Going Lateral

The Recession of 2008 is casting a shadow that doesn't show any sign of fading.

AmLaw's annual Lateral Report, which tracks trends in attorneys' lateral movement, found that a record number of Top 200 Firm partners left their comfortable quarters last year.

And many of them have entrepreneurial aspirations, as significant numbers left Big Law to start their own boutique firms.

Law.com looked at a number of the personal stories behind the lateral moves, and a few consistent themes emerged.

• This trend is not a one-time blip on the radar.

"114 partners left the Am Law 200 to start or join small practices, up from 70 in the previous 12-month period. Some notable new startups include MoloLamken, whose name partners came from Shearman & Sterling and Baker Botts; Kendall Brill & Klieger, an Irell & Manella litigation spin-off; Chaffetz Lindsey, started by five former Clifford Chance litigation partners; Harrington Dragich, a bankruptcy boutique whose founders were Foley & Lardner lawyers; BuckleySandler, formed from the merger of Buckley Kolar and a group from Skadden, Arps, Slate, Meagher & Flom; Bryant Burgher Jaffe & Roberts, whose partners left DLA Piper, McKee Nelson, and Alston & Bird; and Van Etten Suzumoto & Sipprelle, founded by three partners from McGuireWoods."

• These firms saw opportunity in a marketplace that is demanding value.

"If the lawyers who started their own firms had different personal reasons for leaving their old firms, their business rationales are nearly identical: It's all about value. The recession has increased clients' price sensitivity, creating an opening for smaller firms with lower, more flexible costs. Boutiques cater to cost-conscious clients by lowering overhead expenses, slashing rates and offering alternative fee arrangements, while providing the same legal services that their founders offered at their old firms."

• The Great Recession caused chaos that some viewed as opportunity.

"Steven Molo of MoloLamken says " rent of buildings in midtown Manhattan dropped by 40 percent, you had this incredible pool of talent suddenly become available, and you had a greater cost sensitivity among clients. We thought our law firms were great as large law firms, but we really had a desire to do something that would free us up to do new things in terms of fee structures and clients."

• Alternative approaches are becoming the norm.

"Alternative billing arrangements include flat fee installments and multiple bonus options based on trigger "success outcomes."

"B. Seth Bryant of Bryant Burgher says "If the deal breaks down, they pay x; if it goes through, they pay y," In cases where flat or minimum fees don't work, Bryant still uses billable hours, but at rates lower than what he charged at DLA Piper. "Our rates are generally one-third less than large firms' rates," he says."

"These strategies -- flexible fee arrangements, discounted rates and lower overhead costs -- all make sense on paper."

• These firms are built to be nimble.

"These smaller firms are peeling away the layers of infrastructure -- administrative assistants, associates, recruiting programs -- that exist at large law firms.

With head count small, office space is an expense that's easily limited. Molo's firm rents a total of 13,000 square feet in its New York and D.C. offices. "You have a lot more flexibility when you don't take up 10 floors in a big office tower," says Molo.

"If you find a better, more efficient way to operate, you can make a change."