John P. Heinz

The corporate law firm today bears little resemblance to the firms of the 1970s, and the corporate law firm of tomorrow may not even exist, according to a new analysis of urban law practice.

The most significant change in corporate law firms in the last quarter of the 20th century was the sheer increase in the size of the firms, according to John P. Heinz (IPR-Law), Robert L. Nelson (IPR-Sociology) and Edward O. Laumann at the University of Chicago. In a new working paper, the authors explore the costs and benefits of this trend and others that have transformed urban law. These changes include: increased demand for lawyers, greater competition among firms and from accounting and consulting firms, less-intimate relationships with clients, more women lawyers, and an increase in status of Catholic and Jewish lawyers.

The growth of firms is twofold. First, the number of lawyers has increased, to one lawyer per 303 residents in 1995 from one per 572 in 1971. Law firms also are hiring more lawyers. Today, a large New York law firm may have 1,000 or more lawyers, and most large practices operate offices in several major cities in the United States and abroad.

Second, the amount of legal work has grown. With an economy based on services rather than agriculture and heavy industry, the demand for legal services has risen. The nation’s booming economy during the 1990s further boosted demand.

Robert L. Nelson

As the number of lawyers has grown, so has the diversity in their ranks. More women now practice law, and many work for corporate firms, but a disproportionate number practice in the legal departments of corporations or government agencies.

In the past, Protestant lawyers dominated such prestigious areas of practice as securities work, patents, banking and tax work, and avoided the less-prestigious areas of divorce and personal injury work. Catholic lawyers were disproportionately likely to handle personal injury cases, and did relatively little banking, securities, and labor union work. Jewish lawyers were overrepresented in divorce and commercial law, while few did antitrust defense, patents, probate, and business litigation. Now, the work is spread proportionately among different religious groups.

In response to the increased demand for services to businesses, law firms reorganized their practices. One way of retaining a larger share of a client’s legal needs is to provide “one-stop shopping.”

“Many firms appear to believe that their corporate clients will find it advantageous to be able to have all of their problems—taxes, transactions, securities issues, labor and employment matters, or litigation—dealt with by the same law firm,” the authors note. Small firms and solo practitioners are out; megafirms are in. Lawyers are encouraged to specialize, even fresh from law school.

The cost of this transformation is a more distant relationship between lawyer and client. “When a law firm expands from 30 lawyers to 50, to 100, and then to 300 or 800, the officer of the corporation can no longer count on access to the personal advice of the firm’s senior partner on all legal issues. Tax matters will be sent to the tax department, litigation to the litigation department, and the senior partner may be tied up with staffing decisions for the firm’s new office in Prague,” the authors write. So despite a firm’s ability to provide “one-stop shopping,” a client has less loyalty to a particular firm because the days of long-term personal relationships are gone.

After documenting the changes in the field of urban law practice, the authors forecast changes—some of them dramatic—for the bar.

The authors speculate on the possibility of consulting firms, accounting firms, and financial services companies taking over the market for legal services. “Some would argue that accounting firms are already making inroads on corporate law practice,” they write. These new competitors have deep pockets to pay for hiring and marketing, and lengthy client lists that make a legal services branch easy to start and sustain.

“It may be increasingly difficult for firms composed exclusively of lawyers to remain competitive,” the authors note. “…The corporate work done by mid-range and lesser law firms—and perhaps, the more routine work done by large firms—is likely to be squeezed by competition from consulting firms, banks, and other financial services firms.”

But the most elite firms will remain intact, the authors predict, at least for now. “The most sophisticated work done in the top Wall Street firms and in their counterparts in other major cities requires a level of experience and expertise that is difficult to duplicate.”

(The working paper, “The scale of justice: Observations on the transformation of urban law practice,” may be ordered from IPR’s publications department.)