The Impact of the Economic Downturn on the Legal Industry

http://www.theglasshammer.com/news/2008/10/20/the-impact-of-the-economicdownturn-on-the-legal-industry/
by Heather Chapman (New York City)
The financial market isnt the only industry being affected by the recent downturn in the
U.S. economy. Businesses all across the nation have seen a decline in customers.
However, in the legal industry, the number of bankruptcy, litigation, regulatory
compliance, white-collar defense, and divorce cases has risen as people and businesses
try to either save themselves from collapse or cash in on someone elses. With questions
like Should I keep investing my money? to What do I do about my health insurance
plan? lawyers are finding that business is booming.
Rjon Robins, attorney and founder of a lawyer coaching website, says that he is seeing
more personal consumer bankruptcies. The biggest reason is the social factor. When
you see other people around you taking advantage of bankruptcy relief the social stigma
is reduced which makes the decision easier for you to make. The same is true of
commercial bankruptcies. Except that business owners tend to come to the decision a
little faster with the help of accountants and vendors who prevent them from avoiding the
reality of their predicament.
He continued, Litigation attorneys are seeing an uptick in new business. And we expect
that trend to continue too, but not necessarily because the economy is causing people to
have more reason for litigation. Rather every time we see a down-swing in the economy
what seems to happen is that people who might otherwise have focused on the future
instead of resorting to litigation start to try and tie-up loose ends.
Thomas W. Kerner, attorney for Kerner & Betts in Williamsburg, North Carolina, agrees.
He sees consumer debt collection and tax litigation rising, in addition to business-tobusiness (B2B) debt collection. Especially among contractors and subcontractors who
are not being paid because banks have pulled the funding on projects theyve put months
of work into; I would say 75-80% of it is directly or indirectly related to the building
slowdown, which has been fueled by the collapse of the housing market and the
tightening of lending practices which has caused a lot of projects to stop dead in their
tracks.
Julie, a lawyer in New York, says that her firm is seeing a rise in the amount of work in
their bankruptcy department, in addition to an increase in their tax department.
On the more personal side of matters, Clinton J. David, founding partner of Dallas, Texas,
law firm David, Goodman & Madole, says that divorce litigation is also on the rise. We
saw it in 2001-2002 and were probably going to see it again. The number one thing
couples fight over is money and with the pressures of job uncertainty, a declining stock

and housing market, shrinking 401Ks and the holiday shopping season coming up, cracks
in marriages become larger. And divorces in bad times tend to be uglier than divorces in
good times. A couples largest asset is their home. In good economic times, they can just
sell it and go their separate ways. In bad times, the house wont sell and even if it does
there may not be any profits to split.
Larger firms that handle several areas of law, instead of focusing on one, are so busy
trying to help and inform their clients that they have put together multidisciplinary task
forces. In an interview with the ABA Journal, Greg Markel, chairman of Cadwalader,
Wickersham & Tafts litigation department, said that, The severity of clients financial
issues is greater than anything Ive seen in 35 years. The dot-com bubble was a narrow
problem, whereas the credit crisis is so wide-ranging, there is a broad need for expertise.
There is more interaction among practice groups and more of a concerted effort among
the groups to address the complex needs of clients. Other firms such as Potter Anderson
& Corroon, Roetzel & Andress, Holland & Knight, Chadbourne & Parke, and Patton
Boggs have formed similar taskforces to advise their clients.
Yet despite the new business that lawyers across the country are receiving, the firms and
the lawyers who work for them are also being personally caught up in the negative
aspects of a declining economy. Due to the credit crunch, corporate businesses arent
necessarily paying the same high fees that they were, resulting in mass layoffs. Just this
past week, there was news of significant layoffs across the legal industry. In Chicago,
Sonnenschein Nath & Rosenthal let go of about 24 lawyers out of 680their second
round of dismissals this yearand Katten Muchin Rosenman laid off 21 lawyers out of
650. These arent the only firms laying off lawyers - big firms like Clifford Chance,
Cadwalader, and Thacher Proffitt & Wood have all recently laid off some of their cadre of
attorneys. Most experts expect this trend to continue, at least until the market shows
some sign of improvement.