As lawyers get richer, is the quaint notion of “the Philadelphia Lawyer” becoming a thing of the past?
Mark Alderman doesn’t look like the classic Philadelphia Lawyer. He’s 55, but his face is still remarkably youthful, and his shaggy brown hair, reaching down nearly to his shoulders, gives him the appearance of a middle-aged Rolling Stone editor (though a particularly well-dressed one). Almost 30 years ago, when Alderman was graduating from Penn Law — cum laude, editor at the law review, one of the best and brightest at one of the nation’s best and brightest law schools — he and his classmates all had a similar view of their futures: They would join good firms, they would work hard to make partner, and they would stay where they were until they had filed their last brief, overseen their last corporate transaction, argued their last closing argument.
[sidebar]Today, the WolfBlock chairman has a vastly different read on the future of law firms in Philadelphia. “I teach a class at Penn Law School,” Alderman says one day, in his firm’s Arch Street office, a portrait of Winston Churchill hanging on the wall. “I ask my kids, ‘How many of you expect to stay with one firm for your whole career?’ Nobody raises a hand. So I ask, ‘How many expect to be with one firm for five years?’ Maybe half raise their hands. ‘How many expect to be with a firm for two years?’ About a third still don’t raise their hands.” He pauses. “Nobody believes the system will take care of them.”
The legal world in Philadelphia has become a far more volatile place than ever before — not just for law students, but for the people who run law firms, too. And Mark Alderman is candid about the fact that over the past year, WolfBlock, one of Philadelphia’s preeminent law firms for more than a century, has been having merger conversations with just about any firm around the country it makes sense to have a conversation with. The reason isn’t hard to grasp: Wolf’s size and footprint — just over 300 lawyers, in only a handful of Northeast cities — simply aren’t tenable in a world increasingly dominated by 1,000-lawyer firms with offices around the globe.
The most recent rumor came in mid-February, when Wolf was said to be in discussions with Florida-based Akerman Senterfitt. Alderman won’t comment on the likelihood of that deal happening, but he doesn’t hesitate to say that a deal with someone needs to happen — and soon.
“I tell my partners, we gotta get moving here,” he says. If WolfBlock is to survive, it needs more lawyers, more offices, more profits. “Five years from now, if we look like we do today, we’re in trouble.”
On the website of the Philadelphia Bar Association is a section marked “Legends of the Bar.” Click on it, and up pop the names and biographies of dozens of lawyers out of Philadelphia’s past, from Andrew Hamilton — who in the mid-18th century won the case that essentially established freedom of the press in America, and to whom the phrase “Philadelphia Lawyer” was first applied — to more-modern legends like Harold Kohn, the Dilworth Paxson partner who in the 1960s revolutionized the legal profession by inventing the class-action lawsuit. The list is a reminder not only of high ideals that lawyers once aspired to, but of Philadelphia’s rich legacy of legal talent. In the culture at large, the phrase “Philadelphia Lawyer” means an attorney who’s particularly gifted and crafty — It would take a real Philadelphia Lawyer to get us out of this. But to be a Philadelphia Lawyer in Philadelphia, where there are nearly 16,000 attorneys, where one in five Center City offices is occupied by a law firm, has always meant something even more. Lawyers here are a crucial part of both our economy and our identity — a blend of what the auto industry is to Detroit and the Texas Rangers (the ones with guns, not baseball hats) are to Texas. Which is why the changes that have occurred in the profession — and that continue to occur — are so significant.
Lawyers, it probably goes without saying, like to argue, but the one thing they all agree on is that over the past two decades, their once high-minded profession has been transformed into a high-stakes business. “A revolution has occurred,” says Michael Coleman, one of the city’s preeminent legal recruiters. That revolution may only be a prologue to an even bigger transformation now taking place: the high-stakes business slamming head-on into the fast-moving, and generally unforgiving, 21st-century global economy.
