Fighting off a recession (Photo: MJgraphics/Shutterstock.com)

Law firm leaders and market watchers seem to agree: the question surrounding the next recession isn't "if," but "when?"

Several leaders of Philadelphia-based firms said that question has been top-of-mind, and it's shaping their strategies for the coming months.

Ballard Spahr chairman Mark Stewart said firms should be thinking about the Great Recession, and how they might handle another downturn differently.

With regard to his own firm, Stewart said, "We did some things I think were really right, and we did some things that were wrong."

One thing he said was helpful was that Ballard Spahr avoided "massive layoffs" at the junior associate level. At some firms, those were among the first positions to go in their cost-cutting measures.

Referring to the legal industry as a whole, Stewart said, "In some of those practice areas that were wiped out, it's been hard to rebuild." Instead, he suggested, "You have to keep an eye for the future and the fact that [the recession is] going to end."

Barry Levin, managing partner of Saul Ewing Arnstein & Lehr, also noted that industrywide, there seemed to be a hole in midlevel talent once recovery had begun.

"In the last recession, clearly we were impacted as everyone else in the business world was … we did slow down on hiring and we reduced our summer programs, but we didn't stop," Levin said. Looking forward, he added, "I would hope [that while] we'd have to adjust, we wouldn't have to do layoffs."

Levin said his firm is prepared for the next recession in part because of its continuous work toward maintaining a healthy balance sheet, managing receivables and generally running the business well. On the practice management side, he said the firm has made a special effort to embed bankruptcy and restructuring lawyers within its industry-targeted groups, including higher education, life sciences and real estate. The firm even created task forces to that end, which now meet regularly to discuss the restructuring issues that may arise soon.

"Through these task forces we have re-energized these groups to focus on those projects before they're actually there," Levin said. That hasn't yet required a focused effort on hiring bankruptcy lawyers, he noted, adding however that some of the 60 lawyers the firm has hired this year have turnaround experience.

But nationally, firms have been eager to bulk up their bankruptcy and restructuring groups. Major, Lindsey & Africa founder Jon Lindsey told The American Lawyer this week that every law firm Major Lindsey has visited recently listed bankruptcy as a top recruiting priority. He said lateral hiring in that practice area would likely reach its peak next year.

Still others, while they have noticed the signs of a recession ahead, don't feel the need to make many adjustments. They point to already strong counter-cyclical practices, or the fact that litigation often increases during economic downturns.

David Pudlin, president and CEO of Philadelphia midsize firm Hangley Aronchick Segal Pudlin & Schiller, said he has already seen some signs of what is to come.

"We are not doing any special preparation, in good part because most of our practice is relatively recession proof," Pudlin said in an email. "The good news is that our bankruptcy practice, which had been somewhat slow, has picked up, and perhaps that is an early sign of a coming recession."

Similarly, Matthew Taylor, chairman and chief executive officer of Philadelphia-based Duane Morris, said his firm is "bullish" about the future, even if there is another recession on the horizon, in part because of its broad-based practice, of which litigation accounts for the largest chunk.

Taylor said the firm's litigation practice grew during the last recession and he anticipates it will do so during the next one as well, thanks to what is likely to be an increase in demand for  bankruptcy, real estate and banking litigation, among other services.

"The things that companies are going to need to protect the most—their brand, their IP, their employees—we have practice groups to take care of that," Taylor said.

But if there's one thing the firm learned from the last recession, Taylor said, it's the importance of not overreacting to the possibility of another downturn, and instead concentrating on sustaining revenue and revenue-per-lawyer growth, while remaining debt-free.

"We're not economists, we're lawyers," he said. "We certainly look at the economy and pay attention … but we've just concentrated on our fundamentals."

He added, "Very few firms have had 10 years straight of sustained growth⁠—we're one of them. And we're going to have another very good year this year."