Big Law Firm Set to Review Client Base & Set New Client Minimum Billing Threshold of $200,000 a Year
In a recent article on WiredGC, John Wallbillich reports on a recent report on legalweek.com that the global law firm DLA Piper has set out to require minimum annual legal spends by its clients in order to have access to the firms legal services. Existing clients will be dropped sometime in the future if they fail to meet the prescribed minimums.
It is hoped the move... will help reduce conflicts where the firm has been prevented from taking on large instructions after previously accepting smaller mandates.
The firm will also assess all existing clients over the next three years to ascertain which companies it should target for more work and which it should consider dropping.
Wallbillich provides several thoughts on this new global framework below:
1. It makes some sense on the macro level. Large law firms are pricing themselves out of a segment of the legal market anyway. This just makes it clear upfront.
2. Two cheers for a concern about conflicts. Many larger law firms have had to develop an increasingly elastic definition of what constitutes a conflict. Some have even dropped long-standing smaller clients in favor of newer, larger clients. Again, it just makes explicit what has been going on anyway.
3. Sort of one-sided at this point. If I am a client who spends $200,000 right now, I might say “sure, but I need $225,000 of legal value next year, or I’ll walk before you can fire me.” Also, doesn’t this encourage padding or a year-end race to put enough hours in to keep the managing partner happy?
4. Quite a stark message to associates. Most partners at major firms were lucky to have $200,000 in *total* client origination when they made partner in the salad days. So what happens when a senior associate manages to pull a $75,000 matter from a new client as a trial balloon? Does each associate get one marker to call in on this each year? If not, see #5.
5. Hello, virtual law firms! I am an associate at a large law firm. I have 3 clients that generate a total of $150,000 per year. In the New World Order, they don’t pass the intake requirements. In the virtual firm world with overheads at only about 15%, those clients let me feed my spouse and one of my children. One more $50,000 client and I can eat, too.
6. Great advertising fodder for the competition. I can see it now. Full page ads in the American Lawyer from regional firms: “$20,000 Matters Look Good To Us.” It’s how credit unions are attacking the mega-banks today, with talk of lower fees, higher interest rates and better customer service. Heck, you don’t even need a high-priced ad agency to work up the campaign. The mind boggles what the offshore/LPO providers could do with $200,000 and a little forward planning.
7. The Next Wave or The Last Gasp? Some firms will have to look hard at minimum client spending. But it is redolent of a different era where law firms had less competition and clients had less information about pricing. Perhaps a few intrepid law firms will take the opportunity to go up-market. What firm will be the first to hit the $1 million annual minimum? (I think WLR&K may already be there).
What are your thoughts on this approach?
Related Story: Client Minimums and the Smaller Firm, WiredGC