Bloomberg Law
Dec. 8, 2022, 10:30 AM

Big Law Is Driving Blind Into Familiar, Low-Growth Territory

Roy Strom
Roy Strom

Welcome back to the Big Law Business column on the changing legal marketplace written by me, Roy Strom. Today, we look at the cloudy outlook for Big Law in 2023. Sign up to receive this column in your Inbox on Thursday mornings.

When Brad Hildebrandt and Gretta Rusanow put out their year-end report reviewing Big Law’s financial performance, they usually make detailed projections for the coming year. Not this time.

The outlook for Big Law is so cloudy that Hildebrandt said his team at Hildebrandt Consulting Citi Private Bank, where Rusanow is head of advisory services for the law firm group, decided not to even attempt a forecast.

“It’s one of the most difficult reports of our 15 years,” said Hildebrandt, a veteran law firm consultant. “This year, we just couldn’t figure it out. We just didn’t have enough data.”

The key message for the coming year is one that Big Law leaders should be familiar with at this point: Uncertainty.

Some firm leaders will be busy scrambling to undo decisions they made during the recent bull run. But many of the factors that will determine large firm performance in 2023 are out of managing partners’ control.

Will there be a recession? How deep will it be? Will geopolitical tensions ease? Can the tech sector and initial public offerings recover? What will happen with inflation and interest rate hikes by the Federal Reserve? How will that impact financial markets?

In the face of so many unanswerable questions, the easy answer is to be conservative. For Big Law, that means raise billing rates, prudently invest in top practices, and look for cost savings.

Where those savings will come from is perhaps the most important question for Big Law attorneys concerned that the answer will be to trim headcount.

Demand through nine months was down 1.2% compared to the same period a year ago, according to the Citi-Hildebrandt report. It does not anticipate a surge in demand, but rather a return to the slow-growth periods experienced after the Great Financial Crisis.

Lawyer headcount has grown 4.5% over the same stretch, driven mostly by increases in associates, while rising associate salaries have pushed expenses to surge by nearly 13%.

Over-hiring during the boom cycle of the last two years has already led to layoffs at Cooley. Other firms, including Kirkland & Ellis, have laid off attorneys under the auspices of an annual review process.

Firms are likely to seek higher attrition by letting go of “under-performing” attorneys during the review process, but Hildebrandt and Rusanow are skeptical that layoffs will sweep the industry. Many firms still regret the associate purge that followed the 2008-2009 recession, which left them with too few mid-level lawyers when the market rebounded.

“That’s a very clear memory for a lot of law firms,” Rusanow said. “And while it may be painful in the short-term next year, the market will rebound, and we may very well find ourselves in the war for talent again if firms make too many adjustments.”

Law firms with concentrated practices in poor-performing sectors, like tech or IPOs, are most at risk for layoffs, Hildebrandt said.

“The less diversified the firm is, the worse the problem is when that particular business model comes under pressure,” he said.

The last two years required managing partners to make an unusually large number of strategic decisions—it was a time of unprecedented, fast-paced change.

They had to determine how hard they’d ride the bull market. Many entered new, hot markets like special purpose acquisition companies. They had to decide whether to bulk up their associate base to expand capacity or, instead, pass up work opportunities. And they had decisions to make about how to allocate huge profits. It was an exciting time.

Managing partners are now facing, well, less exciting decisions, like whether to retrench or lay off associates. Many of them will be influenced by the actions they chose during the strongest two-year cycle for law firms in anyone’s memory.

Those whose growth plans were more conservative will face less pressure to right-size their firms. And even if they didn’t capture the highest profit growth during the boom, they’ll have less explaining to do with partners who are bound to see lower compensation this year.

It’s tempting to read the Citi-Hildebrandt report as advising Big Law managing partners to sit on their hands during a downturn and hope for the best on the other side. But Hildebrandt cautioned against that approach.

“Law firms are a business, they have to be run like a business,” he said. “You can’t just sit there and do nothing, that doesn’t work. Our report is saying be cautious about what you do.”

On Big Law Contingent Fees

Quinn Emanuel partner Derek Shaffer appeared in the US Court of Appeals for the Federal Circuit this week to argue in favor of a $185 million award granted to the firm for its work on a contingency fee case that won $3.7 billion for a group of health insurers. He didn’t get a warm reception.

Things got a little heated between Shaffer and Chief Judge Kimberly Moore, who chided Shaffer for being “aggressive” with the court during his arguments.

The transcript of what followed offers insight into the seemingly chaotic and random approach Big Law firms take to doling out huge contingent fees among their partners.

Moore: I was trying to sit here and figure out to myself why you’re being so aggressive, pointing your finger at us and sort of yelling at the court. And I realized: It’s your money. So, please continue.

Shaffer: I don’t mean to point my finger to be aggressive. I just mean Chief Judge Moore respectfully to push back on this—

Moore: You haven’t been respectful thus far, just so you know. Your approach has not been respectful.

Shaffer: Please accept my apologies to your honor.

Moore: I realize it’s your money. If I had $187 million on the line, I’d probably lose my cool a little, too, so go for it.

Shaffer: Chief Judge Moore, it’s not about that. And I want to point out that I personally did not participate in the action in question. So it’s not my good work.

Moore: When you say you didn’t participate in the action in question, are you a partner at Quinn Emanuel?

Shaffer: I am. In that sense.

Moore: Wait, wait. Does your profit and your paycheck reflect whether or not Quinn Emanuel gets this $187 million?

Shaffer: Your honor, I’d have to ask the powers that be what the—

Moore: Does your share of the partnership guarantee you a percentage of profit?

Shaffer: Now we’re getting into things that I’d put on the public record. It’s really subject to what the powers that be decide about to my entitlement for a particular year.

Moore: But don’t sit here and try to claim it’s not your money. It is your money.

Me: Maybe. Maybe not.

Worth Your Time

On Big Law Bonuses: Firms are matching last year’s bonus schedule, which as an admission to junior lawyers that times are tough, writes Tiana Headley.

On Crypto Regulation: A 63-year-old lawyer who has spent most of his career working for traditional financial players is giving the US Security and Exchange Commission one of its toughest fights against crypto regulation. Brian Baxter and Justin Wise profile Stuart Alderoty and his fight for Ripple Labs Inc.

On Twitter: Jim Baker, Twitter Inc.’s deputy general counsel, was pushed out of the company over his handling of information, Elon Musk said in a tweet. William Turton covers the story for Bloomberg. The company’s sole remaining deputy general counsel, Regina Lima, is in line to run its legal operations, Brian Baxter reported.

That’s it for this week! Thanks for reading and please send me your thoughts, critiques, and tips.

To contact the reporter on this story: Roy Strom in Chicago at

To contact the editors responsible for this story: Chris Opfer at; John Hughes at