In past economic downturns, law firms have typically been immune and held their own from a financial perspective. The recent recession, however, has had a devastating effect on the business aspect of the legal profession. In the past, many firms leaned on shareholder disputes, general litigation, and bankruptcy filings to get them through the tough times. Today, many firms are finding that business people are less inclined to incur the costs and expenses of litigation, and even angry shareholders are thinking twice before incurring the high costs of litigation.
In the bankruptcy arena, cases that used to linger for months—or even years—are quickly turning into sales of substantially all of the debtor’s assets or straightforward liquidations. As a result, thousands of attorneys have been laid off by some of the biggest and most profitable firms in the country. In addition, firms have de-equitized partners, laid off contract partners, cut salaries, downsized support staff, and cancelled on-campus interviews. Many law firms are rethinking their business models altogether. Some legal analysts are predicting that the legal market will not pick up until 2011, at the earliest.
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