How a law firm might get caught between a rock and a hard place

The Outlook

January 04, 1998|By Stephen Kiehl

WHEN THE law firm of Smith, Somerville & Case LLC shut its doors last week, the reasons cited were a familiar litany for midsize firms: Clients today don't have a need for full-service law firms; they want small firms that concentrate in a few areas. Companies are moving to the suburbs, taking business away from downtown law firms. And corporations that used to be headquartered in Baltimore are being acquired by out-of-town companies, sending business that used to go to Baltimore firms elsewhere.

Smith, Somerville & Case had 26 partners and 45 lawyers, concentrating in 16 areas. Some legal observers said it couldn't offer the full service of large firms and couldn't offer the rates or efficiencies of small, boutique firms. Are medium-size law firms being squeezed out? Are large firms losing business to small boutiques? But are those boutiques so small that changes in laws or the market can wipe them out?

Mark Neumann

President, chief operating officer for Special Counsel, the largest provider of legal staffing in the country.

The problem is that there's been so much consolidation in the business and so many corporate accounts have left the area, there's just not enough work to go around. Work is going to niche firms that specialize or to very large firms that are able to take care of all (a company's) needs in a region or country or the world. Smith, Somerville wasn't big and it wasn't small. They weren't able to be full-service but they weren't as nimble as some of the others.

James L. Shea

Managing partner of Venable, Baetjer and Howard

The theory is that a firm of medium size has the cost structure of a large firm without its revenue base, and that's a hard economic position to be in. I'm not sure that tells the full story, because there are firms of that size that are doing well, and smaller firms that are not doing as well.

We're coming off two of the best years in our history, which is function of a good, loyal client base and a healthy economy. It's not the number of specialties; it's what specialties you have and where they fit in the market. If you're heavily dependent on an area that suddenly has tremendous economic pressure, that's difficult. You're better off if you have diversity in your portfolio.

There was a period of time when you heard that companies were hiring the lawyer, not the firm. I've seen a change over the past few years where companies are trying to whittle down lawyers to a few and looking to a very few firms to do as many different things as they can.

Irwin R. Kramer

Founder of his own law firm in Owings Mills and former chairman of the Solo Practitioners Committee of the Bar Association of Baltimore City

When you get out there in the battlefield of a trial, the judge and jury don't take resumes and they don't care where you went to BTC law school or how many attorneys you're partnered with. They care about the message, about whether the attorney is conducting himself or herself well. Clients are starting to discover that what matters is not the size of the firm or how many attorneys are handing the case but which attorneys are handling the case.

There is some advantage to being smaller. The advantage I find is that at a certain size there are no longer economies of scale, there are efficiencies of scale. There are things the (large) firm pays for that have to be passed on to the clients and there are fees clients don't want to pay if they're excessive. It seems that legal fees at large firms are certainly higher.

Clients are demanding two things: quality and efficiency. They want good work and they want it at a fair price. It's not difficult to find someone to take the case, it's tougher to find someone to take the case, do it well, and do it at a fair price. If we are not satisfying those effectively, then we are all doomed to failure.

Michael Hodes

Managing director of Hodes, Ullman, Pessin & Katz, a midsize firm with offices in Towson and Columbia

The practice of law is a pyramid. At the top is very unique work. The second level is reputation work. The third is bread-and-butter work, then commodity work -- you want to stay out of that because that's where you start getting price pressure. You make money with a reputation or specialty work.

A boutique can get that specialty work. But if enough people start doing that kind of work, specialty work can become commodity work. The big firms can take on a large client. The weakness those firms have is you better have a heck of a lot of those clients.

Smith, Somerville was between a rock and a hard place. They couldn't compete with Piper to do full service, but they were not seen as a boutique.

We see ourselves as in the range of the firms that have strong practice areas but we do not represent ourselves as being full service. We're known in specific areas, but there are many we can't handle. We're a niche firm with more than a single practice area.

Think of a practice as a three-legged stool. You want to have three legs that are very strong with a central focus. If you don't have a focus and say, "Gee, we're going to do anything," you're dead.

Pub Date: 1/04/98

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