2013 in Review: Two Trends in Law Schools

Two major trends have emerged over the past year in law schools around the country: (1) schools are piloting programs for students and grads to gain experience in-house, and (2) the ABA is now reconsidering implementing a practical skills requirement.

First, according to a December 2 National Law Journal article by Karen Sloan, schools like schools like Yeshiva University’s Benjamin N. Cardozo School of Law, University of Colorado Law School, and Northeastern University School of Law are teaming up with companies like Diamonds International, Credit Suisse, Morgan Stanley, Bank of New York Mellon, and Consolidated Edison where companies hire alums and recent grads on a one year, temporary basis at an affordable salary (i.e. around $40,000). As Sloan points out, this goes against “a prevalent notion that new lawyers don’t belong in-house”, as “legal departments have traditionally shied away from hiring green lawyers and training law students, preferring instead to hire laterally from law firms”. However, working with tighter budgets and an increased hesitancy due to the lingering recession, the appeal for companies is growing stronger. The appeal for students and alums is even more obvious. Such programs afford young lawyers the opportunity to build their skillsets and resumes at a younger age and experience level than has long been the norm. Moreover, there is great potential for companies and candidates alike to discern whether the match could be a long-term fit.

Second, law schools are also closely following developments with the American Bar Association. The ABA is currently considering whether to require that students complete up to 15 hours of “practical skills” credit hours. The general idea, like that of the pilot programs for gaining in-house experience, is to better equip and prepare students for whatever legal environment or area of law they choose to enter upon graduation. The State Bar of California approved such a mandate in October, and it is slated to go into effect in 2015. According to Karen Sloan in a December 9 NLJ article, such a policy would revise a plan which the ABA tentatively endorsed in back in August. That plan brought up for consideration 6 credits of “real-world experience”. However, Sloan goes on to say that since that time “the council has backtracked somewhat, agreeing to seek public comment on an alternative proposal to bump the requirement of 15 credits of clinics, simulation courses or externships.”

These trends, together with the overall decline in law school applications, make it clear that the landscape is shifting for law schools, students, and potential applicants as they face the new realities of the legal industry.

2013 in Review: Three Trends for the AmLaw 200

According to the 2013 LegalView Legal Market Index, and a corresponding article by Aric Press for AmLaw Daily, three major trends emerged in 2013 among the AmLaw 200: (1) the overall corporate spend on legal work declined by 5%, (2) firms in the second hundred gained market share from the first hundred, and (3) firms were able to slightly increase their billing rates after an extended period of little to no rate growth.

LegalView’s survey is based on a legal spend and trends seen among 70 of the AmLaw 200’s major clients, 33 of which are Fortune 1000. The survey is somewhat unique however in that, according to Press, “it is based on actual dollars paid by clients, not on surveys of law firm billings”.

Among the many findings of the survey, which looked at totals from Q1-Q3, the following stood out:

  • Total legal spend dropped 2% from $1.89B to $1.85B
  • Total hours billed dropped 5% from 6.1M to 5.8M
  • Among the top hundred, hours were down 6.4% and fees down 3.5%
  • For the second hundred, hours were up 6.2% and fees up 3.3%
  • Outside the AmLaw 200, hours were down 5.7% and fees down 2.5%
  • Average billable rates increased by 3%
  • AmLaw 100 billing rates increased from $466-$480
  • AmLaw second hundred billing rates increased from $338-$348
  • Outside the AmLaw 200, billing rates increased from $233-$241

To put this in perspective, take a look at the following 2 charts. Here we can clearly see that the AmLaw second 100 gained in market share, while rates across all firm categories increased by 3%.

It would also be interesting to see what the numbers look like in terms of market share once New York firms are factored out of the Top 100. By many accounts, New York firms did quite well in 2013, so the percentages for hours lost and fees collected are likely skewed by being significantly lower among various non-New York AmLaw 200 firms. Even so, the overall percentage of market share is still strongly in favor of the Top 100. Says Press: “The AmLaw 100 accounted for 40.9% of the total spending, a decrease of 0.7%,” while the “AmLaw second hundred increased their share by a full percentage point, taking 11.5% of the $1.8B clients paid.” However, if the demand for legal work and where it is going continues to shift in favor of the AmLaw second hundred, it will be interesting to see how the top 100 and firms outside the 200 respond.