Law firm
Encyclopedia
A law firm is a business entity formed by one or more lawyer
s to engage in the practice of law
. The primary service rendered by a law firm is to advise client
s (individuals or corporation
s) about their legal right
s and responsibilities
, and to represent clients in civil or criminal cases
, business transactions, and other matters in which legal advice and other assistance are sought.
and the United Kingdom
, there is a rule that only lawyers may have an ownership interest in, or be managers of, a law firm. Thus, law firms cannot quickly raise capital
through initial public offering
s on the stock market, like most corporation
s. They must either raise capital through additional capital contributions from existing or additional equity partners, or must take on debt, usually in the form of a line of credit
secured by their accounts receivable
.
In the United States this rule barring nonlawyer ownership is promulgated by the American Bar Association
and is adhered to in all U.S. jurisdictions, except the District of Columbia. The U.K. has a similar rule, but in recent years law firms have been able to take on a limited number of non-lawyer partners.
The rule was created in order to prevent conflicts of interest
. In the adversarial system
of justice, a lawyer has a duty to be a zealous and loyal advocate on behalf of the client, and also has a duty to not bill the client excessively. Also, as an officer of the court, a lawyer has a duty to be honest and to not file frivolous cases or raise frivolous defenses. A lawyer working as a shareholder-employee of a publicly traded law firm would be strongly tempted to evaluate decisions in terms of their effect on the stock price and the shareholders, which would directly conflict with the lawyer's duties to the client and to the courts.
s, who are joint owners and business directors
of the legal operation; associate
s, who are employees of the firm with the prospect of becoming partners; and a variety of staff employees, providing paralegal
, clerical, and other support services. An associate may have to wait as long as 9 years before the decision is made as to whether the associate "makes partner." Many law firms have an "up or out policy" (pioneered around 1900 by partner Paul Cravath
of Cravath, Swaine & Moore
): associates who do not make partner are required to resign and join another firm, go it alone as a solo practitioner, go to work in-house in a corporate legal department, or change profession
s (burnout
rates are very high in law).
Making partner is very prestigious at large or midsized firms, due to the competition that naturally results from higher associate-to-partner ratios. Such firms may take out advertisements in professionals publications to announce who has made partner. Traditionally, partners shared directly in the profits of the firm, after paying salaried employees, the landlord, and the usual costs of furniture, office supplies, and books for the law library
(or a database subscription). Partners in a limited liability partnership
can largely operate autonomously with regard to cultivating new business and servicing existing clients within their book of business
. However, many large law firms have moved to a two-tiered partnership model, with equity and non-equity partners
. Equity partners are considered to have ownership stakes in the firm, and share in the profits (and losses) of the firm. Non-equity partners are generally paid a fixed salary (albeit much higher than associates), and they are often granted certain limited voting rights with respect to firm operations. The oldest continuing partnership in the United States is that of Cadwalader, Wickersham & Taft, founded in 1792 in New York City
.
." As the Supreme Court of California
has noted, the title has acquired several related but distinct definitions which do not easily fit into the traditional partner-associate structure. These attorneys are people who work for the firm, like associates, although some firms have an independent contractor
relationship with their counsel. But unlike associates, and more like partners, they generally have their own clients, manage their own cases, and supervise associates. These relationships are structured to allow more senior attorneys to share in the resources and "brand name" of the firm without being a part of management or profit sharing decisions. The title is often seen among former associates who do not make partner, or who are laterally recruited to other firms, or who work as in-house counsel and then return to the big firm environment. At some firms, the title "of counsel" is given to retired partners who maintain ties to the firm. Sometimes "of counsel" refers to senior or experienced attorneys, such as foreign legal consultants with experience in international law and practice and their own clients. They are hired as independent contractors by large firms as a special arrangement, which may lead to profitable results for the partnership. In these situations "of counsel" could be considered to be a transitional status in the firm.
Smaller firms tend to focus on particular specialties of the law (e.g. patent law, labor law, tax law
, criminal defense, personal injury); larger firms may be composed of several specialized practice groups, allowing the firm to diversify their client base and market, and to offer a variety of services to their clients.
Large law firms usually have separate litigation and transactional departments. The transactional department advises clients and handles transactional legal work, such as drafting contracts, handling necessary legal applications and filings, and evaluating and ensuring compliance with relevant law; while the litigation department represents clients in court and handles necessary matters (such as discovery and motions filed with the court) throughout the process of litigation.
(1861–1865). The idea gradually spread across the Atlantic to England, although "English solicitors remained a corps of solo practitioners or very small partnerships until after World War II
." Today, the United States (and the United Kingdom) have many small firms (2 to 50 lawyers) and midsize firms (50 to 200 lawyers).