“The world is flat,” Alderman tells his Penn Law students one day, as they’re seated around a seminar table. Alderman’s course is called “The Law of Law Firms,” and in contrast to the legal-reasoning courses that make up the bulk of a law student’s education, this class attempts to give the next generation of lawyers a realistic view of the business they’re getting themselves into.
Now, the leveling of the economic playing field doesn’t mean that, say, Dick Sprague is suddenly in danger of being replaced by some heavily accented Indian guy working for a few bucks an hour. But the technological and economic changes affecting all of us are certainly making an impact on lawyers — particularly on the dozen or so largest, most prestigious firms in Philadelphia. For starters, the pressure is on firms to be bigger and broader — to open offices in all the places around the world where their clients are doing business. It’s why the city’s most profitable firm, Dechert, recently opened an office in Hong Kong; why fast-growing Duane Morris now has two offices in Vietnam; why Blank Rome has all but joined Match.com in hopes of finding a West Coast partner with which to merge.
Even more important, though, is that the market for legal services has been, if not globalized, at least nationalized — which means that Philly firms are now competing for clients with firms in New York and Chicago and Charlotte and anywhere else easily reachable with a BlackBerry and some frequent-flier miles.
The heightened competition — combined with the bottom-line mentality that began taking hold at least 15 years ago — has spun off its own consequences. While lawyers at big firms make more money than ever, there’s a certain sense of ennui among many in the profession. Previous generations of attorneys had the sense that in practicing law, they were serving the public good. A fair number of lawyers today fret that what they do has no more value than selling used cars. “It can suck the soul out of you,” one lawyer complains of the constant focus on billable hours and client development and all the other things lawyers now do that aren’t actually practicing law. Says another, of the pressure to make more and more profits, “How much is enough?”
Equally significant is the volatility in personnel: Once upon a time, lawyers stayed with their firms for life, but today the need for growth has firms courting partners (and their clients) from rival firms — thus creating a market for mid-career lawyers only slightly less heated than the one for free agents in baseball. In 2007, 109 partners in Philadelphia jumped firms, up from 68 two years prior.
The biggest impact may be on the firms themselves. In the past 20 years, each of the marquee practices in Philadelphia has grown significantly, by hiring more lawyers or by acquiring smaller firms. But legal-world convergence has now reached the point where the hunters are becoming the hunted. The thinking among many lawyers in town is that within a decade, a number of the biggest firms in Philadelphia — excluding the two biggest, Dechert and Morgan Lewis — will likely have merged with other firms around the country. And by “merged with,” they generally mean “been eaten by.” As Alderman puts it, “You can’t be confident that any other Philly firms would be the dominant partner in a merger.”
From a practical standpoint, this may not mean much. There will still be plenty of lawyers in Philadelphia, and plenty of them will still be making plenty of money, even if the big decisions about their firms are being made in other cities. But from a symbolic and psychological standpoint, what’s happening to lawyers is profound. Not only does it further cement Philadelphia’s status as a branch-office town — a phenomenon that’s robbed us of significant public leadership — but in a broader sense, it crystallizes that there’s really only one thing we deem important at the beginning of the 21st century: the bottom line. We aren’t seeing the end of lawyers in Philadelphia, but we are almost certainly watching the last days of that mythic creature called the Philadelphia Lawyer.
In December 2006, press reports revealed that merger talks were under way between Mark Alderman’s firm, WolfBlock, and the Philadelphia firm of Cozen O’Connor. On one level, the discussions were eyebrow-raising, since the firms were so different. Wolf was a century old; in its heyday, it was known as the preeminent Jewish firm in the city, and its practice focused heavily on real estate and estate planning. Cozen, in contrast, was a relative upstart, having been created in the early 1970s by Steve Cozen; it was mainly a litigation firm.
Still, on another, more visceral level, the proposed pairing was understandable. Mergers among firms are now so commonplace, and are seen as such an integral part of where the legal industry is headed, that a strange psychology has taken hold — one that can only be compared to kids lining up dates for the junior prom. No one, it seems, wants to be left without a partner, so all sorts of odd pairings are imagined, if not executed. “Everybody is talking to everybody” is the phrase you hear, well, practically everybody uttering.
