Alternative Dispute Resolution
May 30, 2001
Outhouse to In House
The effects of the dot-com bust can be seen in law firms, where lawyers who last year regularly billed 200 hours per week are doing the unthinkable: having dinner with their families.
Over the last few years, law firm associate salaries have increased dramatically (much like my waistline). In many large firms, associate salaries increased by almost 25 percent in 2000.
These salary increases partly resulted from the increased burden placed on associates by the proliferation of dot-coms. The dot-coms produced a slew of work for lawyers, particularly in the areas of finance, securities and intellectual property. However, now that the dot-coms are disappearing faster than furniture from the White House during Clinton's last days, law firms may be in for some tough times.
Already, the effects of the dot-com bust can be seen in law firms. Lawyers who last year regularly billed 200 hours per week are doing the unthinkable: having dinner with their families.
In fact, one associate said, "It is amazing. Last week, I went to a matinee with ... you know, my son ... whatshisname ... the short one."
Of course, if this keeps up, law firm profits will not justify these increased associate salaries. In fact, speculation has begun that many law firms may be forced to resort to the "L" word - no, not "lobotomy" (that is reserved for after you make partner) - but rather "layoffs." If these layoffs occur, they will leave many lawyers in search of other arenas in which to use their talents.
Hopefully, some lawyers will use this opportunity to pursue rewarding and fulfilling careers, such as teaching. However, for those without the requisite paramilitary training to survive in the public schools, there are opportunities available within the law. One such opportunity is to become an in-house lawyer.
For some law firm lawyers, the thought of practicing "in-house" is much like the thought of being put out to pasture. Trust me, I understand this way of thinking. After all, I haven't always worked in-house (it just seems that way).
I began my law career as a "rough and tumble" M&A lawyer. I still remember the thrill of working on billion-dollar deals: the late nights and early mornings, the first-class flights and chauffeured limousines, and the continual threats of divorce from my wife. Yep, the good old days.
Back then, my colleagues and I regarded in-house legal work as akin to rearing our children; sure, somebody had to do it, but it darn sure wasn't going to be us. Of course, every once in a while, some member of the firm would leave to go work for a client. Our conversations regarding the departure usually went something like the following:
Associate No. 1: "Did you hear about Thompson? He's leaving the firm."
Associate No. 2: "Really? Why?"
Associate No. 1: "Rumor has it that he refused an assignment. It was something to do with his wife being in labor or something."
Associate No. 2: "And his point was?"
Associate No. 1: "Exactly! So obviously, the firm had to get rid of him. So they sent him ..."
Associate No. 2: "Don't say it! They didn't!"
Associate No. 1: "Yes, they did. They sent him to work for a ... (he begins to sob loudly) A CLIENT!"
Associate No. 2 (wailing): "NOOOOOO! Not in-house! Hold me."
The above exchange only slightly exaggerates our misunderstanding of the practice of law on the other side of the wall. However, now that I've come over to the "dark side," I have a new appreciation for in-house legal work. In fact, as we corporate counselors like to say, "Once you go in-house, you get to keep your spouse." On second thought, we need a new saying.
Seriously, there are a number of misconceptions about practicing law as an in-house lawyer. The most significant is that in-house lawyers are ridiculously underpaid. This is simply a matter of perspective.
For instance, although in-house lawyers do not make as much as partners, associates or Tibetan slave laborers, we do get stock options. Of course, for those working for dot-com companies, their stock options are worth about as much as season tickets for the 2002 XFL.
However, these options can be very valuable for those of us working for "real companies." For instance, on retirement, I expect to be able to cash in my options and travel the world, provided, of course, that I travel no farther than Fresno.
Besides, as an in-house attorney, I am compensated in much more important ways: titles. In the business world, a company may not always have the money for bonuses, pay raises or its electricity bill. Therefore, executives find other ways to compensate people.
For instance, in lieu of actual money, my Christmas bonus was a new title, general counsel. In fact, I've been promised that, if I hit all my targets this year, then next year, I will be promoted to legal emperor. Of course, a fancy title will not pay my mortgage (but neither will I), but it sure looks good on my business cards.
However, more important than salary, stock options and titles is the work itself. Of course, law firm work can be very stimulating, demanding and even rewarding. However, in most cases, it pales in comparison to the excitement of the work performed by your average general counsel (or even highway construction worker).
One reason is that law firm work requires a great degree of specialization. For $300 an hour, clients expect their outside lawyers to be experts. And although a client may find it exciting when his new girlfriend says, "I've never done this before," he is going to be much less thrilled when hearing these words from his outside counsel. After all, in most cases, the client is not paying his new girlfriend $300 an hour.
The drawback to this level of specialization is that, although it may make a lawyer valuable to his or her firm, he or she is not going to be a whole lot of fun at parties. On the other hand, an in-house lawyer may deal in several different areas of the law in a single day: intellectual property, employment law, real estate and even criminal law.
For instance, one day, I received a call from a police officer in Chicago informing me that one of the properties we foreclosed on was being used as a "house of ill repute." This was exciting! After all, unless you were White House counsel during the Clinton administration, this is not the kind of call that you get every day.
Last, as in-house counsel, you are more than just a lawyer, you are a business executive. As such, you are expected to make legal judgments as well as business judgments. And part of your duties is to manage employees. This can be challenging, but it also can be very rewarding.
As a lawyer in a firm, I enjoyed the thrill of leveraged buyouts, public offerings and hostile takeovers. However, none of this compared to last week when I was able to give my assistant the good news of a promotion. You should have seen the look on the face of our newest princess paralegal.
Sean Carter is general counsel of a company that would fire him if he named it in this piece.
Contributing Writer
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