Prominent Firms Lag In New Ranking

By James Armstrong

Law360, New York (November 13, 2009) -- The shakeup in the legal industry in the past year has left some prominent firms less beloved by corporate counsel, according to a new report.

The report by the BTI Consulting Group Inc. (Wellesley, Mass.), which has interviewed corporate counsel for its yearly ranking for the past decade, showed several once consistently favored firms slip from the Client Service 30 list.

The BTI Client Service 30 recognizes the 30 law firms that corporate counsel rated the highest across 17 different criteria. These firms tend to set the standards by which other firms are measured by their clients.

Two prominent firms, Skadden Arps Slate Meagher & Flom LLP and Latham & Watkins LLP, ranked in the BTI Client Service 30 every year from 2002, have dropped off in the past couple of years as clients have come to expect different things from outside counsel.

Michael B. Rynowecer, president of BTI Consulting, said Skadden Arps was in the Client Service 30 last year but just missed ranking this year, coming in at No. 37.

Latham & Watkins had also consistently ranked in the Client Service 30, but it fell off the list last year. The firm ranked No. 39 this year.

A third firm, Sullivan & Cromwell LLP, has generally made the list, though it fell short in 2003. The firm fell off the list again this year, this time plummeting to No. 120.

While Skadden, Latham & Watkins and Sullivan & Cromwell might all still be excellent firms, they have not been able to keep pace with some of their competitors as the legal industry has undergone a sea change in the past two years, Rynowecer said.

“Client needs have changed in the past 24 months,” Rynowecer said. “They weren't able to keep up with some of the other firms that were doing a better job of adapting.”

Rynowecer said that with the collapse of Lehman Brothers Holdings Inc. and Bear Stearns Cos., and with the near collapse of American International Group Inc., clients now want to know not just what is going on in the economy, but also what is going on with other companies with which they do business.

Clients need a law firm that understands their business, and that means understanding their suppliers, their customers, their lenders and other companies they rely on to keep a business going, Rynowecer said.

In the difficult economic environment of the past two years, costs have also become an important factor. Clients are not necessarily seeking out the lowest fees but are looking for value for their money, Rynowecer said.

“Many clients are looking for flexibility in costs,” Rynowecer said. “Showing your clients that you're flexible can go a long way.”

Some clients might want to save money by sending work to more junior attorneys. Others might want to use more seasoned lawyers who can get the work done in fewer hours. The important thing is to listen to clients and not take a one-sided attitude, Rynowecer said.

One thing Skadden, Latham & Watkins and Sullivan & Cromwell all have in common is they were also ranked by clients as among the most arrogant law firms, according to the BTI Consulting report.

If a law firm is seen as occasionally being arrogant, it is not necessarily a big deal, Rynowecer said. The problem is that the industry has experienced a hairpin curve in the past two years, and if arrogance shows a lack of willingness to change, firms could be in for a rude awakening.

Rynowecer said he has seen changes in the legal industry as big as this recent shift only twice before now. The last time was after the tech bubble burst. The time before that was in 1991 with the Gulf War and a major recession.

“Then it was more about rates, more about costs,” Rynowecer said. “Now it's about working together to be more cost-effective.”

Law firms need to understand what their clients' objectives are, as well as what concerns or constraints they might have, Rynowecer said. Clients today want business advice, not just legal advice, and even highly ranked firms that fail to see that will likely fall behind, he said.

In the past few years, McDermott Will & Emery LLP, Gibson Dunn & Crutcher LLP, Ropes & Gray LLP and Davis Polk & Wardwell LLP, which all previously spent several years on the BTI Client Service 30, have all fallen off the list.

McDermott, which has not been on the list for a number of years, actually rose in its ranking last year, to No. 77 from No. 118. Gibson Dunn barely missed the list this year, coming in at No. 34. Ropes & Gray ranked No. 136, while Davis Polk came in at No. 84.

Timothy B. Corcoran, a senior consultant with legal consulting firm Altman Weil Inc., said the legal industry as a whole had a good run for a number of years, and high demand was the primary catalyst for a booming legal business.

Now that demand has declined and budgets are experiencing pressure at unprecedented levels, clients are expecting more, Corcoran said.

“The same things that they did three years ago may not be effective now,” Corcoran said. “Clients' expectations are always changing, and over the past two years corporate counsel have been asked to do more with less.”

Eventually, demand will return, but Corcoran does not think clients will be satisfied going back to business as usual after the economy recovers. Now that many firms, including smaller-sized firms, have innovated and offered better value, all firms might now be expected to embrace the new techniques.

Robert J. Henderson, owner of legal consultant RJH Consulting, says top-ranked firms tend to be organized so they can best meet a client's needs. No matter how a firm is organized, though, it has to make an investment in understanding the needs of clients, he said.

“As far as law firms are concerned, the ballgame is changing rapidly, and the firms that fall behind are not going to make it,” Henderson said.

Henderson added that if he were running a law firm that had fallen rapidly in client service rankings, he would want to do a thorough re-evaluation of the firm and how it serves clients.

The next few years will tell how many of the lagging firms do attempt to re-evaluate the way they serve clients, and if they do not — whether or not they will be able to survive.