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    October 6, 2008  
Silver Lining

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With the financial world upside down, we gathered Managing Partners Jamie Baker of Baker Botts, Shemin Proctor of Andrews Kurth, and Mark Flanagan of McKenna Long & Aldridge for insight on what the crisis means for legal business in DC. [Sadly, we already know what it means for our 401(k).]


To keep everyone’s stomach calm in the roiling markets, we made it a lunch at Smith & Wollensky with Jamie, Mark, Shemin, and awesome Bisnow sponsors Matt Medlin, Managing Director with the litigation support specialists at Huron Consulting, and Sudhakar Shenoy, CEO of IT outsourcing firm IMC. Bisnow’s Doug Anderson did moderator duties.

Bisnow: How are the events on Wall Street going to affect firms?
Mark: For a major trend, I’d look at a longer timeframe than the past couple of weeks. We had an explosion from 2001 to 2007 in the legal world, where we had double-digit growth, strong demand, strong productivity, and controlled expenses. That age is over and it’s been over for a while. Now expense growth is outpacing revenue growth, so the margin is compressing.
Bisnow: What do you do about that?
Mark: You think about efficiencies—incorporating more technological solutions into running the firm and delivering services. I also think firms have to start thinking more of a corporate approach for training people and retaining them to avoid the large turnover. 

What is the impact of the crisis on your workload for ’08 and ’09?

Jamie: We had a fairly long relationship with one of the AIG companies, though frankly we haven’t worked much with that client for a year—the winds were probably beginning to shift there. But overall, I think one thing we can comfortably speculate is that there’s likely to be a lot of regulation, or re-regulation, and it’s likely to come about fairly quickly. And that’s going to be very good for lawyers
Shemin: I’d echo that. It’s early for firms to start sculpting any internal changes because we’re still in the throes of this and it’s going to be fluid for a while. You don’t know the rules of the game yet. But the volatility in the market also increases M&A work. Our firm does that, and we do litigation, and we have a strong bankruptcy practice. So we’re thinking of it as opportunity, hopefully.
Bisnow: What will the regulatory work look like?
Jamie: I’ve heard people compare the situation to that surrounding the creation and activities of the Resolution Trust Corporation in the 80s. I don’t think that’s quite the right analogue because there the government was packaging assets and liabilities of failed institutions, whereas now they’re in a substantially different business. They’re going in to try to prevent the failure of institutions in the first place.
Bisnow: What kinds of litigation do you see coming?
Jamie: I think you’ll probably see derivative litigation against management. We have a pretty strong white collar practice that I expect will see some work—although where it comes from, who’s to say. 

I agree, I think white collar work is going to be up. There will be a certain element of congressional oversight that’s going to occur over the financial marketplace. That will be temporary. But after that, there will probably be more significant investigations over whether institutions misled the investing public about their financial condition.

Bisnow: Has anyone put hiring on hold?
Shemin: No. Actually, the executive departures might provide opportunity for additional candidates—from GCs’ offices of these companies or the executives themselves. For years, we law firms lost a lot of talent to the wealth of investment banks. Turnabout could be fair play here, we’ll see.
Jamie: That’s an interesting point. The associate raises last year were driven out of New York, principally by firms competing for talent with investment banks. And this year, we've seen a significant increase of interest among law students in starting their careers in Washington, where for the past several years, I think New York was probably the preferred option for many. So, I think we may see law grads moving from banking to law firms generally, and more associate candidates looking at Washington over the next few years.

John Ford is Bisnow’s Legal Editor. Send him inside scoops at

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