Convergence: Growing dissatisfaction with Biglaw and the Rise of the Alternatives

Presented at Harvard Law School

by Michael B. Moradzadeh and Yaacov Silberman

BIG LAW: TIME FOR CHANGE?

HOW DID WE GET HERE?

Cravath System of early 1900s

Specialization leads to assembly by 1950s

American lawyer rankings start in July 1987

Rise of Megafirms in late 1990s in

reaction to globalization and limited liability

Economic Crash of 2008

Ongoing changes in technology and society

Billing by hour starts to take over in 1960s

CRAVATH SYSTEM

In early 1900s, Paul Cravath turned the affiliation of partners with

apprenticeships model into an up-or-out salaried model with strong

management, specialization, and hierarchy. Associates who survived

became partners. This created a pyramid structure.

Senior Associate

Senior Partner

Junior Partner

Senior Associate

Junior Associate Junior Associate Junior Associate Junior Associate

Mid-Level Associate Mid-Level AssociateMid-Level Associate

Changes in society and business models from the 1920s,

and hyper-specialization resulting from Cravath System,

eventually brought the assembly line to law firms.

ASSEMBLY LINE

Before 1960s, elite law firms would send a bill for “services rendered”.

Clients began to demand clearer metrics, so law firms start billing by the hour.

In 1960s attorneys at elite firms were expected to bill about 1300 hours a year.

BILLABLE HOUR

AMERICAN LAWYER RANKINGS

In July 1987, American

Lawyer Magazine starts

ranking law firms by

profits and revenue.

Result: obsession with profits per partner and revenue. Leads to larger firm, more

leveraging, longer partner-track, higher billable rates, de-equitized partners, more lateral

movements, more mergers, higher pay for rain makers, and higher billing requirements.

Often to overall detriment of firm.

LIMITED LIABILITY PARTNERSHIPS

In 1992, only two states allowed LLPs, by 1996 over

forty states had adopted LLP statutes by the time LLPs

were added to the Uniform Partnership Act in 1996

21992

401996

Limited Liability Partnerships allowed for greater

risk when bringing in lateral partners. This led to

more movement of lateral partners.

Partnership structure is often short-term focused.

MEGAFIRMS

In response to globalization, Limited Liability Partnerships (1992)

and AmLaw revenue rankings, law firms compete for size, starting

in late 1990s. Desire to be everywhere their clients were.

Result: higher conflicts, more bureaucracy, increased leverage.

ECONOMIC CRASH

Overleveraged firms with large employee and real estate

Overhead, and high salaries promised to rainmakers, show vulnerability to

economic downturns, especially in 2001 and 2008.

RISE OF ALTERNATIVE MODELS

(2000) (2001) (2004)

(2008) (2008) (2008) (2008) (2008)

(2010) (2010)

Clerky

(2013)(2011)

WHAT PROBLEMS ARE WE TRYING TO SOLVE?

COST QUALITY LIFESTYLE

Too high

Unpredictable/O

paque

Poor Incentives

High leverage

Associates

learning on the job

Growing dissatisfaction

of attorneys in Big Firm

practice

Is there an alternative to

"Soul Crushing" work?

WHY NOW?Convergence of changes in

TECHNOLOGY, CULTURE and the

ECONOMY

THE ECONOMY HAS PLAYED A HUGE ROLE

Corporate legal departments are under

tremendous pressure to manage costs and justify

expenditures

Old model was squarely CYA

With increased focus on costs, alternatives to

Big Law (including in-house, solos, etc.) are

seen as increasingly legitimate options

CHANGES IN TECHNOLOGY

Disruptive Technology lowers the barrier to entry

enabling startups to compete with Big Law.

OLD REQUIREMENTS NEW MODEL

Real Estate

Technology

Infrastructure

Human capital

(admin)

Expensive

Research Tools

Cloud computing

Subscription model

Self Administration

Increased

competition from

resource providers

EXAMPLE: RIMON

Quartet

Firm-Wide Attorney

Meetings

Managers

Partners

Associates

TRADITIONAL MODEL

Product produced by Associates

STRUCTURE TECHNOLOGY

CHARACTERISTICS OF

ALTERNATIVE LEGAL

SERVICES MODELS

ALTERNATIVE FEE ARRANGEMENTS

Try to reward good work, not inefficiency!

Flat/Fixed

Fees

Partial

Contingency

Pooling

clients

Increased

focus on

project

management

DISTRIBUTED MODEL/ONLINE DELIVERY OF SERVICES

Palo Alto

Chicago

Seattle

Tel Aviv

Washington D.C.

New York Tyson’s Corner

Orange County

San Francisco

San Diego

Los Angeles

New Orleans

SEGMENTATION OF MARKET AND ASSIGNMENT OF WORK BASED ON RELATIVE IMPORTANCE

Would you have an aerospace engineer

repair your Vespa?

1

Bet the

Company

2

Important

3

Routine

EXPERIENCE

from some of the top law firms

in their respective fields.

10 YEARS

OF LEGAL EXPERIENCE

All of Rimon’s

partners have at least

Recognized by Best Lawyers of America and

SuperLawyers

Hold JDs, PhDs, LLMs, and MBAs from the best

universities in the United States and abroad

All attorneys working on every matter are highly

specialized in their respective field

Former partners at global law firms,

executives at global corporations, and

professors in business, law and science

SAMPLE OF REPRESENTATIVE CLIENTS

Big Law is not dead

Most prestigious firms

will continue to thrive

Innovation will need

to occur at all levels

CONCLUSION

THANK YOU