The Age of the Specialist Is Upon Us
Clients want narrow expertise and law firms are responding. Where do generalists fit in a landscape being flooded by specialists?
November 30, 2018 at 05:00 AM
13 minute read
The original version of this story was published on The American Lawyer
Mirra Levitt and Basha Rubin were operating a new online platform connecting small businesses with legal counsel a few years ago when a client requested help finding an intellectual property lawyer. But not just any IP lawyer. The client wanted an emoji specialist.
“We thought that was a little silly,” Rubin says. “But they were insistent.”
Levitt and Rubin, both Yale Law School graduates, tracked down an emoji lawyer with relative ease. A seed was planted: What if they tweaked their business model and focused on helping corporate counsel find outside lawyers who were superspecialists?
The idea transformed Priori Legal into the legal platform that it is today. Corporate counsel submit a request for proposal through the site, which uses its global network of several thousand lawyers to play matchmaker.
“What our clients want is a very granular understanding of what lawyers bring to the table,” Levitt says.
One of Priori's clients, Erik Syvertsen, general counsel for AngelList, a California-based recruitment website for startups, says he and other in-house lawyers in the tech community are increasingly seeking out specialists when they need outside counsel.
“That's absolutely the direction it's going,” he says. “It's not helpful to just have a strong employment or international practice. It's trying to find who's the best lawyer to answer this question in Singapore.”
Priori launched in 2016 and just had its biggest year to date: the business averaged 30 percent month-over-month growth for 2018, according to Levitt and Rubin. Their experience affirms what general counsel, outside lawyers and consultants are saying: The specialist lawyer is en vogue.
“When you need brain surgery for your child, you'll travel across the country to find the guy who isn't just a pediatric brain surgeon, but the guy who is the expert in the specific type of brain surgery that you need,” says Jason Winmill, managing partner at legal department consulting firm Argopoint in Boston.
More than ever, legal departments are applying the same philosophy.
|Narrower Niches
Winmill's assessment falls in line with what leaders in law firms are seeing. As Fox Rothschild managing partner Mark Morris explains, “Clients are selecting law firms—whether it's big firms or small firms—for their expertise and for their credentials in a given area.
“The niches are becoming more and more specific,” he adds. “They want to know that somebody's done what they need them to do before.”
Michael Lincoln, partner and head of the business department at Cooley, says firms are looking to add specializations they think will make them more profitable. Cooley fits that mold, in part, because the firm focuses on the life sciences, education technology and cybersecurity sectors, and has built up specialized capabilities to be able to serve companies in those spaces. To that end, Lincoln says Cooley has hired many lawyers who have doctorates in a scientific discipline.
Lincoln also points to the firm's work for cybersecurity intelligence businesses. Representing those kinds of companies, he says, often leads to contact with government regulators at the Committee on Foreign Investment in the United States. So, in addition to having lawyers with experience in, say, guiding an early-stage cybersecurity company through an investment round, Cooley also has lawyers who know the ins and outs of CFIUS regulation and how the agency deals with cybersecurity companies.
“We have to have that capability because it's so central” to the companies in that sector, Lincoln says.
While larger law firms offer specialists, general counsel also turn to smaller practices and solos when they need a specific type of lawyer. One such lawyer, Ken McGuire of Troy, New York, represents race car track operators and racing equipment suppliers. His path to specialization began when he had a business building engines.
McGuire says he was often called on as an expert witness in cases involving the racing industry and became frustrated while working with lawyers who “couldn't put a nut on the end of a bolt.” So he went to law school and became a lawyer for the racing world—and “friends who get speeding tickets,” he jokes.
In one products liability case, McGuire defended a company that makes steering parts for race cars after a home-built airplane that used some of those parts in its landing gear crashed. When McGuire looked at the wreckage, he says, he noticed a perfectly round puddle of oil beneath a broken cylinder for the landing gear. Had the cylinder failed in midair, as the plaintiffs claimed, oil would have been spread all over the fuselage. But that wasn't the case, which indicated that the cylinder broke on impact. The suit ended up settling for $5,300, according to McGuire.
