Recession Offers Attorneys Chance To Branch Out

By Shannon Henson

Law360, New York (October 28, 2009) -- While the economic downturn has caused hardship for many law firms and lawyers, the hard times have also sparked entrepreneurship, with attorneys striking out on their own and forming boutiques.

The list of small firms that have been formed over the past few months is sizable.

Intellectual property boutiques Yamauchi & Mason LLC, Milstein Zhang & Wu LLC and Dennis Donahue & Associates and litigation boutiques Molo Lamken LLP and Ichter Thomas LLC are among the firms to hang out their shingles.

Some partners at larger firms have also moved to existing boutiques and smaller law firms. Corporate law boutique Bryant Burgher Jaffe & Roberts LLP, for example, recently added seven attorneys — including lawyers from Orrick Herrington & Sutcliffe LLP, Dewey & LeBoeuf LLP and Skadden Arps Slate Meagher & Flom LLP.

“The meltdown could be the impetus for the rebirth of the boutique practice,” said Gary Klein, founder and president of attorney recruiting firm Klein Landau & Romm Inc.

A number of things about boutiques make the firms attractive in lean times, consultants said.

Some lawyers may be compelled to start their own firms after being laid off, and others may yearn for the freedom to charge lower rates amid rate pressure from clients, they said.

“It's the catalyst to do what they wouldn't have done in good times,” said Brian Davis, partner at legal recruiting firm Major Lindsey & Africa. “It's driven by the economy and conflicts, and sometimes partners want to be more in control of their own destiny.”

Joseph Milstein and Philip Zhang — who formed Milstein Zhang & Wu recently with Duan Wu — said the recession, in some ways, had given their boutique an advantage.

“We can promise our clients high quality work, but we don't have as high of a profit expectation as large, national firms,” said Zhang, formerly with Cooley Godward Kronish LLP.

The co-managing principals said they sell their services by not only touting savings, but by showing clients that experienced attorneys — not junior associates — are handling their work.

Personally, Zhang and Milstein, who was with Hiscock & Barclay LLP, enjoy not having to run decisions through a slew of partners, they said, adding that being part of a boutique allows them to represent some clients that they couldn't handle at larger firms.

“Most large, national firms are built around litigation and big-ticket transactional work, and they are not that flexible in terms of giving discounts to entrepreneurs, startups or academic institutions,” Zhang said. “But a lot of patent work is associated with those entities.”

Cary Ichter, who recently left Adorno & Yoss LLP to form Atlanta-based Ichter Thomas LLC, said compensation pressure was what pushed him to return to his boutique roots. He previously practiced at a boutique from 1992 to 2003.

Ichter said he hadn't adjusted his rates, and that the recession was the “perfect environment” to start a business.

“Space is inexpensive. Talent is inexpensive. As long as you have financing lined up and you have a few clients, it's OK,” he said.

Boutiques like Ichter Thomas and Milstein Zhang & Wu may be able to prosper in a down economy — partly because of cost pressures felt by corporate America and the hard times facing some large firms.

“People who leave big firms to start their own boutique-like practices can prosper if they do it correctly,” Klein said.

Some boutiques — which can be defined as either small law firms or those that specialize in one practice area — are doing better than others in the recession, consultants said.

The boutiques that focus on countercyclical practice areas, for example, tend to be doing well, they said.

Joe Antonji, a consultant at Hildebrandt International Inc., said that pure litigation boutiques were thriving.

Labor and employment boutiques have also been successful, said Ward Bower, a principal at legal consulting firm Altman Weil Inc.

On the other hand, securities, mergers and acquisitions, and corporate boutiques may be “feeling the pain of the economy,” he said.

Many boutiques, Bower said, tend not to use lower prices as their marketing strategy with clients.

However, boutiques are in a better position to charge clients on an alternative fee basis, which has become fashionable in the downturn, because they have a better handle on their costs, he said.

“They are smaller, and it's easier to get their arms around the financial operation of the firm,” Bower said.