As it turned out, the differences between the Wolf and Cozen firms trumped the cultural pressure to merge — “There were some structural issues,” says Steve Cozen — and the talks fell apart. But just because this particular marriage couldn’t be arranged didn’t mean either party was resigning itself to the law-firm equivalent of spinsterhood.
In 2007, WolfBlock had gross revenues of $173 million, and average partner income of about $502,000. At the time of the proposed Cozen merger, WolfBlock was the ninth most profitable firm in Philadelphia, and the 145th in the country. That we actually know how much the lawyers at Wolf made is somewhat curious, since unlike public corporations, which have a fiduciary responsibility to their shareholders to track how well business is performing, Wolf is a private entity, owned by and operated solely for the lawyers at the firm. Telling the world how much they make is like your neighbor enclosing his tax return with his Christmas card: Peg and I were thrilled to pull in $133,000 — seven percent more than last year! Okay. Thanks for sharing. So why does Wolf — and nearly every other major firm in America — share its earnings? The answer to that question — and to the broader question of why the legal profession in America currently operates the way it does — can be traced back to changes that started in the 1980s. Actually, it can be traced back to the influence of one man.
In 1979, Steve Brill, an ambitious, aggressive young man four years out of Yale Law School, launched a publication called The American Lawyer. Whether Brill had much of a legal mind is tough to tell — he’s never really practiced much law — but there was no doubting his editorial chops. Like all brilliant editors, he had a knack for knowing what people really want to read, and for getting his reporters and editors to deliver it. When it came to covering the legal world, Brill’s genius was to approach it not as a musty, staid profession, but as a juicy, high-stakes club filled with power grabs, ego clashes and huge personalities.
The ultimate expression of Brill’s editorial approach came in 1986 with the introduction of an annual list called “The Am Law 100.” Other publications had ranked law firms before, but their lists had always been based on the number of lawyers the firms had. Brill’s genius was to rank the firms based on something juicier — indeed, on the thing attorneys had always wondered and whispered about but never really knew: what kind of money firms earned.
The impact of the American Lawyer rankings over the past two decades is tough to overestimate. For starters, they’ve transformed the mind-sets of many lawyers — or at least those who run large law firms. Twenty years ago, a partner at a Philadelphia firm might have been very happy making $150,000 per year — until he saw that lawyers at a firm in, say, Boston were making $250,000 per year. Telling competitive people like lawyers how much their peers were making was like giving someone with an addictive personality his first hit on a crack pipe.
Just as important, though, is that over the years, large firms have come to realize that the Am Law rankings are their best marketing tool when it comes to attracting the best law-school graduates and, now, the best partners from other firms — partners who bring with them books of clients that contribute handsomely to the bottom line. After all, why stay at a firm with profits per partner of only $400,000 per year when folks at the firm down the road are making 20 percent more?
Now, a case can — and should — be made that Steve Brill was merely the personification of a force already on the loose in the culture. But whether Brill was a chicken or an egg isn’t really the point. The point is that the Am Law rankings — both literally, in the sense that firms care enormously about where they fall on them, and figuratively, in the sense that they represent a legal world all about the Benjamins — have become the dominant measuring stick in the legal industry.
If there’s an irony in law having become a business, it’s that law, it turns out, isn’t a very good business — or at least doesn’t have a very efficient business model. While manufacturers typically make money through economies of scale, and other service professionals, like investment bankers or architects, make money by taking a percentage of a deal or the cost of a project, lawyers for the most part still work for an hourly wage. In short, they’re in the business of selling their time.
The problem, of course, is that time is finite, so even if you’re selling those hours for an exorbitantly high rate — a handful of lawyers in Philadelphia can charge up to $1,000 an hour — it can be tough to build a successful, globally competitive business.
