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WHAT WE'RE WATCHING

CHECK ENGINE - With demand falling and expenses still surging by double digits, profits-per-lawyer dropped 3.6% last quarter, according to a new report. In legal industry parlance, that trend could be described as "not so good." The Law Firm Financial Index found that inflation, the competition for talent, office returns, as well as a continuing slowdown in corporate and M&A work, contributed to a second straight quarter of profit decline, Law.com's Andrew Maloney reports. Analysts wrote in the report that the overall index, a composite score of quarter-over-quarter changes in law firm profitability metrics, in the second quarter reached its lowest level since the global financial crisis, despite the fact that billing rate growth is still robust, realization has "vastly improved" and firms are investing heavily in new technology. The report, published Monday, likened the index to an "early warning" system in an automobile, showing that firms are "beginning to drift away from profitability growth." "Firms enjoyed growing profits per lawyer for seven consecutive quarters; but as momentum reversed, the [index] score and average profit-per-lawyer began to likewise decline," the report stated. "While firms have two more quarters before they realize their profits at the end of the year, this downward trend should serve as a warning of potential trouble."

QUALITY TIME -  When the pandemic hit in 2020, it brought many economic vectors to a standstill, within legal and beyond. Between 2020 and 2021, 70.5% of corporate legal departments cut outside vendors, while only 15.9% added them. Additionally, the median number of non-Big Law, non-ALSP vendors serving the typical legal department also dropped by 9%, according to data from LegalVIEW's 5th Insights report conducted by Wolters Kluwer. The survey is based on invoice data in the LegalVIEW database, which consists of $150 billion in invoice data from medium to enterprise-size Wolters Kluwer clients. However, while that may sound alarming, legal tech experts told Law.com's Isha Marathe that they're not necessarily worried. In fact, they think the thinning of the herd might be an opportunity for the existing legal tech vendors to load up on the necessary services within their products. What's more, the loss of outside counsel might pose an opportunity for tech to fill gaps. Brett Burney, principal at Burney Consultants and eLaw Evangelist at Nextpoint, told Marathe he thinks the loss of tech vendors might pose a chance for the competition to brush up on their "soft skills," that is, the service elements of their product. "I would see an opportunity here for vendors that are willing to put more into their services area, bringing value-add options to the relationship, and who put time and resources into that relationship instead of a bottom-line focus," Burney said.

ON THE RADAR - Honeywell Intelligrated and Idexcel Inc. were sued Monday in Pennsylvania Middle District Court over alleged employment discrimination. The lawsuit was filed by Karpf, Karpf & Cerutti on behalf of a former Honeywell safety coordinator who claims he experienced a 'sexual harassment double standard' while in the workplace in which women employees were permitted to engage in offensive and explicit behavior without consequence. Counsel have not yet appeared for the defendants. The case is 1:22-cv-01232, Barone v. Idexcel, Inc. et al. Stay up on the latest deals and litigation with the new Law.com Radar. 

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