, antitrust
, intellectual property
, or telecommunications) and are called boutique law firms.
transactions, banking, and certain types of high-stakes corporate litigation. These firms rarely do plaintiffs' personal injury work. However the largest law firms are not very large compared to other major businesses (or even other professional services firms). In 2008, the largest law firm in the world was the British firm Clifford Chance
, which had revenue of over US$2 billion. This can be compared with $404 billion for the world's largest firm by turnover Exxon Mobil and $28 billion for the largest professional services firm Deloitte.
and a close focus on profits per partner (as opposed to sheer scale) has to date limited the size of most American law firms. Thus, whilst the most profitable law firms in the world remain in New York, four of the six largest firms in the world are based in London
in the United Kingdom
. But the huge size of the United States results in a larger number of large firms overall — a 2003 survey found that the United States alone had 901 law firms with more than 50 lawyers, while there were only 58 such firms in Canada, 44 in Great Britain, 14 in France, and 9 in Germany. There is an increasing tendency towards globalisation of law firms.
Due to their size, the U.S. and UK-based law firms are the most prestigious and powerful in the world, and they tend to dominate the international market for legal services. A 2007 research paper noted that firms from other countries merely pick over their leftovers: "[M]uch of the competition is relatively orderly whereby predominantly Australian, New Zealand, and Canadian firms compete for business not required by English or American law firms."
reported that 700 jobs were cut that one day at law firms across the country.] Among the firms closed included Heller Ehrman
, a San Francisco-based firm established in 1890 and Halliwells of the UK. Among those that survived, law firm layoffs became so common that trade publications like American Lawyer produced an ongoing “Layoff List” of the law firms nationwide that cut jobs.
In 2006, median salaries of new graduates ranged from US$50,000 per year in small firms (2 to 10 attorneys
) to US$160,000 per year in very large firms (more than 501 attorneys).
Many large firms in major markets such as New York City
, Los Angeles
, Washington DC, Boston
and Chicago
compensate new associates using the following pay scale:
Other markets such as Texas
start at US$160,000, but the annual increases are much smaller than the above scale.
With a few exceptions, markets such as Atlanta, Philadelphia, New Jersey
, Florida
, Denver, and Seattle generally start at US$35,000-US$50,000 for small law firms to US$130,000 or US$145,000 for large law firms.
With a few exceptions, most other U.S. markets start within US$20,000 to US$100,000.
As a result of the current recession, many firms froze salaries (no annual salary increases in January 2009), reverted to the early 2007 pay scale shown below, and/or cut salaries.
NYC bonuses (the highest in the U.S.) in 2007 were as follows:
In 2008, several firms reverted to the 2006 bonus structure (e.g., no special bonus) or creating a new scale as shown below.
Larger markets outside NYC typically match the base bonus without the special bonus. Smaller markets and/or smaller firms pay $5K to $20K bonuses, if any at all.
Some prominent law firms, like Goodwin Procter
and Paul Hastings, give generous signing bonuses (e.g., $20k) to incoming first-year associates who hold JD/MBA degrees.
s in the world (though only in 2004, Paul Hastings was the first firm to put its name on a skyscraper). Some solo practitioners practice out of their homes or in offices built as special additions to their homes.
Because their "work product" is often intangible, or at least conceptually difficult for clients to grasp, large corporate firms are notorious for using jaw-dropping interior design
(huge amount of floor space and fantastic views) as a "shock and awe" tactic to impress prospective clients and intimidate opposing counsel. Other firms will find more modest office space, depending on the nature of the practice.
In late 2001, it was widely publicized that one personal injury plaintiffs' firm in the state of New York has been experimenting with bus
-sized "mobile law offices." The firm insists that it does not "chase ambulances". It claims that a law office on wheels is more convenient for personal injury plaintiffs, who are often recovering from severe injuries and thus find it difficult to travel far from their homes for an intake interview.
, lateral hires and legal clients. Substantive rankings typically cover practice areas such as The American Lawyer
's Corporate Scorecard and Top IP Firms. Work place rankings are directed toward lawyers or law students, and cover such topics as quality of life, hours, family friendliness and salaries. Finally, statistical rankings generally cover profit-related data such as profits per partner and revenue per lawyer.
In an October 2007 press conference reported in The Wall Street Journal
and The New York Times
, the law student group Building a Better Legal Profession
released its first annual ranking of top law firms by average billable hours, pro bono participation, and demographic diversity. Most notably, the report ranked the percentages of women, African-Americans, Hispanics, Asian-Americans, and gays & lesbians at America's top law firms. The group has sent the information to top law schools around the country, encouraging students to take this demographic data into account when choosing where to work after graduation. As more students choose where to work based on the firms' diversity rankings, firms face an increasing market pressure in order to attract top recruits.
shows have revolved around relationships occurring in fictional law firms, highlighting both public fascination with and misperception of the lives of lawyers in high-powered settings.