To compensate for that labor-intensive business model, firms have adopted various strategies. Strategy number one: Make young lawyers — associates — bill as many hours as humanly possible. In the 1960s and ’70s, associates at big firms were expected to bill between 1,600 and 1,800 per year; today, the expectation is generally around 2,200 hours per year. And since not every hour you spend at the office can be billed to a client, associates typically end up putting in 80-to-90-hour weeks. With starting associate salaries approaching $150,000 at Philly’s biggest firms, this might not be so bad — if the work was consistently challenging intellectually, and if the path to becoming a partner was as fast as it used to be. But some associates complain that they spend their days locked in the office, pushing through paper. As for partnership, it’s a reward that takes longer and longer to realize these days.
But associates aren’t the only ones for whom the rules of the game have changed. While once it was enough for a partner at a firm simply to be a smart practitioner who understood the law and served his clients well, today the focus is less on what you do in the courtroom or boardroom than on what kind of business you bring in the door. In the past, becoming a partner at a big firm was pretty much like becoming a tenured college professor — you were there for as long as you wanted to be. Today, it’s not unheard-of for a partner to be de-equitized — essentially, pushed back to being a salaried employee — or driven out completely. “I know some lawyers in their 50s who have been asked to leave their firms because they don’t have a book of business,” says Steve Cozen, of Cozen O’Connor. “The problem is, they were never told they had to have a book of business. It used to be enough for them just to be good lawyers.”
In some firms, it’s no longer enough even to have clients — they must be clients who can pay hourly rates hefty enough to support an insatiable appetite for profits. Over the past few years, Dechert has rid itself of several practice areas that simply didn’t command high enough rates from clients, including media law, which was led by respected First Amendment attorney Amy Ginensky, who last year moved to Pepper Hamilton after 28 years at Dechert. Ginensky says she could have stayed, but she didn’t like the constraints the firm’s economic strategy placed on her. “I didn’t want to decide what cases to take based solely on how much money they would make,” she says. Dechert’s strategy is one any businessman would understand instantly — if a product line isn’t profitable enough, you discontinue it and move on to something else. But for the lawyers involved, who were asked to practice a different type of law or simply to leave, it’s a tough adjustment to make. “We’re dealing with human capital, not widgets,” says legal recruiter Michael Coleman. “I don’t know if when you’re 45, you want to be retooled.”
That said, you can’t argue with Dechert’s success — at least, the way success is currently measured. Over two years, the firm’s profits-per-partner have nearly doubled, to $2 million per year. In the most recent Am Law ranking, it jumped from 40th in the country to 27th.
IF THERE WAS a particular period when the Philadelphia Lawyer reached his highest status — when income, intellect, security and civic contribution combined to give lawyers their greatest power — it was in the decades immediately following World War II. At the time, the big firms in the city mirrored the biases and attitudes of Philadelphia’s establishment: They were made up almost solely of white men, they were divided between white-shoe WASP firms and prominent Jewish ones, and the practice of law could be described in a word: clubby. Clients were almost exclusively Philadelphia-based corporations, run by men the lawyers either had gone to school with or saw frequently at their country clubs, and their legal partners were very much that — partners, men they worked shoulder-to-shoulder with, often for their entire careers. “There was a lot more camaraderie and firm loyalty,” says Charlie Kopp, who started at WolfBlock in 1960 and rose to become co-chair of the firm from the mid-’80s to the mid-’90s. “And there was a lot more identity between the lawyer and his law firm.”
Things began to change in the late ’60s and early ’70s. First were the social changes: By the middle of the Me Decade, the divide between the Waspy firms and the Jewish ones had eroded (“The worst thing that ever happened to us was other firms starting to hire Jews,” cracks one lawyer at Wolf), and by the ’80s, women — and, to a lesser extent, minorities — had a significant legal presence. Just as important, though, was what was happening with clients: Not only were some of the best ones starting to be poached by aggressive New York firms, but Philadelphia’s corporate base began to crack, first with the decline of institutions like the railroads and Curtis Publishing, then with consolidation in the banking and insurance industries. Today, when it comes to business, maybe the only thing Philadelphia is known for is how little we’re known for.
