provided outside the limited regulatory structure ostensibly responsible for dealing with the “unauthorized practice of law”.

All this also comes together in the fact that potential clients—large and even individual—now have access to the “mysteries” of law in ways that previously were under the control of the legal profession. The upshot is that the data on a drop in demand for legal services is not adjusted for the “new normal” [I hate that term] in which clients are doing some of what lawyers formerly did for them, lawyers are operating more efficiently, people who rarely or never received legal services or advice now have a chance to obtain some through the new technologies, a “Black Market” has arisen outside the “counting” system that offers significant “legal” services, and other professionals have encroached on the offering of legally related services.

An important added element is that lawyers under economic stress are likely to invent new ways of offering legal services at reasonable prices to previously underserved groups with the result that the overall availability of legal assistance to a wider range of Americans in need of service will be created. The bottom line is that while what is going on is generally bad for a significant number of law schools and law firms it is good for the society and will lead to wider and better service. Law schools that recognize these trends and make real rather than cosmetic adaptations will do well. Ones that don’t may not survive and will have no one to blame but themselves.

Posted by: David | Nov 18, 2013 6:48:11 AM

*Very* useful, real world aggregate data.

Because of what it discloses about the *per hour* compensation of firms on different levels of the (increasingly absurd) law firm "prestige pyramid".

Are AmLaw 100 firms *really* worth about $475 per hour when Non-AmLaw 200 firms only charge about $240 per hour?

*Prove it* AmLaw 100...

Posted by: cas127 | Nov 19, 2013 1:23:05 AM