Lawyer
A lawyer, according to Black's Law Dictionary, is "a person learned in the law; as an attorney, counsel or solicitor; a person who is practicing law." Law is the system of rules of conduct established by the sovereign government of a society to correct wrongs, maintain the stability of political...
s to engage in the practice of law
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...
. The primary service rendered by a law firm is to advise client
Consumer
Consumer is a broad label for any individuals or households that use goods generated within the economy. The concept of a consumer occurs in different contexts, so that the usage and significance of the term may vary.-Economics and marketing:...
s (individuals or corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
s) about their legal right
Right
Rights are legal, social, or ethical principles of freedom or entitlement; that is, rights are the fundamental normative rules about what is allowed of people or owed to people, according to some legal system, social convention, or ethical theory...
s and responsibilities
Obligation
An obligation is a requirement to take some course of action, whether legal or moral. There are also obligations in other normative contexts, such as obligations of etiquette, social obligations, and possibly...
, and to represent clients in civil or criminal cases
Criminal law
Criminal law, is the body of law that relates to crime. It might be defined as the body of rules that defines conduct that is not allowed because it is held to threaten, harm or endanger the safety and welfare of people, and that sets out the punishment to be imposed on people who do not obey...
, business transactions, and other matters in which legal advice and other assistance are sought.
Arrangements
Law firms are organized in a variety of ways, depending on the jurisdiction in which the firm practices. Common arrangements include:- Sole proprietorshipSole proprietorshipA sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business. The owner receives all profits and has unlimited responsibility for...
, in which the attorney is the law firm and is responsible for all profit, loss and liability; - General partnershipGeneral partnershipIn the commercial and legal parlance of most countries, a general partnership or simply a partnership, refers to an association of persons or an unincorporated company with the following major features:...
, in which all of the attorneys in the firm equally share ownership and liability; - Professional corporations, which issue stock to the attorneys in a fashion similar to that of a business corporation;
- Limited liability companyLimited liability companyA limited liability company is a flexible form of enterprise that blends elements of partnership and corporate structures. It is a legal form of company that provides limited liability to its owners in the vast majority of United States jurisdictions...
, in which the attorney-owners are called "members" but are not directly liable to third party creditors of the law firm; - Professional association, which operates similarly to a professional corporation or a limited liability company;
- Limited liability partnershipLimited liability partnershipA limited liability partnership is a partnership in which some or all partners have limited liability. It therefore exhibits elements of partnerships and corporations. In an LLP one partner is not responsible or liable for another partner's misconduct or negligence. This is an important...
(LLP), in which the attorney-owners are partners with one another, but no partner is liable to any creditor of the law firm nor is any partner liable for any negligence on the part of any other partner. The LLP is taxed as a partnership while enjoying the liability protection of a corporation.
Restrictions on ownership interests
In many countries, including the United StatesUnited States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
and the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
, there is a rule that only lawyers may have an ownership interest in, or be managers of, a law firm. Thus, law firms cannot quickly raise capital
Capital (economics)
In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...
through initial public offering
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
s on the stock market, like most corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
s. They must either raise capital through additional capital contributions from existing or additional equity partners, or must take on debt, usually in the form of a line of credit
Line of credit
A line of credit is any credit source extended to a government, business or individual by a bank or other financial institution. A line of credit may take several forms, such as overdraft protection, demand loan, special purpose, export packing credit, term loan, discounting, purchase of...
secured by their accounts receivable
Accounts receivable
Accounts receivable also known as Debtors, is money owed to a business by its clients and shown on its Balance Sheet as an asset...
.
In the United States this rule barring nonlawyer ownership is promulgated by the American Bar Association
American Bar Association
The American Bar Association , founded August 21, 1878, is a voluntary bar association of lawyers and law students, which is not specific to any jurisdiction in the United States. The ABA's most important stated activities are the setting of academic standards for law schools, and the formulation...
and is adhered to in all U.S. jurisdictions, except the District of Columbia. The U.K. has a similar rule, but in recent years law firms have been able to take on a limited number of non-lawyer partners.
The rule was created in order to prevent conflicts of interest
Conflict of interest
A conflict of interest occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other....
. In the adversarial system
Adversarial system
The adversarial system is a legal system where two advocates represent their parties' positions before an impartial person or group of people, usually a jury or judge, who attempt to determine the truth of the case...
of justice, a lawyer has a duty to be a zealous and loyal advocate on behalf of the client, and also has a duty to not bill the client excessively. Also, as an officer of the court, a lawyer has a duty to be honest and to not file frivolous cases or raise frivolous defenses. A lawyer working as a shareholder-employee of a publicly traded law firm would be strongly tempted to evaluate decisions in terms of their effect on the stock price and the shareholders, which would directly conflict with the lawyer's duties to the client and to the courts.
