RSS FeedCorporate Legal Spending Expected to Rebound Sharply
Following a significant decline in corporate expenditures on legal services in 2008 and the first half of 2009, businesses will once again begin increasing their law budgets in the second half of this year according to the results of a study announced today by legal industry research leader BTI Consulting.
The study, titled ‘BTI Mid-Year Spending Update and Outlook,’ covers 16 practices and 18 industries and is based on 370 interviews with corporate counsel at Fortune 1000 companies that average $19.4 million in outside counsel spending. Key findings of the study include:
- Clear signs of renewed legal spending after a sharp decline of 7% since year-end 2008.
- Corporate legal spending at large companies will grow nearly 5% over the next 6 months, bringing overall market growth to only negative 1.4 percent for the year.
- Leading the growth in spending will be the practice areas of regulatory compliance, employment, securities and bankruptcy/corporate restructuring law.
- Year-to-date, the hardest hit core practice areas have been corporate, securities and finance, and intellectual property.
“We have all read the headlines detailing drops in business spending across every category, including legal services. This study presents a big ray of sunshine in what has been a very stormy environment. The reversal of this negative spending trend will help buoy flailing legal markets and offers some hopeful news about business spending in general,” explains Michael B. Rynowecer, President of The BTI Consulting Group.
Rynowecer suggests the increase in spending will not, however, alleviate law firm lay-offs which have been rampant in recent months. “Rather than a wholesale recovery, we are seeing a shift of resources to specific firms and practices that are well-positioned,” Rynowecer warns. “Large companies are sharing this renewed spending with a smaller group of law firms than just 6 months ago. Those firms caught unaware or unprepared for this shift will continue to face significant challenges and not reap the benefits of this increased spending.”
A Guide To Investing In Recession
In January 2008, I began investing in the stock market.
I was asked to by my good friend – and fellow LawIsCool contributor – Lawrence Gridin, and I just couldn’t say no.
Except for ECON101 and a couple of books by Sachs and Krugman, I have no education in economics or finance. I understand the principles of supply and demand, elasticity, inflation, and comparative advantage. With enough effort, I can summon and apply these principles to elementary models involving apples and small integers.
But when it comes to the stock market, I tend to gravitate to those anecdotes of dart-throwing monkeys outperforming experienced stockbrokers.
In addition to my lack of training, I am not a gambling man.
I went to a casino for the first time a few months ago. In one night I lost $10 on a 5¢ slot machine. I still rue my loss to that noisy one-armed bandit.
At the time Lawrence asked me to begin investing, I had been following the sub-prime mortgage crisis closely. I am still fascinated by it.
The modern economy can express the folly of myopic greed so beautifully and measurably. A law student might even claim that it does more than reify our sins, but that it also dispenses justice, if it were not for the fact that not only the greedy now suffer.
Since January 2008, the stock market has plunged.
The S&P 500 is an index of the prices of five hundred large, publicly-traded companies in the United States. It is considered a bellwether for the American economy. It has fallen from 1468 points to a recent low of 682, or -54%.
So it was that at one of the worst times in history to invest in the stock market, I invested in the stock market.
Believe it or not, I have lost nothing.
More incredibly, ranked against 66,000 avid stock traders — the type who research, trade daily, and actually try to make money off it – I am in the 97th percentile. I beat virtually all of them. What have I gained? Since all that Lawrence asked me to invest was a bit of my time on a popular stock prediction website, I have gained nothing but a better view of the American consumer.
How did I, an uninformed novice, beat the vast majority of enthusiast traders in one of the worst markets ever? I focused on what I did know about the American economy and consumer.
I knew enough about the sub-prime mortgage crisis that it would probably infect the broader credit market. I knew that this would deepen the already existing recession by decreasing consumer spending which, in turn, would generally lower demand in the economy. I thought to myself, what do American consumers nonetheless demand when times are tough, when they’re stressed and unemployed, when property crime is increasing, when their house is foreclosed, and when uncertain political change is fast approaching ?
