Boutiques Face Fight To Keep Client Gains Post-Recession

Law360, San Diego (June 17, 2013, 10:06 PM ET) -- The recent recession gave boutique law firms an opportunity to leverage specialized expertise and lower billing rates to lure clients from BigLaw competitors, but a recovering economy means boutiques will need to rival large firms’ new creative fee structures and embrace cutting-edge legal management technologies if they want to preserve their gains, legal experts say.

Boutiques, which cater to legal needs in a specific area, such as intellectual property or employment law, are flourishing after companies turned to them during the recession in search of more flexible fee arrangements, and boutiques proved themselves by parlaying those opportunities into deeper client relationships and more consistent work, according to experts.

However, as the teetering economy continues to right itself and bigger firms improve how they provide quality, cost-effective legal services to clients, boutiques will need to prove themselves once again.

“The truth is that the demands of boutiques versus global and multidisciplinary firms are cyclical,” said Toni Whittier of Whittier Legal Consulting. “Boutiques are particularly strong right now, but there has been a natural ebb and flow in the legal services market for years and years. In the future, there will be a flow back to clients wanting to concentrate their legal representation in a larger law firm.”

Corporate legal departments have a greater appreciation for small and midsized firms as go-to firms than in the past because, while the recession drove companies to seek out better attorney rates, they realized the quality of service was roughly the same, if not better, according to Eyal Iffergan, president and chief executive officer of Hyperion Global Partners.

“We saw boutiques gain cachet during the recession that perhaps they didn’t have before at any recognizable scale, and I think that cachet has stuck,” he said. “General counsel are especially seeking them out now for their enhanced client service, for the same quality of legal service and certainly for the lower rate.”

Boutique health law firms in particular have a bright future as companies seek help to comply with the federal Affordable Care Act, and employment and patent shops continue to shine, according to Whittier.

“These are entities that have very deep knowledge about one or more subjects, and [employment and patent law] are areas where it is very helpful to really sell that expertise,” she said.

Doll Amir & Eley LLP, a Century City, Calif.-based boutique focusing on commercial, IP and entertainment litigation formed in 2005 by former Gibson Dunn & Crutcher LLP attorneys, has continued to expand its bench strength and attract new clients following the economic downturn, according to Michael Amir, co-founder of the boutique.

The firm has brought in three Fortune 100 clients within the last two months, hired four attorneys since October 2010 and is in the process of looking for a larger office, he said.

“We are doing better than we were even in the recession,” Amir said. “Even though the economy is obviously much better, legal departments are still under pressure to keep their budgets down. Our experience is that cost is still a very important feature of the lawyer clients choose.”

Boutiques especially have done an exceptional job of staffing cases with partners and other high-level legal experts and giving clients the personalized attention they demand, according to experts.

“Boutiques are providing customized services, focusing on understanding the business of the new clients and forging deep personal relationships,” Whittier said. “They are really thinking about what the client needs at the legal level, while also taking into account the economic and business factors down the road.”

But larger firms have taken notice of the demand for such treatment, Iffergan said.

“Large law firms are working to emulate the close personal relationships that companies got out of small firms,” he said.

And although the recession turned out to be a boon for many boutiques, BigLaw firms are starting to branch out from the hourly billing standard and invest much more heavily in legal technologies, efforts that could test the loyalty of boutiques’ newer clients, according to experts.

Some bigger firms are following through on client demands for more flexible fee arrangements, such as handling a case for a fixed amount, offering a blended rate by using both partners and associates on a project or doing part of a case on a contingency basis, according to Amir.

“Big firms are getting wise and more sensitive to the fee advantages that boutiques have and are becoming much more creative,” he said.

In addition, larger firms are leading a trend toward being more efficient and effective at leveraging technology related to project management, social media and document management in order to better share information and collaborate with clients, according to Iffergan.

“Smaller and midsized firms oftentimes just don’t have the budgets to sustain the best, biggest and innovative technologies … and struggle to keep up,” he said.

Smaller firms and boutiques involved in litigation also are trying to keep pace with the technological demands of e-discovery, according to Whittier.

“This is time consuming and expensive, but it’s important, and boutiques need to put e-discovery technology in place to stay competitive in the field,” she said.

Luckily for many boutiques, they continue to show that they are hardy and adaptable entities, according to Theresia Moser of Meyer Moser Lang LLP, a boutique that represents management in employment disputes.

“When you are not a hammer, you don't see everything as a nail,” she said. “When you don't have 10 lawyers you can pull off whatever else they are working on to throw at a trial, you necessarily design a ‘lean mean fighting machine.’”

Boutiques’ expertise in specific fields also gives them a foothold in the legal market and will keep being a draw for some clients, according to Ed Poll, a legal consultant at Edward Poll & Associates Inc.

“Repetition enables them to do a better job … like a surgeon who develops and enhances the mobility of his hands from doing surgery over and over again,” he said.

Even after the recession, buyers of legal services are still interested in resolving legal disputes as early as possible to avoid the high costs of litigation and extensive discovery, and boutiques are in a prime position to take advantage of this need, according to Whittier.

“Smaller firms and boutiques can successfully compete when early and creative resolutions are in demand,” she said.

While the recession may have helped them bring in new business, boutiques should remain cautious about hiring too many attorneys or taking on too much debt at once, Amir said.

“The biggest expense is going to be lawyers,” he said. “Boutiques need to strike the right balance to have enough lawyers to service their existing clients.”