Partnership
Law firms are typically organized around partnerPartnership
A partnership is an arrangement where parties agree to cooperate to advance their mutual interests.Since humans are social beings, partnerships between individuals, businesses, interest-based organizations, schools, governments, and varied combinations thereof, have always been and remain commonplace...
s, who are joint owners and business directors
Board of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
of the legal operation; associate
Associate attorney
An associate attorney is a lower-level employee of a traditional law firm who does not hold an ownership interest as a partner.-Attorneys:An associate may be a junior or senior associate, but normally does not yet hold an ownership interest in the firm even if they have been associated with the...
s, who are employees of the firm with the prospect of becoming partners; and a variety of staff employees, providing paralegal
Paralegal
Paralegal is used in most jurisdictions to describe a paraprofessional who assists qualified lawyers in their legal work. This is true in the United States and many other countries. However, in Ontario, Canada, paralegals are licensed by the Law Society of Upper Canada, giving paralegals an...
, clerical, and other support services. An associate may have to wait as long as 9 years before the decision is made as to whether the associate "makes partner." Many law firms have an "up or out policy" (pioneered around 1900 by partner Paul Cravath
Paul Cravath
Paul Drennan Cravath was a prominent Manhattan lawyer and a partner of the law firm today known as Cravath, Swaine & Moore.-Biography:He graduated from Columbia Law School in 1886 and was awarded first Municipal Law prize....
of Cravath, Swaine & Moore
Cravath, Swaine & Moore
Cravath, Swaine & Moore LLP is a prominent American law firm based in New York City, with an additional office in London. The second oldest firm in the country, Cravath was founded in 1819 and consistently ranks first among the world's most prestigious law firms according to a survey of partners,...
): associates who do not make partner are required to resign and join another firm, go it alone as a solo practitioner, go to work in-house in a corporate legal department, or change profession
Profession
A profession is a vocation founded upon specialized educational training, the purpose of which is to supply disinterested counsel and service to others, for a direct and definite compensation, wholly apart from expectation of other business gain....
s (burnout
Burnout (psychology)
Burnout is a psychological term for the experience of long-term exhaustion and diminished interest. Research indicates general practitioners have the highest proportion of burnout cases; according to a recent Dutch study in Psychological Reports, no less than 40% of these experienced high levels of...
rates are very high in law).
Making partner is very prestigious at large or midsized firms, due to the competition that naturally results from higher associate-to-partner ratios. Such firms may take out advertisements in professionals publications to announce who has made partner. Traditionally, partners shared directly in the profits of the firm, after paying salaried employees, the landlord, and the usual costs of furniture, office supplies, and books for the law library
Law library
A law library is a library designed to assist law students, attorneys, judges, and their law clerks and anyone else who finds it necessary to correctly determine the state of the law....
(or a database subscription). Partners in a limited liability partnership
Limited liability partnership
A limited liability partnership is a partnership in which some or all partners have limited liability. It therefore exhibits elements of partnerships and corporations. In an LLP one partner is not responsible or liable for another partner's misconduct or negligence. This is an important...
can largely operate autonomously with regard to cultivating new business and servicing existing clients within their book of business
Book of business (law)
Book of business is common parlance in the United States legal services sector and refers to the collection of clients that a lawyer has assembled throughout his or her career. It is often used to refer to the valuation of such client following.Since most U.S...
. However, many large law firms have moved to a two-tiered partnership model, with equity and non-equity partners
Equity partner
An equity partner is a partner in a partnership who is a part owner of the business, and is entitled to a proportion of the distributable profits of the partnership...
. Equity partners are considered to have ownership stakes in the firm, and share in the profits (and losses) of the firm. Non-equity partners are generally paid a fixed salary (albeit much higher than associates), and they are often granted certain limited voting rights with respect to firm operations. The oldest continuing partnership in the United States is that of Cadwalader, Wickersham & Taft, founded in 1792 in New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
.
Termination of one's partnership
It is rare for a partner to be forced out by fellow partners, although that can happen if the partner commits a crime or malpractice, experiences disruptive mental illness, or is not contributing to the firm's overall profitability. However, some large firms have written into their partnership agreement a forced retirement age for partners, which can be anywhere from age 65 on up. In contrast, most corporate executives are at much higher risk of being fired, even when the underlying cause is not directly their fault, such as a drop in the company's stock price. Worldwide, partner retirement ages can be difficult to estimate and often vary widely, particularly because in many countries it is illegal to mandate a retirement age."Of counsel" role
In the United States, Canada and Japan, many large and midsize firms have attorneys with the job title of "counsel", "special counsel" or "of counselOf counsel
Of counsel is often the title of an attorney who is employed by a law firm or an organization, but is not an associate or a partner. Some firms use titles like "counsel," "special counsel," and "senior counsel" for the same concept...
