Top law firms fared surprisingly well during COVID-19 pandemic, survey says
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Updated: The legal industry has fared surprising well during the COVID-19 pandemic, according to a survey of mostly larger law firms by Wells Fargo Private Bank's legal specialty group.
Although demand was down 10.4% in May compared to the same month last year, demand for the first five months of the year was down only 1.4%, according to a press release summarizing the survey results.
Cash collections were up more than 3% through May, and expenses were essentially flat as law firms reduced discretionary spending.
The survey is based on data from April and May for 52 of the nation’s top 100 grossing law firms and 20 midsized and regional law firms.
Joe Mendola, senior director of sales for Wells Fargo Private Bank’s legal specialty group, told Law360 that future months could be more challenging, since lower demand in April and May could lead to declines in client payments over the next three or four months. Mendola also said law firms could have trouble with collections.
Fifty-four percent of the law firms reported increases in client requests for discounts in May, compared to the previous month, Mendola said. Fifty-two percent reported more requests for extensions the same month.
“I think the key to 2020’s final results [for law firm financials] will be how collections play out,” Mendola told Law360.
Other survey findings include:
• Lawyer layoffs have been modest. Layoffs of nonlegal staff members have been concentrated in jobs that don’t lend themselves to remote work. Mendola told Law.com that the number of associates at law firms dropped by just 0.9%, while nonlegal staff positions dropped by 4.1%.
• Transactional practices, such as corporate and real estate, were most affected by the slowdown in demand. Practices have been active, however, in bankruptcy, banking and labor and employment.
• Liquidity is good, with almost 90% of law firms having the ability to cover at least three months of monthly expenses, excluding partner draws. Mendola told Law.com that more than 50% of the surveyed law firms cut or delayed partner contributions, which gave them more cash own hand.
Updated June 24 at 9:05 a.m. to add information from Law.com and Law360.
