I recently wrote about the change in law firm structures here.
Several readers emailed me and pointed out I did not discuss the effect of corporate mergers or the impact of companies adopting ‘the Dupont legal model’.
Here is some background for current and future lawyers under age 40. When I graduated from law school in 1993, there were healthy defense-centric practices all over Mississippi. There were well-known great insurance defense firms in towns like Columbus, Laurel and Pascagoula. While there may not have been a ton of defense work in these towns, they had little competition. Insurance companies hired the local defense attorneys.
In a big case with a corporate defendant, a company might hire a Jackson firm. But the Jackson firm turned around and associated the local defense firm as ‘local counsel.’ This meant the small town defense lawyers had two ways of getting hired: (1) directly by the defendant; and (2) indirectly by other lawyers as local counsel. So not only were these firms not at a disadvantage to the big Jackson firms, in some ways they had advantages.
You may ask why the companies didn’t just hire a firm with multiple offices all over the state? Because there weren’t any. I can’t think of one firm with offices in multiple regions of the state. For sure, none of the ‘Big 5’ Jackson firms did.
This changed in the mid-90’s with the Dupont legal model. Here is an explanation from a 2004 ABA article:
In just over 11 years, the DuPont legal model has become enshrined as the way to get value for money in legal services. More than 160 corporations and government agencies have been in touch with E.I. DuPont de Nemours Co. to take a close look at the model, and there are a lot of variations at work around the country.
Devotees use fewer law firms and other legal-related service providers, develop a close relationship and a detailed playbook with them, then measure results to determine best practices. (See www.dupontlegalmodel.com.) DuPont was working with more than 350 law firms before it created the model. Now it uses just 41.
The first to get squeezed out by the Dupont model were the small town defense firms. If companies were going to hire a firm to cover a whole state, they wanted a statewide firm. Two things started happening almost simultaneously.
First, Jackson firms quickly opened outposts all over the state. Sometimes they hired established local attorneys to open the office, sometimes they dispatched talented young attorneys to the new offices. Second, regional firms opened offices in Mississippi. Suddenly the small town defense firms had competition from firms who could offer the Dupont model.
While all this was going on, the number of U.S. companies hiring attorneys was shrinking. From 1996 to 2016, the number of publicly traded companies shrank from 7,322 to 3,671. Locally, many companies that hired local attorneys were taken over by national companies that stopped hiring local attorneys.
Attorneys as old as me don’t need the stats. We just know there are a lot fewer corporate/insurance clients than 30 years ago. In Mississippi, I don’t believe there are half the corporate/ insurance clients there were in 1995.
For many of us–myself included–our best clients were bought by other companies where other people made hiring decisions and hired other lawyers. There was nothing worse than having a great relationship with an in-house attorney, only to have the caseload taken over by someone you didn’t like and who had stupid ideas for defending cases.
Everyone who did any defense work from 1990 – 2005 knows what I’m talking about.
In the 2000’s, we have fewer clients hiring fewer attorneys.
For litigation, that’s where there is litigation. Because while all that consolidation was happening, there was also consolidation of litigation itself. There are a lot fewer cases being litigated in fewer places.
These trends magnified the pressure on rainmaking. Thirty years ago, rainmaking wasn’t as important because there was a lot more rain. With so many clients hiring so many attorneys, it wasn’t as hard to have a book of business.
Compared to how it used to be, the legal industry is in a drought. In a drought, rainmakers are king.
Defense firms aren’t the only attorneys who have felt the pain. In a follow up post, I may discuss why attorneys with practices like mine are dinosaurs destined for extinction.