." As the Supreme Court of California
Supreme Court of California
The Supreme Court of California is the highest state court in California. It is headquartered in San Francisco and regularly holds sessions in Los Angeles and Sacramento. Its decisions are binding on all other California state courts.-Composition:...
has noted, the title has acquired several related but distinct definitions which do not easily fit into the traditional partner-associate structure. These attorneys are people who work for the firm, like associates, although some firms have an independent contractor
Independent contractor
An independent contractor is a natural person, business, or corporation that provides goods or services to another entity under terms specified in a contract or within a verbal agreement. Unlike an employee, an independent contractor does not work regularly for an employer but works as and when...
relationship with their counsel. But unlike associates, and more like partners, they generally have their own clients, manage their own cases, and supervise associates. These relationships are structured to allow more senior attorneys to share in the resources and "brand name" of the firm without being a part of management or profit sharing decisions. The title is often seen among former associates who do not make partner, or who are laterally recruited to other firms, or who work as in-house counsel and then return to the big firm environment. At some firms, the title "of counsel" is given to retired partners who maintain ties to the firm. Sometimes "of counsel" refers to senior or experienced attorneys, such as foreign legal consultants with experience in international law and practice and their own clients. They are hired as independent contractors by large firms as a special arrangement, which may lead to profitable results for the partnership. In these situations "of counsel" could be considered to be a transitional status in the firm.
Mergers and acquisitions between law firms
Mergers, acquisitions, division and reorganizations occur between law firms as in other businesses. The specific books of business and specialization of attorneys as well as the professional ethical strictures surrounding conflict of interest can lead to firms splitting up to pursue different clients or practices, or merging or recruiting experienced attorneys to acquire new clients or practice areas. Results often vary between firms experiencing such transitions. Firms that gain new practice areas or departments through recruiting or mergers that are more complex and demanding (and typically more profitable) may see the focus, organization and resources of the firm shift dramatically towards those new departments. Conversely, firms may be merged among experienced attorneys as partners for purposes of shared financing and resources, while the different departments and practice areas within the new firm retain a significant degree of autonomy.Size
Law firms can be small or can be huge. The tiniest law firms are lawyers practicing alone, who form the vast majority of lawyers in nearly all countries.Smaller firms tend to focus on particular specialties of the law (e.g. patent law, labor law, tax law
Tax law
Tax law is the codified system of laws that describes government levies on economic transactions, commonly called taxes.-Major issues:Primary taxation issues facing the governments world over include;* taxes on income and wealth...
, criminal defense, personal injury); larger firms may be composed of several specialized practice groups, allowing the firm to diversify their client base and market, and to offer a variety of services to their clients.
Large law firms usually have separate litigation and transactional departments. The transactional department advises clients and handles transactional legal work, such as drafting contracts, handling necessary legal applications and filings, and evaluating and ensuring compliance with relevant law; while the litigation department represents clients in court and handles necessary matters (such as discovery and motions filed with the court) throughout the process of litigation.
First multi-lawyer law firms
The United States pioneered the concept of the large law firm in the sense of a business entity consisting of more than one lawyer. The first law firms with two or more lawyers appeared in the U.S. just prior to the American Civil WarAmerican Civil War
The American Civil War was a civil war fought in the United States of America. In response to the election of Abraham Lincoln as President of the United States, 11 southern slave states declared their secession from the United States and formed the Confederate States of America ; the other 25...
(1861–1865). The idea gradually spread across the Atlantic to England, although "English solicitors remained a corps of solo practitioners or very small partnerships until after World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
." Today, the United States (and the United Kingdom) have many small firms (2 to 50 lawyers) and midsize firms (50 to 200 lawyers).
Boutique law firms
Lawyers in small cities and towns may still have old-fashioned general practices, but most urban lawyers tend to be highly specialized due to the overwhelming complexity of the law today. Thus, some small firms in the cities specialize in practicing only one kind of law (like employmentEmployment
Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as:- Employee :...
, antitrust
Antitrust
The United States antitrust law is a body of laws that prohibits anti-competitive behavior and unfair business practices. Antitrust laws are intended to encourage competition in the marketplace. These competition laws make illegal certain practices deemed to hurt businesses or consumers or both,...
, intellectual property
Intellectual property
Intellectual property is a term referring to a number of distinct types of creations of the mind for which a set of exclusive rights are recognized—and the corresponding fields of law...
, or telecommunications) and are called boutique law firms.
