Last month, just ahead of the fiscal cliff deal and as part of the NLJ’s Regulatory Summit, the top partners at five big Washington firms explored the year ahead for the business of law and the state of the regulatory and political climates in D.C.
The panelists included Richard Alexander, managing partner of Arnold & Porter; Bobby Burchfield, co-head of McDermott Will & Emery’s Washington office; R. Bruce McLean, chairman of Akin Gump Strauss Hauer & Feld; and Richard Wiley, chairman of Wiley Rein. Aric Press, ALM’s editor in chief, moderated the panel.
Here’s what they see for 2013:
AGENCIES WILL RULE: Capitol Hill may dominate the headlines with partisan warfare over the debt ceiling, immigration reform, gun control and other issues. Nonetheless, the real action in 2013 will be in the executive branch (and, potentially, in the courts). The president has an agenda and will want to enact it. Expect executive orders, rule changes and the like to help the president bypass fights on the Hill.
“We think the administration will use the issuance of regulation rather than Congress to handle its business,” Burchfield said. “We expect quite a bit of administrative litigation to challenge the validity of those regulations.”
GOOD NEWS FOR FIRMS: The math is fairly simple: More regulation means more work — particularly for firms with a strong Washington presence. Burchfield said McDermott’s health care group is “working around the clock” to deal with the fallout from the Affordable Care Act. Wiley said a strong regulatory approach has created “four or five of the best years in the firm’s history.” This year should bring more of the same. And Wiley Rein won’t be alone.
DON’T GET TOO COMFORTABLE: A strong regulatory practice is going to be good for the bottom lines of many firms. So why are so many top partners expressing a sense of dread? It doesn’t help that the economy still looks fragile, and political brinkmanship continues — a trillion-dollar coin, anyone? Overseas, Europe may yet melt down, and China’s growth seems to be slowing.
Even without those happy thoughts, firms — as Arnold & Porter’s Alexander put it — face continuing client pressure on pricing and an evolving staffing model. Alexander said he’s being cautious about 2013 “because of the headwinds facing the profession.…Change in the business is accelerating.”
THE BATTLE FOR LATERALS: Firms in the market for laterals are in a “war for talent and clients,” Alexander said. He said Arnold & Porter’s business model is being driven in part by that ongoing war: “The reason that we feel we need to be in the markets that we are [in] and grow even further is because we want to succeed in those talent and client wars.”
The fight will extend to top talent from the Obama administration. The players who will be most in demand? Lawyers who had a hand in drafting and implementing the Affordable Care Act.
IT’S TIME TO GET SMARTER ABOUT PRICING: “I do think that clients will look for the ability of the law firms to manage costs,” Wiley said. “They will expect law firms to price accordingly and look for alternative fee arrangements.” But he preaches caution when it comes to things like fixed fees: “Usually when a cap is set, it’s…wrong,” Wiley said. Lawyers “promise more than they can deliver. I always see if they can get into a range or agree on a kicker or a bonus if the firm delivers. A static cap usually means a discount for us and that is a mistake.” McLean said his firm, Akin Gump Strauss Hauer & Feld, had hired a pricing officer who is involved in alternative fee arrangement decisions and rate issues. “[Clients] are moving away from billable hours, and looking at some other ways of buying legal services,” McLean said.