Business boutiques among practices feeling the pinch

SPECIALTY LAW FIRMS REACT TO RECESSION

December 26, 1991|By Blair S. Walker

The recession drags on, but you'd never guess it from chatting with attorney Jonathan Schochor.

"The recession really has not affected [my] practice at all," said Mr. Schochor, a partner with the Baltimore law firm Schochor, Federico and Staton. His six-lawyer business is what is known in legal circles as a "boutique" -- a firm with a small number of attorneys specializing in one area of the law.

At Schochor, Federico and Staton, "the specialty is medical malpractice, so it hasn't directly been hit by the recession," Kerry D. Staton, another partner, noted.

Not so at Bass and Denick, a real estate boutique in Baltimore.

"Every law firm that is involved in business and real estate matters has felt the recession," managing partner Stuart L. Sagal said. "It's tighter, there's no question about that."

Mr. Sagal said he is fortunate in that his firm, which also has six lawyers, focuses more on the management side of real estate than on the development side.

So, although real estate transferals and development are down, condominium and homeowner associations collecting delinquent assessments from financially troubled tenants provide a good deal of business, Mr. Sagal said.

Boutique law firms differ from large, full-service law firms in the ways they cope with recessionary times. The latter might offset a downturn in one practice group with an upturn in another.

Boutiques, in contrast, are more of a hit-or-miss proposition.

"The boutique law firms that are in the depressed legal practice areas are obviously not doing well at all, and they have either lost partners, split up or merged," said Benjamin L. Landis, a Washington law firm management consultant. "This particular [economic] period is demonstrating the truth of the old saying, 'Don't put all your eggs in one basket.' And that's the basic structural weakness of a boutique law firm.

"But you have boutique law firms that are doing very, very well, because of the legal practice area," Mr. Landis said. He pointed to a proliferation of patent and trademark boutiques in the Washington area because of an increased workload in those areas.

"Another boutique-type law firm that is doing very well is a firm specializing in construction litigation . . . where developers are being sued by creditors," said Mr. Landis, who works with the Law Office Consulting Group.

A strength boutiques have is that they pay less than larger firms forsupport staff, equipment and rent, said Phillip P. O'Shaughnessy, a Baltimore attorney. His eight-lawyer downtown firm, Sandbower, Gabler and O'Shaughnessy, concentrates on civil litigation.

"I think that with a large law firm, its overhead is going to stay fairly fixed," Mr. O'Shaughnessy said. That is a real drawback when money gets tight, said the lawyer, who left Smith, Somerville and Case seven years ago to start his business.

"We handle disputes involving both people and corporations," he said. "And those disputes are going to happen in robust economic times, and they're going to continue in down economic times.

"Where we see the recession's impact is in the mix of business," Mr. O'Shaughnessy said. "For example, there are now more stockholder suits against corporations that have fallen on tough times. And we're defending some officers and some corporations from those suits."

Boutiques typically are created when lawyers such as Mr. O'Shaughnessy leave a large, established firm to start a small one, said Ward Bower, a Pennsylvania legal management consultant. The flip side is that large firms often absorb well-managed boutiques with legal specialties the big firm needs.

"It's sort of a cyclical thing," said Mr. Bower, a principal with Altman Weil Pensa Inc. in a Philadelphia suburb. "The result is, I don't think we're seeing necessarily any more boutique firms than we were several years ago, but we're seeing different ones as new spinoffs occur and boutiques are being acquired by big firms."

Environmental law and intellectual property are two particularly hot specialty areas, he said. Another twist: Basik & Bushel, a new Baltimore firm, specializes in property tax assessment appeals.

How would an estate and trust boutique fare in a recession? Pretty well, said Max E. Blumenthal, a lawyer who left Frank, Bernstein, Conaway & Goldman earlier this year to start Stewart, Plant and Blumenthal. He and his partners stepped out into an economic downturn that quickly developed into a full-blown recession.

"A lot of that, I think, became evident after we did this," Mr. Blumenthal said. "Remember, we did this in early spring.

"I think it's safe to say that we feel we are very much in control of our destiny. We would have done it anyway."

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