Where’s the Hurt? Part 2: The Financial Forecast for Large Washington Law Firms amid Coronavirus

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You only need to Google “law firm coronavirus” to see the bad news with articles like “The Law Firm Coronavirus Layoffs Are Here” and “2 NY Law Firms Cut Staff, Salaries Amid Coronavirus Crisis.”

“‘Firms are doing everything they can to build as much reserve as they can while they wait to see what the market tells them is going to happen … ,’” Michael Blanchard, managing director of the law firm advisory team at risk mitigation firm Aon PLC, according to Law360. “With the exception perhaps of the top 50 firms, most firms have two to three months tops of cash reserves, according to Blanchard.”

Locally, it’s not so clear. The WSBA Ethics Line has received inquiries from laid off or furloughed attorneys concerned about their firm’s ability to continue serving clients while also cutting staff, but other evidence seems to indicate that Washington-based medium and large firms aren’t gutting staff expenses on the books. Robin Schachter of Gamoran Legal Consulting advises medium and large firms in Seattle (as well as Anchorage and Portland), but said her clients haven’t reported layoffs or other significant cuts.

“I’ve already seen East Coast firms or larger firms, partners are taking compensation cuts or they’re furloughing staff, and I’ve not heard that yet for any Seattle firms … ,” Schachter said, noting that in the wake of the 2008 crash many firms recognized the need to diversify their services and client base. “The firms that are well positioned to pivot and serve their clients no matter what those clients’ needs are, are going to be in good shape.”

Of the 51 firms Above the Law lists on its “COVID Crisis Law Firm Layoff Tracker,” only two had locations in Washington, both in Seattle; however, two other firms with offices in Seattle and Bellevue “have told employees they won’t cut salaries/conduct furloughs” or “have offered bonuses and special pandemic tech stipends.”

One area where there’s near unanimous agreement is that the sudden shift in day-to-day business has exposed myriad questions and a few problems as the entire legal community was thrown into the deep end of working remotely.

Beyond the practical aspects of managing a legal business and interacting with clients without being in the same physical location, legal professionals face unique challenges: everything from protecting confidential conversations against hackers—with the term “Zoombombing” now part of our cultural lexicon—to insurance coverage. Shannon O’Dell with First Choice Insurance Services recently shared some of her observations and concerns with members of the WSBA Solo and Small Practice Section, which has organized weekly virtual roundtables for members to meet and share information.

At the top of her list of recommendations for lawyers are to read your insurance policy and call your agent to ask about your coverage and whether it extends to your home that is now serving as your office. And the top three most important policies legal professionals need in this new age of remote working are cyber security coverage, inclusion of your home office in your plan, and malpractice insurance.

While new rules have been put in place to allow legal professionals to handle client interactions remotely, O’Dell stresses that face-to-face contact with a client should be avoided at all costs on the off chance the client is infected with the virus and later files a personal injury lawsuit against the lawyer, which she predicts will be a common theme in the wake of the pandemic.

“Ten years from now there are going to be the commercials: Were you injured by coronavirus?” O’Dell said.

If and when payments from clients slow or stop altogether due to the wave of layoffs and business closures, O’Dell further cautioned against aggressively pursuing those payments, noting that suing a client for fees or getting collections involved can lead to bar complaints and malpractice lawsuits.

For firms, especially larger ones, Schachter predicted that with an anticipated influx of bankruptcy, employment law, landlord-tenant, and similar cases, legal professionals will have to be extra vigilant in identifying conflicts of interest. As laid off employees file lawsuits against former employers or tenants file against former landlords or small business owners file against their lenders, a large and rapid flow of cases could easily lead to conflict where none would have existed under normal circumstances.

At the same time, the near-overnight shift to a fully remote legal profession could also lead to improvements.

“It’s not the end of going into the office but it may really jumpstart some conversations about a more diffuse [business],” Schachter said. “What’s the value of the office space versus how can we improve the security and files and collaboration and accommodate a more remote, dispersed workplace?”

Right now, such questions are top of mind for many lawyers and firms, but as they grapple with the unexpected transition, it’s upending plans for those preparing to transition from law school to lawyer.

In the next part of this series, we’ll look at how the emerging crisis is impacting law students, how career-placement offices are responding, and what it all means for firms now and the future of the profession.