Analysis

Agile But Vulnerable, Smaller Firms Fight To Weather Virus

By Natalie Rodriguez
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Law360 (March 27, 2020, 6:00 PM EDT) -- This summer, John Harrity, a name partner of patent boutique Harrity & Harrity LLP, planned to send an emergency drill text message to all his staffers requesting that they work remotely. It was supposed to be a simulation for what to do if a disaster struck. He planned not to give partners a heads-up that the text message was coming.

With many attorneys forced to work remotely because of the coronavirus outbreak, experts say small and midsize firms may be able to adapt to changes more readily than BigLaw. Above, a lone commuter crosses the street outside New York City's Grand Central Terminal during the normally busy morning rush hour. (AP)

Then the coronavirus pandemic hit, forcing him to recommend that most of his attorneys and staff start working remotely in mid-March.

When Harrity first spoke with Law360 on March 10, he felt the Virginia-based firm, which had already been liberally using video conferencing for internal communication, was relatively well prepared for the potential scenario of going fully remote. Five years ago, the firm had started offering more flexibility to attorneys, largely to appeal to potential recruits. The firm went cloud-based and paperless.

"The bigger firms are going to struggle during this time period way more because we're already ready for this," Harrity said.

Many midsize and smaller firms like Harrity & Harrity have had an edge over BigLaw when it comes to transitioning to remote work, whether because they had already started doing it or because their smaller size allowed them to be more nimble in putting together new response plans, according to experts. For many, however, the longer-term potential impact on business development is weighing heavily on smaller firms.

Harrity is steeling for the hit to the firm's work if the larger economic dip results in fewer patent applications. Other firms focused on such hard-hit practice areas, including litigation and deals, are already feeling significant pressures, and some small firms have begun to slash staff in response, according to John Remsen of The Remsen Group, a law firm management consultancy that often works with smaller and midsize firms.

"It's a very uncertain period," said Remsen, who has been holding regular calls with midsize and small firm managing partners.

In these early stages of the pandemic, the focus for many midsize and small law firm leaders has been simply working to stay connected to clients and either testing or adding technology to prepare for their offices to go remote.

"From a business continuity standpoint, you can never take a wait-and-see approach," Alan Tarter of midsize New York firm Tarter Krinsky & Drogin LLP said in early March.

Before New York City's lockdown measures went into effect, Tarter's firm had done a "full business continuity program" that included testing how phones, operations and administrative processes might work in the event the entire office had to work remotely.

"This way, if there are any gaps in our business continuity program, we can seal them now before we find ourselves in a crisis,"  Tarter said. "As a midsized firm, our clients rely on us to be their solution, not add to their problems. Likewise, our employees look to us to provide reassurances and support."

Mike Arias of California litigation boutique Arias Sanguinetti Wang & Torrijos LLP, which also has offices in Las Vegas and Montreal, started limiting client face-to-face meetings several weeks ago and moving toward more virtual or phone connections to protect attorneys and staff from the coronavirus.

"There is an understanding that you're dealing with a finite group of people, but not just the people in your office. You're dealing with them and their families," Arias said.

For many midsize and smaller firms, their size has meant fewer decision-makers in the mix and the ability to make policy changes and decisions quickly, according to Remsen. Smaller firms have often had the advantage of not needing to keep track of a patchwork of lockdown measures for offices across the country.

"If you're a large firm with offices scattered in different cities, states, you have different scenarios in each one of those offices," said James Cotterman, a principal at professional services consulting firm Altman Weil Inc.

A number of midsize and smaller firms — especially those that had already invested in connecting their workforce through technology — have been able to communicate well with lawyers and staff in these uncertain times. At many firms, managing partners and executive committee members are dividing up staff lists to check in one-on-one with people who are working remotely, according to Remsen.

The economic pressures and uncertainty that have come with the COVID-19 outbreak, however, are also putting many midsize and small-law leaders in a tough spot when it comes to staffing and financial decisions.

Many law firm leaders expect the pandemic to have a four-to-six-month immediate effect on their operations, which edges to where many could see significant bottom line issues, according to experts.

"There will be a lot of firms who don't get through this," Remsen said.

Part of the problem for many midsize and smaller firms is that they don't have the cash stash that BigLaw does. Some firm partners are already passing on their draws as cash flow tightens, while others are using their credit lines to cover partner draws, Remsen said. Still others are starting to — or thinking about — making staffing cuts.

"Most firms seem to be taking a blended approach," Remsen said.

So far, many firms are trying to hold onto staffers who have been loyal, according to Remsen. But he has also heard from one firm that cut its support staff by 75% in response to the pressures.

Remsen said he expects that more midsize and small firms will be forced to make cuts as well and that firms should use the situation as an opportunity to deal with chronic underperformers.

For many leaders of such firms, how they handle this crisis could mold their legacies, according to Remsen.

"It's time for you as a managing partner to step up," he said. "Your tenure will be largely dependent on how you handle this."

--Editing by Jill Coffey and Michael Watanabe.

For a reprint of this article, please contact reprints@law360.com.

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