“That's not because I'm a super lawyer,” he says. “It's because I know how shit happens.”
|The Road to Specialization
A push for specialization and narrow industry focus has come amid a period of relatively stagnant demand for the legal sector. Firms are vying for larger pieces of a pie that hasn't grown much in size. The tightness of the market helps explain why law firms might home in on niche offerings. From a marketing standpoint, it helps firms set themselves apart from competitors by touting their specific expertise, according to industry sources.
“It's made us much more attuned to the fact that we need to train lawyers to be proficient in niches in certain subsets of categories because, ultimately, that's what we're going to have to market,” Morris says.
Law firms are also responding to the demands of their current and prospective clients, who have begun to expect a higher level of expertise from their outside counsel.
Richard Otera, a former in-house attorney for American Honda Motor Co. and the top lawyer for Sumitomo Electric Industries, says he never looked for a generalist or someone who was “an inch deep on a million things. I'd rather have a person who was a mile deep on the one thing that was the topic of the moment.”
Otera, now a partner at Nelson Mullins Riley & Scarborough in Torrance, California, says he typically relied on references from colleagues when he was searching for a microspecialist. And he usually paid those specialists an hourly rate, though he sometimes tried to negotiate an alternative fee arrangement. But specialists often have an advantage when it comes to fee negotiations, because they're the best in their field.
“It's a different world when you're talking about specialists,” Otera says. “Typically, if you need that specialized knowledge you have less negotiating leverage to ask that specialist to take a haircut or give you some kind of alternative fee arrangement.”
Ken Hammer, general counsel for Toshiba Global Commerce Solutions in Cary, North Carolina, agrees that the billable hour remains king. He says he tries to keep most of his work in-house, but when he has to go outside for a specialist, he tries to keep a tight rein on costs.
“I try to do as much as possible by the budget,” he says. “I start out by saying, 'This is what I need. How much is this going to cost from start to finish?'”
In-house legal departments often have to work around internal budget constraints and may have an easier time justifying their legal spending if they propose to hire an outside firm that has repeatedly completed the same types of tasks for companies in the same industry. Law firms, in turn, have responded to those client pressures and found that specializing can help them stand out in a fiercely competitive market.
“The way we've gone about developing our strategy is to look at the client expectations for specialization versus general service,” says Sandy Thomas, global managing partner and executive committee chairman of Reed Smith. “One way to differentiate oneself in a really competitive business is to bring to the table unique knowledge that will help solve the client's legal challenges.”
While specialization and industry focus are clearly on the minds of Big Law leaders, the marketing efforts behind promoting those capabilities may actually be even more vital to smaller regional firms that see Big Law entering their local markets, according to legal marketer Gina Rubel.
Compared with the sophisticated marketing departments in large firms, smaller firms may not yet have developed a clear focus with their marketing dollars, she says, and that leaves them at risk of falling behind. Specialization can help by giving firms expertise to promote and ensuring their marketing efforts aren't fragmented.
“Lawyers make marketing and business development decisions based in fear—'if we don't market to them, then we won't get that business'—as opposed to marketing in a more proactive, positive stance, which is, 'If we do focus our energy and our marketing, we will get more of that kind of business,'” Rubel says. “A firm needs to determine who they are and where they want to go if they want to be more effective with their dollars.”
|The Bad With the Good
Of course, opting to specialize—either in a niche practice or a specific industry focus—means making trade-offs. On an institutional level, firms may give up the ability to boast to a potential client that they're truly the prized one-stop shop. But there are also potential disadvantages for individual lawyers, as Fox Rothschild's Morris notes.
As an example, he points to the prerecession era when whole classes of rising associates focused almost exclusively on securitization transactions. When the financial crisis hit, and regulators subsequently cracked down on the widespread use of mortgage-backed securities, that work all but dried up. That, in turn, stranded droves of associates who had spent the better part of a decade focused on a specific niche no longer in demand. The question for those lawyers, then, is what do they do next?