Throughout the ’80s and ’90s, firms responded by growing — although some were more aggressive and successful than others. There’s clearly no better success story than Dechert, which under the leadership of chairman Barton Winokur has gone from being just another Philadelphia law firm to an international law firm that happens to be based in Philadelphia. Winokur, a Harvard Law grad who started practicing in the mid-’60s, saw the game changing early, and was determined that he — and his firm — not be left behind. “I wasn’t going to wait behind the walls of the city as the invaders were skimming all the cream off our milk,” says Winokur. “We were going to meet the enemy on their territory and compete with them there.” Since becoming chairman of Dechert in 1996, Winokur has followed a singular vision: Over time, he’s said, 10 to 20 huge law firms will handle most of the corporate legal work around the world, and he wants Dechert to be one of them. Not everyone is convinced Dechert is actually at that level, but it, along with Morgan Lewis & Bockius, has largely separated itself from the rest of the Philadelphia firms in terms of size and profits.
More recently, the firm of Duane Morris has gone on a growth binge. Behind the decade-long leadership of chairman Sheldon Bonovitz, Duane has gone from 225 lawyers to nearly 700, and opened offices in 25 cities around the country and world. “We were convinced we couldn’t survive at the size we were,” says Duane’s new chair, John Soroko, who succeeded Bonovitz in January, and who hopes to grow the firm to at least 1,000 lawyers in the near future.
Bigger firms and fiercer competition have changed the atmosphere in the Philly legal community from clubby to corporate … and occasionally nasty. Last May, Ballard Spahr chairman Arthur Makadon got local lawyers buzzing with remarks he made at the funeral of respected attorney Alan Davis. In his eulogy, he took shots at unnamed partners at WolfBlock — the firm Davis once worked for — who, Makadon suggested, had ruined the firm. It was the kind of dirty-laundry-airing that would have been hard to imagine a generation ago.
One of the people Makadon was referring to, rumor had it, was Charlie Kopp. Kopp declined to comment about the incident, but he certainly doesn’t disagree that the tenor of the legal world has changed. Although WolfBlock’s growth has been more modest — as of the beginning of this year, it had about 300 attorneys, up from around 150 in the mid-1980s — Kopp says things feel a lot different from the old days: “It’s tough to develop camaraderie when you don’t know half the people there.”
One other change has contributed to the coarsening of tone in the practice of law. A whole generation of once-idealistic lawyers — inspired by the Philadelphia Lawyer legend — all hit middle age, and its attendant crises, at the same time. “A lot of lawyers I know are in their basements at midnight, working on a screenplay or novel, trying to become the next Grisham,” says one attorney. “Law school teaches you how to be an asshole, and a bunch of us woke up around age 55 and said, ‘I don’t want to be an asshole anymore.’”
AMONG THE PEOPLE who run Philadelphia’s biggest firms, there isn’t much nostalgia for or sentimentality about the way things used to be. “People who lament the passing of the old days, I think they just don’t want to be judged on the merits,” says Makadon. Adds Steve Cozen, “There’s nothing mutually exclusive about being a good lawyer and using smart business practices.”
They’re not wrong: Running a firm efficiently and maximizing profits don’t necessarily harm the quality of work being done. In fact, no one claims the lawyers practicing in Philadelphia are any less adept than they ever were.
But efficiency does create winners and losers, and both Makadon and Cozen are clearly on the winners’ side. Among the losers, not everyone is happy with the current state of the world. Hit hardest by the changes in the profession are those lawyers in their late 40s and 50s dreaming of following in Grisham’s footsteps. They entered one legal world 25 or 30 years ago and now find themselves trying to function in a completely different one. “Before, people went to law school because they liked the intellectual challenge and they didn’t want to have to deal with marketing and sales and all that business stuff,” says Frank D’Amore, a local legal recruiter. “Now it’s all about marketing, it’s all about sales.”
