The Decline of Litigation? (Part 1)

Topics: Business Development & Marketing Blog Posts, Client Relations, Law Firm Profitability, Law Firms, Litigation, Midsize Law Firms Blog Posts, Peer Monitor

addiction

I’ve been thinking a lot lately about litigation.

It’s been one of the two major locomotives driving revenue and profit for BigLaw for the past 50 years or so — the other being transactional or corporate work — and has customarily provided 25% to 60% of a firm’s revenue; call it 25% to 40% for the median firm. If you look at a wide sample of firms’ lawyer headcount by practice area, rare is the firm that strays too far from the range of about 30/30 to 40/40 litigation/transactional.

But litigation has been the sickly child for the past decade or so.

This is the first in a multi-part series asking the question, “Is litigation in long-run secular decline?”

When we bat around the term “litigation” in this series, we should be more precise: Here are some of the things we mean and some of the things we do not mean.

  • First off, we mean revenue from litigation as a practice area for law firms, not the number of disputes or filed claims, or their notional value, in the US or global economy.
  • Second, as with almost all trends and developments in our industry these days, the pleasure and pain of this has not been and will not be distributed evenly. Some categories of firms are suffering a lot more than others.
  • Third, we make a vivid distinction between the Big Bad matters — the Deepwater Horizon, the VW emissions scandal, the Apple vs. Samsung IP war, Preet Bharara or Robert Mueller coming after you — and the run-of-the-mill, garden variety commercial dispute, including litigation as transactional negotiation by other means. When the big bad things happen, you have no choice but to open the war room and the checkbook, and sally forth. But when the smaller things happen, clients actually have a wide span of discretion in what they do — if they choose to do anything at all. So, when we use the word “litigation” in this series, we are actually referring only to the non-life-threatening matters, and particularly to how much revenue they drive to law firms.

The “decline of litigation” is a hypothesis, not yet a proven fact, but we, as is our wont, will show you some data that seems to support this hypothesis.

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To read the full article go to AdamSmithEsq.com. This has been republished with permission.