"Megafirms" or Biglaw
The largest law firms have more than lawyers. These firms, often colloquially called "megafirms" or "biglaw", generally have offices on several continents, bill US$750 per hour or higher, and have a high ratio of support staff per attorney. Because of the localized and regional nature of firms, the relative size of a firm varies."Full service" firms
The largest firms like to call themselves "Big-Law" firms because they have sections specializing on each category of legal work, which in the U.S. usually means mergers and acquisitionsMergers and acquisitions
Mergers and acquisitions refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or...
transactions, banking, and certain types of high-stakes corporate litigation. These firms rarely do plaintiffs' personal injury work. However the largest law firms are not very large compared to other major businesses (or even other professional services firms). In 2008, the largest law firm in the world was the British firm Clifford Chance
Clifford Chance
Clifford Chance LLP is a global law firm headquartered in London, United Kingdom and a member of the 'Magic Circle' of leading UK law firms. It is one of the ten largest law firms in the world measured by both number of lawyers and revenue...
, which had revenue of over US$2 billion. This can be compared with $404 billion for the world's largest firm by turnover Exxon Mobil and $28 billion for the largest professional services firm Deloitte.
Worldwide
The largest law firms in the world are headquartered primarily in the United Kingdom and the United States. However, large firms of more than 1,000 lawyers are also found in Australia (Minter Ellison (1,500 attorneys),China (Dacheng 2,100 attorneys)and Spain Garrigues (2,100 attorneys).The American system of licensing attorneys on a state-by-state basis, the tradition of having a headquarters in a single U.S. stateU.S. state
A U.S. state is any one of the 50 federated states of the United States of America that share sovereignty with the federal government. Because of this shared sovereignty, an American is a citizen both of the federal entity and of his or her state of domicile. Four states use the official title of...
and a close focus on profits per partner (as opposed to sheer scale) has to date limited the size of most American law firms. Thus, whilst the most profitable law firms in the world remain in New York, four of the six largest firms in the world are based in London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
in the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
. But the huge size of the United States results in a larger number of large firms overall — a 2003 survey found that the United States alone had 901 law firms with more than 50 lawyers, while there were only 58 such firms in Canada, 44 in Great Britain, 14 in France, and 9 in Germany. There is an increasing tendency towards globalisation of law firms.
Due to their size, the U.S. and UK-based law firms are the most prestigious and powerful in the world, and they tend to dominate the international market for legal services. A 2007 research paper noted that firms from other countries merely pick over their leftovers: "[M]uch of the competition is relatively orderly whereby predominantly Australian, New Zealand, and Canadian firms compete for business not required by English or American law firms."
Recession
As a result of the U.S. recession in 2008 and 2009 many U.S. law firms have downsized staff considerably, and some have closed. The Denver Post reported that major law firms have cut more than 10,000 jobs nationwide in recent months. On February 12, 2009, BloombergBloomberg L.P.
Bloomberg L.P. is an American privately held financial software, media, and data company. Bloomberg makes up one third of the $16 billion global financial data market with estimated revenue of $6.9 billion. Bloomberg L.P...
reported that 700 jobs were cut that one day at law firms across the country.] Among the firms closed included Heller Ehrman
Heller Ehrman
Heller Ehrman LLP was an international law firm of more than 730 attorneys in 15 offices in the United States, Europe, and Asia. Heller Ehrman was founded in San Francisco in 1890 and had additional offices located in most of the major financial centers around the world including New York City, Los...
, a San Francisco-based firm established in 1890 and Halliwells of the UK. Among those that survived, law firm layoffs became so common that trade publications like American Lawyer produced an ongoing “Layoff List” of the law firms nationwide that cut jobs.
Salaries
Law firm salary structures typically depend on firm size. Small-firm salaries vary widely within countries and from one country to the next, and are not often publicly available. Because most countries do not have unified legal professions, there are often significant disparities in income among the various legal professions within a particular country. Finally, the availability of salary data also depends upon the existence of journalists and sociologists able to collect and analyze such data.United States
The U.S. is presently the only country with enough lawyers, as well as journalists and sociologists who specialize in studying them, to have widely available data on salary structures at major law firms.In 2006, median salaries of new graduates ranged from US$50,000 per year in small firms (2 to 10 attorneys
Lawyer
A lawyer, according to Black's Law Dictionary, is "a person learned in the law; as an attorney, counsel or solicitor; a person who is practicing law." Law is the system of rules of conduct established by the sovereign government of a society to correct wrongs, maintain the stability of political...
) to US$160,000 per year in very large firms (more than 501 attorneys).
Many large firms in major markets such as New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
, Los Angeles
Los Ángeles
Los Ángeles is the capital of the province of Biobío, in the commune of the same name, in Region VIII , in the center-south of Chile. It is located between the Laja and Biobío rivers. The population is 123,445 inhabitants...
