What’s the prognosis for smaller firms?
While big firms have the most storied pasts, get the most press, and earn the highest profits in Philly’s legal world, they account for only a portion of the law market in town. Does the Philadelphia Lawyer live on at smaller firms? Generally speaking, while they’re facing some of the same issues as their larger brethren — including an ever-deepening focus on the bottom line — the situation for small firms is less volatile. Their clients tend to be local or regional, so the competition isn’t as intense. Best-positioned for the future are “boutique” firms practicing specific types of law — litigation, bankruptcy, real estate. For some of these, prospects are quite rosy. For example, plaintiff litigation firms, though they have relatively few lawyers, can ring up huge profits, since they charge on a contingency basis, not by hourly rate, and take home a portion of the judgments they win for their clients. (Several years ago, the Center City firm Kline & Specter scored a $153 million verdict against Ford.)
And consolidations and shakeouts at larger firms have benefited small and medium-sized firms, where hourly billing rates deemed measly by an Am Law list firm can still be a boon. “Some firms have been able to pick up partners from big firms who were squeezed out by the need to get higher rates,” says legal recruiter Frank D’Amore.
There are some challenges. Firms that specialize in insurance defense litigation have been hurt in the past few years as insurers have gotten tougher about billing rates and expenses. And small general-practice firms can also face rough going. “When you’re small and you get too broad, you tend to lack depth,” says D’Amore. That makes it tough to compete with the big boys. Says one lawyer who recently left a small general-practice firm, “I think in the future you’re either going to see mega-firms or boutiques, without much in between.”