Answer: guns, drugs, beer, and cigarettes.
So that’s exactly what I invested in. My picks included Sturm, Ruger & Company, Smith & Wesson Holding Corp, Johnson & Johnson, Molson Coors Brewing Company, Anheuser-Busch, Reynolds American, and Altria Group.
It turns out my sardonic hunch was dead on; these companies and their ilk have defied the recession and done incredibly well over the past year, as demand for their products surges.
Will I start investing real money in my hunches? Since my conscience prohibits me from lending money to gun and cigarette makers, I’ll have to wait for now…
You can sign up at The Motley Fool – Caps to view my performance and make your own predictions. My username is ilovetogamble.
“If you don’t follow the stock market, you are missing some amazing drama.”
- Mark Cuban, American billionaire
Recession and Altruism
With American law firms shedding lawyers by the hour, things sound all doom and gloom down there. But CNN has picked up on a positive side effect of the firm layoffs: it’s an unprecedented opportunity for many lawyers to take up public-interest work.
“There is a once-in-a-lifetime opportunity coming out of a difficult situation,” said Esther Lardent, president of the Pro Bono Institute in Washington D.C., who began discussions this month with at least 15 corporate firms nationwide about placing unemployed attorneys in public interest firms.
Who knows, maybe this recession will even boost the legal profession’s reputation.
(Credit to David Carson for initially tweeting this story)
Employment Lawsuits Will Rise in Recession
In the current economic climate, companies big and small are feeling the stress of financial insecurity and reduced profits. As a result, more and more Canadians are finding themselves unemployed. This will likely lead to an increase in employment-related lawsuits.
To quote a recent article by CFO Publishing, “layoffs mean lawsuits.” In the United States, employment litigation has risen correspondingly to the decline of the country’s economic health.
In a case of being fired without just cause, a former employee can make a claim of wrongful dismissal; thus age-discrimination lawsuits and so forth have been on the rise recently.
But a business may collapse suddenly, still owing its employees wages and/or benefits. Take for example the case of a Saskatoon company that built trailers for the oilpatch. A slowdown in the tar sands led to its laying off all 270 employees, many of whom are owed outstanding wages. A group of the former employees is now considering a class-action suit.
The number of employment-related class-action suits has been on the rise, according to Toronto-based employment lawyer Daniel Lublin. This has led to what he calls “workplace law’s newest, and biggest, phenomenon: lawyers specializing in class action lawsuits.”
As companies like IBM and Air Canada let employees go, they will have to be careful to avoid class-action suits – especially since employees are becoming informed and asserting their rights.
Finally, even without firing employees, a company can become the target of a class-action suit. In the current case of CIBC, the bank is fighting employee claims of unpaid overtime. Since the ramifications of this case “could spill over into workrooms across the nation,” companies that scrimp and save in the face of economic uncertaintly may find themselves in the courtroom if they choose to do so at the expense of employee entitlements.
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UPDATE, 26 Feb 2009: Today as part of a series looking at the recession’s effects on people in Toronto, the Globe & Mail published an article about booming business at one employment law firm. The article references this survey of litigation trends, in which “Labour/employment” is by far the top type of legal dispute currently worrying Canadian firms.
Dion Speaks in London
Here’s a few clips Stéphane Dion’s talk in London, Ontario last night.
In the first clip he reaches out to minorities communities, expressing a vision of inclusion, and mentioning that Stephen Harper had accused him of being pro-Taliban when he criticized the war effort.
In the second clip he talks about the problems in the Canadian economy,
All of us, we have a sense of history. We will remember that during the Great Depression, it was Roosevelt that took us out of trouble, not Hoover…
I’ve seen Flaherty, after destroying your economy, say to the investors of the world, ‘Don’t invest in Ontario.
Canadians are rightly concerned about the position of the economy. Bank of Canada governor Mark Carney said earlier this week,
Any slowdown in the U.S. economy would have consequences for Canada, but the current situation poses particular problems.