D’Amore says there’s no question the level of discontent among lawyers is higher than ever. The problem faced by lawyers of a certain age is that it’s too late to drop out and start over at something else. “Most don’t do anything,” D’Amore says. “They suck it up.”
Maybe not surprisingly, the move to reform the profession is coming not from the top, but from the bottom — indeed, from people who aren’t even lawyers yet. Last year a group of students at Stanford launched an organization — it now has members at prominent law schools around the country, and this month is coming to Penn — called “Law Students Building a Better Legal Profession.”
“We see increasing billable hour requirements, decreasing professionalism, and a more dominant focus on the bottom line,” the manifesto on their website declares. “Law firms are jeopardizing the roots of the profession in assiduous service to our clients, community service, and justice. The time has come for change.” (Barack Obama, call your lawyer.)
Among the changes the students call for, the most notable is replacing the billable-hour model with transactional billing — in essence, charging clients for the work performed, not the time it takes to do it. Maybe even more significant, though, is that the organization has crafted its own rankings — a new generation’s answer to Steve Brill’s Am Law 100. It ranks firms not on profits, but on their culture and ability to provide work/life balance for attorneys. (For now, these rankings only focus on firms in a few cities; Philly isn’t among them.)
It’s too soon to tell whether the nascent movement will make a big difference — though the issue of work/life balance is something that managing partners at Philadelphia firms say they’re going to have no choice but to address. (Their general assessment of young lawyers is that they want to work less but get paid the same.) That said, no one currently in charge sees the billable hour going anyplace soon. “There has been talk for 30 years about alternatives to the hourly rate,” says Brad Hildebrandt, founder and chairman of the country’s largest law-firm consulting business. The biggest obstacle? Clients, who want to know what they’re paying for.
SO, WHAT WILL happen to Philadelphia’s biggest firms? In the current world, to stand still is to go backwards. As Alderman recently said, “There may be no place in the future for a 300-lawyer regional firm.”
Not growing — both in number of lawyers and offices around the country — means an increased risk of losing clients, which means an increased risk of declining profits, which means an increased risk of losing partners, which means an increased risk of losing clients … and on and on it goes, a vicious cycle that can quickly obliterate even what appears to be a healthy firm. Last year, 17 major law firms across the country dissolved.
One glimpse of what the future might look like is Duane Morris. With lawyers in 20 offices around the country, it’s now classified — by none other than American Lawyer — as a national firm, not a Philadelphia one. And it’s clear that Philadelphia is less and less crucial to its future. Every other year, Duane holds its annual partners meeting in Miami — and it doesn’t do anything to play up its Philadelphia roots. The firm can’t, John Soroko says, get a San Diego lawyer with a hefty client base to join the firm by selling its Philadelphia-ness. As he puts it carefully, smiling one day in the firm’s 17th Street offices, “We try not to be Philadelphia chauvinists.”
AS PART OF his class on law firms, Mark Alderman asks his students to do short presentations on the firms at which they worked as summer associates. One day in early February, two students got up. The first, a young man, recounted his experience last summer, in which he started working at the Washington, D.C., office of a West Coast-based firm, only to see that office close a week after he started. He managed to land a job at another firm in D.C. — only to see that one merge a few weeks later.
“That’s going to be pretty tough to beat,” Alderman laughed. “You basically just summed up this entire course.”
Next came a young woman whose presentation may have been even more instructive about where the legal industry is headed. As she talked about her summer — partly spent in London, partly in New York — she made reference to the “company” she was working for, then talked about a trend that “all the big law companies” were following. When her presentation was over, she was asked whether that phrase — law “companies,” not firms — was an emerging one in the business. She looked momentarily perplexed, then acknowledged that she had simply misspoken. She meant firms.
But the slip of the tongue may have been a more honest description of the state of the legal industry. While previous generations seemed to understand that there was such a thing as a higher calling, we’ve created a world where the only measure that matters is money. And so the big law companies will continue to manufacture and sell legal services in Philadelphia — and maybe every once in a while, if their billable-hour requirements allow it, the lawyers will stop to wonder where we’ll lead them next.