'Black Thursday' staggers legal community

The U.S. legal community is calling Feb. 12 "Black Thursday."

On that day, six major U.S. law firms let go more than 700 attorneys and support staff, including the Missouri-based firm of Bryan Cave LLP.

There had been layoffs on the coasts, and just last October in Chicago. "But the Bryan Cave thing kind of reinforced what I think everyone knows - this recession is hitting everyone," said Virginia Fry, co-managing partner of Husch Blackwell Sanders LLP in Springfield. "In our world, that was something that was significant because it involved a big firm in our state. And it was the first time."

On the positive side, however, the New York Law Journal reports that law firm layoffs are expected to slow in the months ahead as firms gauge the effects of the economic stimulus. Meanwhile, the national trend of mergers among law firms - 55 mergers were completed in 2008 - is expected to continue or even intensify, Fry noted.

Effective Feb. 1, Kansas City-based Shughart Polsinelli PC made its debut, after the October 2008 shareholder approval to merge the firms of Polsinelli Shalton Flanigan Suelthaus PC and Shughart Thomson & Kilroy PC. Eight of the firm's 480 attorneys practice from Polsinelli Shughart's Springfield office in Hammons Tower.

While the practice of law often has been considered somewhat recession-proof, the current economic climate is proving a challenge even to members of the bar.

"Like anyone in business, you're more attuned to cost. I can't speak for anyone else, but I think you're a little more careful on any of your capital expenditures," said Wallace Squibb, a solo practitioner and 2009 president of the Springfield Metropolitan Bar Association.

It's a good time to "evaluate your operation and make sure you are maximizing efficiencies through technology," he added, and to look for ways to leverage the areas of practice that are most profitable.

Meanwhile, competition is strong in the Springfield area market. "I know that we continue to see some of the larger firms from Kansas City and St. Louis growing their presence down here, so you see some increased competition in some of the full service firms," Squibb said.

With the economic downturn, as some areas of practice have slowed, others have picked up.

"For example, if your practice is doing transactions and the banks stop loaning money, that obviously will impact your workload, but it tends to increase work in other areas, for instance, creditor/debtor work," Fry said.

"Litigation tends to be steady despite the economy, although I think the focus of the lawsuits that you see being filed perhaps switches a bit," she added. For example, Fry would expect more employment-related cases to be filed in a recession as a result of employers downsizing.

The economy-driven shift in demand for legal services can be seen in the pages of The Daily Events, a newspaper of public record primarily supported through legal notice advertising.

Though he declined to give specifics, Publisher Jeff Schrag said, in the last year, his page count and revenue rose about 30 percent from his previous best year, 2007.

Not surprisingly, foreclosures are leading the uptick, though given economic pressures, it is perhaps surprising that Shrag isn't seeing a large number of bankruptcies.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made it more difficult for individuals to file, requiring most individuals to reorganize their debt rather than liquidate, and requiring more paperwork and more labor on the part of attorneys. "Bankruptcies are down significantly from what they were before the legislation changed," Schrag said. "And by significantly, (I mean) they are a fourth."

Nationally, the complexity and expense of filing bankruptcy, coupled with the burden of unaffordable mortgages, may be driving the rise in foreclosures as some borrowers realize it's easier to walk away from an impossible-to-pay mortgage than it is to file for bankruptcy protection. But that may be changing.

President Barack Obama's Homeowner Affordability and Stability Plan includes a hotly debated provision that would allow bankruptcy judges to modify mortgage terms for borrowers who have exhausted all other options.

Yet that's far from the only change in the law coming out of Washington, D.C., Fry noted.

Legislation coming down the pike includes the Lilly Ledbetter Fair Pay Act, the extensive Troubled Asset Relief Program and changes to the Family Medical Leave Act.

Fry also is keeping an eye on the Employee Free Choice Act, which is being considered by Congress right now and "would make substantial changes in the ability of unions to organize," she said.