What the US legal market can expect in the year ahead

What trends can we expect to see in the US legal market over the next year?

1. Hardship for mid-sized firms

In a larger context, mid-sized law firms are continuing to experience difficulties. These concerns have been increasing since the economic difficulties first began in 2007-08. This period has demonstrated the unhappy reality that most law firms are simply not managed very well.

A law firm of 30 to 50 lawyers is a good-sized business and managing it properly requires management training and a substantial skill set. However, many lawyers continue to refuse the reality that good management is in fact a necessity, thinking that a lawyer should be able to maintain his practice while still managing the firm part of the time. That kind of thinking is akin to the idea – still supported by some – that global warming is a myth.

Firms that have made the Cartesian leap and have acknowledged this very basic fact of business are those that will survive this thinning of the herd, which is now a very big part of the uber-competitive legal market in cities like Los Angeles. There are 300 mid-sized firms around Century City, all gunning for the same fairly rare $100m to $500m companies.

Those law firms which are embracing and utilising technology, properly training and supporting lawyers and staff, and understanding that management is the key ingredient to success will further distance themselves from the others in 2013 and the years to come.

2. Professional liability claims

Professional liability claims will continue to beset law firms. The extraordinary rise in claims in certain practice areas (such as real estate) has levelled off, but we can expect the continuing occurrence of a large number of claims.

Some of this will be due to a lack of appropriate training of lawyers, which is perhaps at its lowest ebb in generations. The law firm pyramid structure of larger law firms through to the mid 1990s at least allowed for the training of associates. Training today for new ?lawyers is hard to come by, unless they are at AmLaw100 firms.

For better or worse, a lawyer is now seen as an integral part of the business transaction process, which can be a double-edged sword. If a transaction goes awry, it is hard to believe that there won’t be pressure applied to reduce fees (at best) or that a lawsuit isn’t a phone call away.

3. Sector changes

Beyond this, some practice areas may see an improvement. Family law may get some breaks because the worst of the financial crisis appears behind us, although some say that many couples stayed together simply because they couldn’t afford a divorce. That arena could get even busier and bruised feelings often end in acrimony, inwardly or outwardly directed (towards the lawyer).

Real estate transactions practices should begin to make a comeback (especially on the eastern seaboard), as will the inevitable insurance litigation sourced from the same storm.

Patent litigation will continue to be hot and heavy and other types of general business litigation may actually increase as businesses try to claw themselves back into the black.

If the immigration reform movement takes hold, an immigration law practice (generally very small and specialised) will become a very hot commodity.

On the contingency side, specialty asbestos litigation firms will continue to dwindle in number, but the larger better-financed firms will pick up the pace.

Class actions may become rarer, but the amount involved in the cases that survive should actually be larger.

Of course, pharmaceutical cases will continue unabated.

4. Evolution of technology

Technology will be both the helpmate and the bane of law firms in future. The recent news of IBM’s ability to utilise a DNA genome for data storage is a wake-up call to what the future holds.

Today, the real explosion is in the field of data deployment. Added to the calculation is the dizzying array of mobile devices and the whole question turns on speed and availability of information.

Data storage will inevitability head for the cloud and the question has become not how to integrate but how to utilise information. Here, again, there will be an ever-widening gap between law firms that grasp technology and those that don’t.

Tom Berman has been advising law firms on practice management and professional liability issues for over 20 years ?(www.bermanassociates.net)