Leveraging the law

As one of the nation's largest and most profitable law firms, Morgan Lewis & Bockius L.L.P. of Center City seemed for a time to be immune from the layoffs that have been pounding the legal profession. While law firms nationwide began to whack away at both lawyer ranks and administrative staff last year, Morgan Lewis maintained that such cutbacks were not needed.

But on March 9, the firm said it could not hold out any longer, and announced that 55 lawyers and 161 staff in offices around the United States had been let go. Firm chairman Francis Milone said the move had as much to do with declining revenue as client expectations. Clients are not telling law firms how to run their business, but they are pressuring them to deliver a lot more for every dollar they spend.

And that, according to Milone, who last week was voted by the firm's partners to another five-year term as chairman, has triggered a huge industry restructuring.

Question: Law firms are still very profitable. Why do they need to downsize?

Answer: You have to make a judgment about whether you can keep people busy going forward. It is not healthy for a lawyer to not be busy, to have free time on his or her hands. You don't grow, you don't develop, you're not happy.

And from a cultural perspective, you don't want to build a firm that culturally is populated by a lot of people, or too many people, who don't have enough to do.

Q: Is that the only reason?

A: The other piece of it is the feedback we got from clients. Because they're looking at the way they want law firms to act. They're not going to be as willing to pay, frankly, to train new lawyers. So it's going to be harder to find things for new lawyers to do. And when we're paying new lawyers $160,000 and clients don't want to pay for them, you're putting them in a position where there may not be a lot of things for them to do.

Q: Were you hearing from your clients that they really didn't want to pay for first-year associates on their jobs?

A: We're hearing from some clients. It's a trend. We literally have some clients who are telling us they do not want us to put brand-new associates on their matters.

Some clients will tell you that, "I'd rather pay $1,000 an hour for somebody because they have the answer at their fingertips, they don't have to think long about it, they don't have to research it."

Q: Are clients asking you to discount your rates?

A: It's more subtle and, frankly, more sophisticated, than that. They're not just saying, "We want a discount." In fact, most of them, not most of them, many of them are now saying, "Discounts are not the answer." They want a higher correlation, frankly, between the value and the cost.

Q: How has the fee structure changed?

A: It's not uncommon anymore to work on a fixed-fee basis. Now you can't do it on all matters. But product-liability cases are being done now with some clients on a fixed-fee basis.. . . And the reason you can do it is because you sit down with a client and you work out how the document management piece is going to be handled, and who will handle it, and what kind of compensation and rate level is involved.

Q: But isn't the bottom line for clients to pay less, right? And aren't the general counsel offices under pressure from their own CEOs to cut costs.

A: Sure, every business is under pressure to cut costs. The general counsels are under pressure to cut costs. But they're a lot more, frankly, sophisticated than simply saying, "We want more for less." They really are focusing on outcomes and what the value of the outcome is to the business.

Q: Do you think that the practice of law at big law firms has gotten off track?

A: I think there was too much focus on money, on profit. I think there was a disconnect between this notion of value and the cost that clients were paying. I think there was too much competition among law firms based upon who made more money, and less upon how well we fulfilled our professional mission. And I think getting the pendulum to swing back more to where it belongs, more to the middle, is a good thing.

Q: So what are the strong practice areas for you now?

A: Right now our labor and employment practice is very busy. We're one of the firms that decided to continue to invest in it 10, 12, 15 years ago, when the fear among many law firms, I can't say, "all," obviously, many law firms, was that it was becoming a commoditized practice.

It's a very well-managed group in the sense that they team together well. We get very, very strong, positive reviews from clients on service and reputation and accountability.

Q: What other practice areas are strong?

A: Commercial litigation has been busy. Product-liability litigation has been busy. The only area in litigation where things have slowed down for us a little bit is in the securities enforcement area. And that's been more due to the fact that the change in administration has delayed some of the enforcement activities. White collar [litigation], particular criminal and government investigation work in a variety of industries, has been very, very busy.

Job: Chairman, Morgan, Lewis & Bockius L.L.P.

Age: 61

Residence: Villanova

Hobby: Enjoys working out

Family: Married. Two sons, one from an earlier marriage.EndText