, Washington DC, Boston
Boston
Boston is the capital of and largest city in Massachusetts, and is one of the oldest cities in the United States. The largest city in New England, Boston is regarded as the unofficial "Capital of New England" for its economic and cultural impact on the entire New England region. The city proper had...
and Chicago
Chicago
Chicago is the largest city in the US state of Illinois. With nearly 2.7 million residents, it is the most populous city in the Midwestern United States and the third most populous in the US, after New York City and Los Angeles...
compensate new associates using the following pay scale:
| Year | Salary (US$) |
|---|---|
| First | 160,000 |
| Second | 170,000 |
| Third | 185,000 |
| Fourth | 210,000 |
| Fifth | 230,000 |
| Sixth | 250,000 |
| Seventh | 270,000 |
| Eighth | 280,000 |
Other markets such as Texas
Texas
Texas is the second largest U.S. state by both area and population, and the largest state by area in the contiguous United States.The name, based on the Caddo word "Tejas" meaning "friends" or "allies", was applied by the Spanish to the Caddo themselves and to the region of their settlement in...
start at US$160,000, but the annual increases are much smaller than the above scale.
With a few exceptions, markets such as Atlanta, Philadelphia, New Jersey
New Jersey
New Jersey is a state in the Northeastern and Middle Atlantic regions of the United States. , its population was 8,791,894. It is bordered on the north and east by the state of New York, on the southeast and south by the Atlantic Ocean, on the west by Pennsylvania and on the southwest by Delaware...
, Florida
Florida
Florida is a state in the southeastern United States, located on the nation's Atlantic and Gulf coasts. It is bordered to the west by the Gulf of Mexico, to the north by Alabama and Georgia and to the east by the Atlantic Ocean. With a population of 18,801,310 as measured by the 2010 census, it...
, Denver, and Seattle generally start at US$35,000-US$50,000 for small law firms to US$130,000 or US$145,000 for large law firms.
With a few exceptions, most other U.S. markets start within US$20,000 to US$100,000.
As a result of the current recession, many firms froze salaries (no annual salary increases in January 2009), reverted to the early 2007 pay scale shown below, and/or cut salaries.
| Year | Salary (US$) |
|---|---|
| First | 145,000 |
| Second | 155,000 |
| Third | 170,000 |
| Fourth | 190,000 |
| Fifth | 210,000 |
| Sixth | 225,000 |
| Seventh | 240,000 |
| Eighth | 255,000 |
NYC bonuses (the highest in the U.S.) in 2007 were as follows:
| Year | Bonus (US$) |
|---|---|
| First | 45,000 (35,000 + 10,000 special bonus) |
| Second | 55,000 (40,000 + 15,000) |
| Third | 65,000 (45,000 + 20,000) |
| Fourth | 80,000 (50,000 + 30,000) |
| Fifth | 95,000 (55,000 + 40,000) |
| Sixth | 110,000 (60,000 + 50,000) |
| Seventh | 115,000 (65,000 + 50,000) |
In 2008, several firms reverted to the 2006 bonus structure (e.g., no special bonus) or creating a new scale as shown below.
| Year | Bonus (US$) |
|---|---|
| First | 17,500 |
| Second | 20,000 |
| Third | 22,500 |
| Fourth | 25,000 |
| Fifth | 27,500 |
| Sixth | 30,000 |
| Seventh | 32,500 |
Larger markets outside NYC typically match the base bonus without the special bonus. Smaller markets and/or smaller firms pay $5K to $20K bonuses, if any at all.
Some prominent law firms, like Goodwin Procter
Goodwin Procter
Goodwin Procter LLP is a prominent law firm based in the United States, consisting of 850 attorneys serving clients in Boston, Hong Kong, London, Los Angeles, New York City, Silicon Valley, San Diego, San Francisco, and Washington, D.C....
and Paul Hastings, give generous signing bonuses (e.g., $20k) to incoming first-year associates who hold JD/MBA degrees.
Location
Most law firms are located in office buildings of various sizes, ranging from modest one-story buildings (e.g. SLC), to some of the tallest skyscraperSkyscraper
A skyscraper is a tall, continuously habitable building of many stories, often designed for office and commercial use. There is no official definition or height above which a building may be classified as a skyscraper...
s in the world (though only in 2004, Paul Hastings was the first firm to put its name on a skyscraper). Some solo practitioners practice out of their homes or in offices built as special additions to their homes.
Because their "work product" is often intangible, or at least conceptually difficult for clients to grasp, large corporate firms are notorious for using jaw-dropping interior design
Interior design
Interior design describes a group of various yet related projects that involve turning an interior space into an effective setting for the range of human activities are to take place there. An interior designer is someone who conducts such projects...
(huge amount of floor space and fantastic views) as a "shock and awe" tactic to impress prospective clients and intimidate opposing counsel. Other firms will find more modest office space, depending on the nature of the practice.
In late 2001, it was widely publicized that one personal injury plaintiffs' firm in the state of New York has been experimenting with bus
Bus
A bus is a road vehicle designed to carry passengers. Buses can have a capacity as high as 300 passengers. The most common type of bus is the single-decker bus, with larger loads carried by double-decker buses and articulated buses, and smaller loads carried by midibuses and minibuses; coaches are...
