Should Large Law Firms Farm Out Smaller Clients?
An interesting law suit was filed claiming that a really big international law firm ( Reed Smith) took on the defense of a small non-profit corporation and basically went nuts billing the small client. The complaint alleges:
"In implementing its ambitious strategy of capturing global clients, which Reed Smith boasts results in a constant increase in revenue per partner,' it has acknowledged that comparatively small regional or local law firms can or perhaps should service smaller clients," the complaint stated. "This is so because such firms typically charge much lower fees than 'white shoe' international law firms like Reed Smith and are therefore more affordable to these smaller clients. However, Reed Smith has inexplicably continued to represent certain much smaller clients which lack substantial financial resources, such as Bair, a not-for-profit charitable foundation."
There is no doubt in my mind that large firms are not appropriate for smaller businesses, but not because smaller firms have lower rates. In fact, even at higher rates, a smaller firm is often a better choice for a small business. Here are a few reasons why:
- Small businesses' work is often delegated to inexperienced associates, while in a smaller firm the small business is more important and gets a more experienced associate or partner.
- As associates move up the firm ladder, they are assigned bigger clients, so the small client gets the new associate, who now is not only inexperienced, but also unfamiliar with the client.
- Associates have to bill out about 8 hours a day. You can not bill 8 hours and work only 8 hours. So in order to keep the billing up there, associates bill for things like, walking down to the file room and finding the client's file; practicing their ability to talk very very slowly without appearing to talk slowly; manually correcting every place in a contract that says shareholder and changing it to holder of shares, rather than either ignoring it, or making a note "do global replace."
I'm not imputing ill-will to the associates. It's a tough life for them. Whether they ever make partner is based as much on their billable hours as their skill. And it's true that small firms have associate issues too.
But it just makes a lot of sense for a smaller business to want to be a bigger fish in a smaller pond. Having said that, I'm making no comments about the merits of the Reed Smith case. I'm only saying I can believe the plaintiff felt taken advantage of. I only wonder why they chose Reed Smith to begin with.
