Just before Christmas, a partner at one of the most perennially profitable law firms in the land told me a funny story about a former colleague’s explanation for jettisoning his career at the firm and entering academia. The Big Law refugee told his partners that being elected to their ranks was like winning a pie-eating contest, only to discover that the prize is more pie. It wasn’t worth it to put in years of crushing work to become a partner, he said, when partnership’s only reward (aside from heaps of money) is the right to continue to work yourself into numbness.
I laughed at the story, mostly at the vision of expensively suited law firm partners with their faces planted in coconut cream pies, but the context was serious. We were talking about the decline in law school applications. My Big Law companion – whose own children have avoided legal careers – said kids are smart to opt against a future in which the only certainty is law school debt. Too gloomy an outlook, especially from a partner at the pinnacle of the profession? He’s still working as hard as ever, after all. After we plowed through the Christmas party crowds at the restaurant bar and said our goodbyes, he headed back to his office to log a few more hours.
I think my Big Law friend is dead-on – and not just about the prospects for young lawyers. I suspect that 2014 is going to be a pivotal year for big-case litigators, a moment when the normal cycles of litigation combine with changes wrought by the U.S. Supreme Court to undermine the foundation of their practice. If firms fail to anticipate and adapt to looming declines in the cases they’re built to handle, new law school graduates won’t be the only lawyers looking for work.
The fall-off in smart device patent cases and litigation over mortgage-backed securities – two of the mainstays of big-firm litigation over the last five years – is a troubling, but not unusual, change for law firms, which are accustomed to the waxing and waning of particular practice areas as clients’ business strategies (and business conduct) change. To be sure, law firms will mourn the end of smart device and MBS litigation. There probably hasn’t ever been a set of patent cases as lucrative for lawyers as the smartphone wars, which have generated hundreds of millions, if not billions, of dollars in legal fees for such firms as Quinn Emanuel Urquhart & Sullivan; Morrison & Foerster; Wilmer Cutler Pickering Hale and Dorr; Sidley Austin and others lucky enough to represent Google, Samsung, Apple, Microsoft or one of the handful of smaller smart device players. Appeals of some of the many, many patent cases in which these competitors attempted to obliterate one another’s products are still under way, but, as I’ve said before, if the smartphone patent wars have taught us anything, it’s that cooperation in the form of cross-licensing deals – and not litigation – will be the only economically rational way forward for makers of products that employ dozens or more patents.
Litigation over the esoteric financial instruments that precipitated the financial crisis was also bound to fade away as we move further from the housing crash. Law firms with securities and white-collar defense practices have gotten fat in the last five years from representing banks accused of selling fraudulent mortgage-backed securities and collateralized debt obligations. And a long list of firms on the other side have done extremely well for themselves in asserting fraud and breach-of-contract claims against those banks, perhaps none more so than the tiny Texas firm of Gibbs & Bruns, which stands to earn about $150 million if both the Bank of America and JPMorgan Chase put-back settlements with private MBS investors go through. Plaintiffs shops like Quinn Emanuel (again!); Patterson Belknap Webb & Tyler; Kasowitz, Benson, Torres & Friedman; Bernstein Litowitz Berger & Grossmann; Labaton Sucharow; Robbins Geller Rudman & Dowd and Cohen Milstein Sellers & Toll (among many others) deserve credit for pioneering the theories that pushed the government to bring cases against MBS issuers and the credit rating agency Standard & Poor’s. But while the Justice Department still has plenty of time to assert claims and bring charges under the Financial Institutions Reform, Recovery and Enforcement Act, private investors don’t have the luxury of a 10-year statute of limitations. As the New York state appeals court highlighted in a ruling earlier this month on when the clock begins to tick on MBS breach-of-contract claims, time is almost up for MBS litigation.