-sized "mobile law offices." The firm insists that it does not "chase ambulances". It claims that a law office on wheels is more convenient for personal injury plaintiffs, who are often recovering from severe injuries and thus find it difficult to travel far from their homes for an intake interview.
Rankings
As legal practice is adversarial, law firm rankings are widely relied on by prospective associatesAssociate attorney
An associate attorney is a lower-level employee of a traditional law firm who does not hold an ownership interest as a partner.-Attorneys:An associate may be a junior or senior associate, but normally does not yet hold an ownership interest in the firm even if they have been associated with the...
, lateral hires and legal clients. Substantive rankings typically cover practice areas such as The American Lawyer
The American Lawyer
The American Lawyer is a monthly law magazine published by ALM. It was founded in 1979 by Steven Brill. Features include the annual AmLaw 100 Survey and AmLaw 200 Survey , "The View From the Top", their annual poll of law firm chairpersons, and their "Corporate Scorecard"...
's Corporate Scorecard and Top IP Firms. Work place rankings are directed toward lawyers or law students, and cover such topics as quality of life, hours, family friendliness and salaries. Finally, statistical rankings generally cover profit-related data such as profits per partner and revenue per lawyer.
In an October 2007 press conference reported in The Wall Street Journal
The Wall Street Journal
The Wall Street Journal is an American English-language international daily newspaper. It is published in New York City by Dow Jones & Company, a division of News Corporation, along with the Asian and European editions of the Journal....
and The New York Times
The New York Times
The New York Times is an American daily newspaper founded and continuously published in New York City since 1851. The New York Times has won 106 Pulitzer Prizes, the most of any news organization...
, the law student group Building a Better Legal Profession
Building a Better Legal Profession
Building a Better Legal Profession is a national grassroots organization founded by students at Stanford Law School in January 2007. The group collects and publicizes employment data at large private law firms as a way of encouraging workplace reform at these companies...
released its first annual ranking of top law firms by average billable hours, pro bono participation, and demographic diversity. Most notably, the report ranked the percentages of women, African-Americans, Hispanics, Asian-Americans, and gays & lesbians at America's top law firms. The group has sent the information to top law schools around the country, encouraging students to take this demographic data into account when choosing where to work after graduation. As more students choose where to work based on the firms' diversity rankings, firms face an increasing market pressure in order to attract top recruits.
Television shows
A number of televisionTelevision
Television is a telecommunication medium for transmitting and receiving moving images that can be monochrome or colored, with accompanying sound...
shows have revolved around relationships occurring in fictional law firms, highlighting both public fascination with and misperception of the lives of lawyers in high-powered settings.
See also
- Big Five law firms (South Africa)Big Five law firms (South Africa)The Big Five law firms is a term informally used in South Africa to refer to those law firms which, collectively, are perceived to be the largest firms based in South Africa....
- Big Six law firms (Australia)Big Six law firms (Australia)The Big Six law firms is a term informally used in Australia to refer to those firms which, collectively, are perceived to be the largest firms headquartered in Australia and distinguished in comparison to their other competitors...
- Bitter LawyerBitter LawyerBitterLawyer.com is a legal humor and news blog targeted at disgruntled lawyers. The site features a webshow titled Living the Dream, created by Rick Eid, which follows the bumblings of fictional big law junior associate Nick Conley . Accompanying blog posts describe the real-life inspirations...
- Book of business (law)Book of business (law)Book of business is common parlance in the United States legal services sector and refers to the collection of clients that a lawyer has assembled throughout his or her career. It is often used to refer to the valuation of such client following.Since most U.S...
- Law firm network
- List of 100 largest law firms globally
- Magic CircleMagic Circle (law)The "Magic Circle" is an informal term used to collectively describe what are generally regarded to be the five leading UK-headquartered law firms and the four or five leading London-based commercial barristers' chambers.-Law firms:...
- Multidisciplinary professional services networksMultidisciplinary professional services networksMultidisciplinary professional services networks are organizations formed by law, accounting and other professional services firms to offer clients new multidisciplinary approaches solving increasingly complex issues. They are a type of professional services network which operates to provide...
- Offshore magic circleOffshore magic circleThe offshore magic circle refers to a number of law firms practicing in offshore jurisdictions which are considered to be amongst the leaders in the field. The term was adopted as an imitation of the more well-recognised London Magic Circle law firms...
- Seven Sisters (major Canadian law firms)Seven Sisters (law firms)The Seven Sisters refers to a collection of seven leading Canadian law firms with offices in Toronto. The term can be traced back to at least 2001, when it may have been coined by Sandra Rubin to describe the top seven Canadian law firms by mergers and acquisitions deal volume...
- White shoe firmWhite shoe firmWhite shoe firm is a phrase used to describe the leading professional services firms in the United States, particularly firms that have been in existence for more than a century and represent Fortune 500 companies...