VOL. 123 | NO. 247 | Thursday, December 18, 2008
Small Law Firms Brace Against Economic Storm
By Rebekah Hearn
Small boutique law firms and solo practices may be struggling in some ways during these economic times, but in general, most are weathering the economic storm, observers say.
How well a firm or solo attorney is doing certainly depends on the firm’s area of practice. Most attorneys do appear to be holding tight – and some even have had to hire additional support staff.
Maureen Holland, a solo practitioner at Holland & Associates PLLC, said the biggest problem she has faced with the recession is collecting on her accounts.
“(The recession) has not affected the clientele as much as it has affected my overall accounts receivables,” Holland said. “They have gone really high, but my ability to collect has become more challenging, because people aren’t in a position to maybe hire me.”
As a result, Holland said she has had to do more contingency-based work, which also is challenging to collect on, because in those cases she can only charge the client if she makes a recovery for them.
Holland primarily represents employees, and has seen more employees or former employees being sued by their employer or ex-employer.
“I’m seeing more people being pursued under former employers under documents (such as non-compete clauses) that they’ve signed, because the companies are needing the money, despite the legal fees to the company,” she said.
The Donati Law Firm LLP, a group of attorneys who also focus mostly on employee-related issues, Social Security disability appeals and veterans’ issues, has seen an increase in clientele, said attorney Billy Ryan.
“The downturn in the economy has definitely resulted in an increase in calls related to employment law issues,” Ryan said.
When the economy turns rough and more and more people get laid off, Ryan said, those types of calls increase.
The attorneys at the Donati Law Firm also mostly work on a contingency basis, although Ryan said they do charge an hourly rate to review severance packages offered to laid-off employees by their former employers.
Because of their contingency fee policy, not every call to the Donati Law Firm means money earned. However, Ryan said they still have seen an increase in clientele.
“I would say we’re pretty busy,” he said. “Our business picks up when the economy contracts. The guys who are getting squeezed are the guys who are doing real estate closings. Nobody’s buying houses, so nobody’s closing on loans and those people would have seen a downturn, I would imagine.”
Not all bad
Holland said she’s been lucky; so far, she has not had to scale back on her operating expenses.
“A lot of that has to do with hustling; working extra hard to try to get some matters in the door,” she said. “When the economy started getting bad, I immediately started paying attention to my overall expenses anyway, so I haven’t had to make an adjustment yet.”
Holland has one employee who serves as an administrative assistant/paralegal.
Ryan said at the Donati Law Firm, in addition to the hiring of another attorney, Ellen Donati, they have had to hire two additional support staff members “to assist with the increased demands on our staff.”
William Jeter of Jeter & Nahmias PLLC, a firm that focuses mostly on construction issues and litigation, said the firm hasn’t seen a marked decrease in clients.
The way Jeter’s firm operates also helps keep down operating expenses.
“So much of our stuff is done through the use of computers that we just don’t have a high overhead,” Jeter said.
In addition to Jeter, Adam Nahmias and James Lawson, the firm has six support staffers, three of whom are part-time students.
“We have not (had any difficulties),” Jeter said. “We are very cautious about what 2009 is going to bring, because we are very aware of the circumstances, just like everyone else.
“We have no plans to expand or get more lawyers or anything like that at this point, because it’s the same attitude I think a lot of firms – big, small, the whole lot – is it’s just kind of a wait-and-see situation.”
Jeter also said small firms that deal in real estate closings and sales have most likely encountered problems.
Jeter’s practice also represents some companies involved in mortgages, and much litigation has come about as the result of the local and national mortgage crisis.
One option Holland discussed with The Daily News is mediation. Although Holland is not a Rule 31 certified mediator, she said she uses mediation whenever possible to avoid expensive litigation.
“I think not only mediation, but non-litigation settlements, outside settlements, would increase,” she said. “I’ve noticed some clients are willing to resolve their cases under terms that they wouldn’t have two years ago. They would have held out longer, but now, with everybody needing money, they’re willing to resolve things more rapidly to try and get it done.”
Although some attorneys are doing well in this recession – and some, like Holland, have had to make some adjustments but are still keeping their heads above water – the legal profession is not necessarily recession-proof.
“I think it takes a while to get there, because even personal injury (and) insurance defense lawyers, when something like this happens, everyone wants to sue to try and get a little bit more money,” Jeter said. “And that spurs litigation.”
A recent survey published in The National Law Journal said two-thirds of law firms expect to lower their 2009 revenues – but these are mostly large firms.
The article, available at www.nlj.com, said “the economic slowdown has so far mostly harmed the balance sheets of big city firms with more than 250 attorneys," according to a new Altman Weil survey.
"Large law firms, or those with more than 250 lawyers … have felt the most impact on collections.”
Altman Weil polled 708 law firms in November and collected responses from 85 firms for the survey.
Holland said as a solo practitioner, she has learned how to operate her business so she doesn’t crash and burn in hard times.
“If you’re a small practitioner, you very quickly learn that it’s better not to overextend if at all possible,” she said.
Also, Holland said she’s seen the landscape of solo practitioners change recently.
“I have noticed people who are solo practitioners who have left solo practice to go with government work or more salary-driven positions, because it is very hard right now, and there is a lot of competition for the same dollar,” she said.
If a client calls around and compares prices for a consultation and comes back to Holland and asks her to lower her fee to match a competing attorney, in some cases, Holland said she will do so.
“Not always, not if it’s just an awfully difficult process that one really can’t afford to, but if at all possible, I certainly try to keep my prices competitive,” she said.
When her employee-driven clients come to see her, Holland said she often sees talented people who are “used to making good money” struggling with severance packages or trying to get new jobs.
“I do feel the impact of the economy,” she said. “I see what’s going on, and how it’s affecting my clients.”