“That is a downside to it on an individual basis,” Morris says. “There's a tension there for young lawyers.”
Susan Hackett, CEO of law department consultant Legal Executive Leadership in Chevy Chase, Maryland, says the trend toward specialization could backfire for some lawyers “who market themselves as 30 miles deep in an expertise that's 3 inches wide.”
“What's valuable today is agility, the ability to see trends and capitalize on them,” Hackett adds. “Rather than assuming you'll leave law school and start developing one niche that will last your lifetime, why not embrace the idea that the fun of legal work is leveraging whatever is rising as an issue and getting in front of it? And when something else is trending, move and anticipate that need, too.”
Munger, Tolles & Olson partner and business development co-chairwoman Hailyn Chen says specialization also can have negative consequences on a firmwide level. Channeling resources and hiring lateral partners to bulk up a specific niche practice can seem like an attractive decision when that practice is hot, but problems arise when the work slows down, she says.
“If you've got a bunch of lawyers whose only specialty was that one niche, it can be difficult to figure out where your next case is coming from,” Chen says. “If that's all they know how to do, it can be tough to figure where that practice group is going next.”
Focusing intensely on one specific area of the law also could pose a larger risk to the profession if lawyers have their eyes too close to their microscopes to see trends that cut across different areas of the law, according to Levitt and Rubin, the co-founders of Priori Legal. They say they're working on ways to use their platform to not only create communities of experts but also to zoom out and identify trends that connect those different communities.
Dealing with superspecialists also can have some drawbacks for general counsel. DuPont's former top lawyer and senior vice president Tom Sager, now a partner at Ballard Spahr in Philadelphia, says some specialists, while talented, can be “kind of prima donnas.”
“So you kind of hold your nose sometimes, but they are usually used to dealing with boards and CEOs and bring an impressive level of sophistication,” he says. “Most of them check their egos at the door.”
|Swimming Against the Current
Recognizing the downsides of specialization, Munger Tolles has opted to resist the push for developing narrow, niche practices, according to Chen. That can be challenging in today's climate, when calls for specialization are common among prospective clients. Chen and others at her firm have seen a growing number of requests for proposal from in-house legal departments that ask for detailed information on the firm's experience handling a specific type of case.
Still, for Munger Tolles, those demands haven't altered an approach that has involved developing lawyers from within, as opposed to bolting on lateral groups. Chen says the firm, instead, allows lawyers to develop their own path, something she believes “helps us to think creatively across disciplines” and allows the firm to adapt as the industry evolves.
“Even in the face of these client pressures, we maintain our philosophy of hiring the best and smartest lawyers and letting them chart their own course,” Chen says. “On a firmwide level, having a more generalized approach helps us to be more nimble and able to move with the times.”
That sort of approach might make sense for Munger Tolles, and there are certainly other law firms with such strong reputations that they can credibly market themselves based on a general-service approach. Even in those instances where a firm's reputation might set it apart, Rubel says, specialization still finds a way to rear its head. In her view—and it's an opinion shared by many at law firms and in-house legal departments—specialization has grown to such an extent that almost no player in the legal industry can ignore it.
That goes for the generalists, too. Rubel says that even a law firm that holds itself out as a general-service operation is likely to still maintain a level of specialization. A firm may have top-flight lawyers across a wide range of practice areas, but when you drill down, there's a strong chance those lawyers focus on representing companies in specific sectors.
“Some firms have so much brand equity and name recognition that they can get away with being the 'one-stop shop,'” she says. “That being said, every one of those places is very well known within a certain industry.”
Generalists certainly aren't in danger of going extinct at this point. But they're facing more competition than ever from specialists who are entering the legal ecosystem to answer demands from clients with highly specific needs.
“Once you find that person, you're thinking, 'Why would I go anywhere else?'” says Otera, the former in-house lawyer. “It redefines what you're shopping for as a consumer.”
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