Trends in the contract attorney market

We spent the last 9 days in Chicago, D.C., NYC and Philadelphia.  We met with Posse List members, law firms, e-discovery companies and staffing agencies, as well as a few in-house corporate legal departments where we have contacts.  We even managed meetings with our friends at the DOJ and some members of the Association of Corporate Counsel.

What follows are some brief observations on trends we see in the contract attorney market based on our meetings.  Some of these trends will have a greater affect on the major metro markets (Chicago, DC, LA) but most will affect the whole contract attorney market dynamic.  

Each observation below merits greater discussion which we will provide in the coming weeks (just in time for your holiday reading):

1.  Yes, it’s pretty dire out there.   But projects will begin again in January: FCPA cases, Federal government investigations, bankruptcy/restructuring and subprime/credit crunch work.   A good chunk of this work will come to the major metro centers (Chicago, DC and NYC) but the preferred locales are what the industry calls the lower cost “on shore” centers: Atlanta, Charlotte, Columbus, Houston, Indiana and even Los Angeles.  A fair amount will be in Philadelphia.  To keep up with bankruptcy, FCPA, subprime, and other aeas please go to our links in the right-hand column.

Side note on the increase in FCPA cases: we discussed the increase in FCPA cases with one of our DOJ contacts and our contacts at several law firms that have a niche for FCPA work.  The increase is due mainly to the expansion of U.S. companies into Eastern and Central Europe, Central Asia and the Far East — areas where pay-off/corruption is the by-word (whereas we excel at financial fraud, manipulation and meltdown).  U.S. companies need to hire local managers, they know the culture and they know what’s in store.  These are large U.S. corporations who hire law firms to “handle this” much to the glee of the law firms who have clients with deep pockets.  And the government action pick-ups because a competitor didn’t get the deal, knows why they didn’t get the deal, and an envelope with documents or an email with no return address gets routed to the DOJ.  The targeted corporation says “Shock! Horror!”, a few folks (custodians) get thrown under the bus and on we go.

Ok, we’ve simplified this and it deserves a fuller discussion.  But the trend in FCPA investigations is up (the source of most of the language projects we have been posting).  For an excellent site on FCPA cases please click here for The FCPA Blog. 

2.  Contract attorneys are being used more and more at both law firms and corporations for substantive work.  Although permanent associates are being laid off, the use of temporary attorneys for substantive work is on the rise as indicated by our postings. 

3.  Several smaller staffing agencies will close and we are told that at least one major staffing agency is “on the block”.  No one would go on record and we want to track down more info before we discuss specific agencies.

4.  Several DC/NYC law firms intend to go “direct hire” in 2009 because they like the Crowell and Covington models.  They have done cost structure reviews and the cost savings is significant, as is the control factor.

5.  One major caveat: all those we spoke with seem to think reviews will be shorter (in general) because negotiation/settlement will be the name of the game in 2009.

6.  The poor economy is causing a great part of this but a more long-term trend is the movement by clients and law firms toward using e-discovery companies rather than the regular staffing agencies – what several law firms affectionately called “the body shops”.  That’s been the trend for law firms in general.  We met with litigation support teams at several law firms.  In many law firms, the document review function is being taken away from law firm HR departments and put with the IT/litigation support departments.  Of the 14 law firms we met with, we’d say 75% were looking to go with e-discovery companies who can do “end-to-end” production.

This trend is client driven.  Corporations are taking more control over e-discovery.  The buzz words (repeated endlessly) are “secure more ownership”, “reduce costs”,  “early case assessment”, etc.  Clients are doing much of the work themselves directly with e-discovery companies, or directing their law firms how to proceed.  We think it’s why so many e-discovery companies are doing well in the DC and NYC markets, and growing in other markets.  We met several Posse List members whom have joined several e-discovery companies as analysts and project managers.  Posse List members have seen a greater number of e-discovery job posts these last 6 months.  While sitting in the reception areas of 6 law firms we visited in DC, NYC and Chicago we met 3-5 e-discovery companies waiting to meet the law firm’s IT/litigation support team.   We’ll have a further posting on these companies and their impact on the contract attorney job market. 

7. Which brings us to technology.  As the IT people tell us, there is so much great technology out there that they need to consider e-discovery company “end-to-end” solutions which in many cases they say boils down to “we don’t need a boatload of contract attorneys.”   And many of these e-discovery companies have built a permanent or temporary staffing component, or are looking to buy a body shop or strike a deal with a body shop.  The newest technology can parse and analyze documents at a higher level than the technology we saw just 2 years ago.  We sat in on demos at 4 law firms and were amazed at the reduction of costs by deploying high-end data culling and case management, plus transparent/auditable production.  And with the government buzz words of “negotiate, settle, get the $$$” it makes sense. 

This move to e-discovery technologies that are transparent, auditable and “trackable” (details on how searches are performed) with intricate database mapping has been reported elsewhere.  But it was interesting to see it demonstrated. 

Also, these e-discovery companies have a pricing model different from “the body shops” in that they price the front end per gig and the review/production per doc/per page.  They have some amazing algorithms and case mapping technologies.  

For two great web sites that analyze all manner of e-discovery technology and application we recommend Gabes Guide which you can access by clicking here, and Ralph Losey’s site called eDisovery Team which you can access by clicking here.

8.  India – the big gorilla in the room.  We discussed it at many of our meetings.  It’s a topic too large for purposes of this posting but in brief:

We look at India as stages of software.  Today we have “India 3.0”.  It started with legal research, mortgage processing/foreclosure and insurance claim processing (still major sectors), then it moved into document review, and now we have several well-established LPOs and a wide range of dedicated centers doing all types of things which were built/sponsored by U.S. companies and law firms. 

One of our staffers recently returned from India (he was there during the recent Mumbai tragedy).  He was in Bangalore, Chennai, Hyderbad, Mumbai, and Mysore.  It was a follow-up to a trip made to India early this year by the head of The Posse List. 

He met with a number of U.S. attorneys who were project managers for LPOs (independent Indian companies as well as divisions of U.S. staffing agencies) and he also met U.S. attorneys working for U.S. companies and U.S. law firms who have dedicated document centers.  Many complained they were still training Indian lawyers in proper English, the nuances of American slang, the structure of legal documents and court document formatting.  But the flow of work is quite high and the work included a high percentage of subprime/credit crisis work, legal analytics, discovery and litigation support, and document drafting. Several project managers indicated they were also getting bankruptcy filing and processing.

We will provide a more detailed review of his trip and the India saga but in the meantime please check our background stories about the India LPO market by clicking here.  Also, please see an excellent article on the geopolitics of the Mumbai attacks by clicking here.

That’s a brief look at the results of our meetings.  Please check the rest of our site for background articles on various facets of the contract attorney industry.  To get on our job notification lists please click the subscription drop-down in the menu bar above.

And please feel free to leave a comment below or email us at manager@theposselist.com