This is our 26th annual report on what’s going on in the legal profession, not only in the United States but also in other parts of the world. Like all our previous reports, it is based on information we compile throughout the year from many sources – not just our own clients but many other firms, as well as general counsel and other leaders in the profession.

As always, some of our findings are widely recognized, but we report them here because they continue to impact the profession and have had, or will have, unintended consequences. Other of our findings we believe are, or will be, significant. The resulting picture is a montage of a profession that will continue to change, not just in 2015, but for years to come.

This report presents the big picture but the local picture will vary by individual firm depending on its size, client base, nature of practice, and geographic focus.

Red Hot Practice Areas

Intellectual Property. Trademarks and patent prosecution have become red hot due to the rise of social media and the increase in branding. Patent litigation continues to be red hot due to Congress’s failure to address patent reform and patent trolls’ continued licensing and suits. However, the most litigious troll in 2013, Acacia Research Corporation, lost a major case in July 2014 that was one of the first to apply new U.S. Supreme Court guidance about when ideas are too “abstract” to be patented. If patent reform is passed this year – and it is almost a certainty – it would curb suits brought by patent trolls and therefore reduce the amount of litigation.

Federal False Claims. According to an expert who has handled whistleblower cases for many years, “There has been an explosion and the number of cases grows every year. There has not been an industry that has not been affected.”

Labor and Employment. President Obama’s August 2014 executive order regarding contractors and subcontractors that receive more than $500,000 in federal money will further fuel an area that was already hot due to union campaigns and wage-and-hour class actions, not only nationally but, for some firms, also internationally.

Technology. This area will become red red hot if patent reform finally happens in 2015.

Hot Practice Areas

Anticorruption. Larger U.S. firms continue to increase enforcement of the Foreign Corrupt Practices Act, which leads to more prosecutions. The United Kingdom, China, Brazil, and Canada have all enacted anti-bribery laws in the last few years and are now increasing investigations.

Litigation. Most“bet the company” cases are still going to the big firms but many of the other cases are going to mid-size and boutique firms.Much of the work is still on an hourly basis although it appears contingency arrangements are increasing. Also see “alternative fee arrangements” under “Issues Affecting Law Firm Management.”

Inversion. At certain large firms, inversion is hot and will continue to be hot unless the Obama Administration and Congress agree on significant changes in corporate tax laws.

Environmental. On the companies’ side, frac sand mining continues to be a major issue. For instance, Pennsylvania Governor Tom Wolf wants impact fees levied. On the landowners’ side, leases continue to be active.

Energy. All forms including “clean” are hot.

White Collar Crime. Many areas are involved, including government and health care, tax, and intellectual property.

Health Care. Adding to the heat are billing investigations and complaints from patients about HIPAA compliance, along with provider self-reports related to privacy and security breaches.

IPOs. Initial public offerings are hot but could cool off next year if financial markets stumble again.

Practices Areas Getting Hot

Elder Law. This area continues to grow because people need to make changes in their estate plans since they are living longer. Some firms now have paralegals who research long-term-care facilities and retirement homes to help clients select ones they can afford and that can provide the care they currently or eventually will need.

Same-Sex Marriage Rights. At least 30 of the nation’s largest firms are representing parties challenging state laws banning same-sex marriage.       

Immigration. Now that President Obama has announced executive action, this practice area will heat up.

Hot Geographic Markets

London. U.S. firms continue to enter the market in several ways: U.S./U.K. mergers such asSutherland and U.K. energy boutique Asbil; U.S. mergers such as Squire Sanders and Patton Boggs; and office openings by mid-size U.S. firms, including Butler Snow.

Mexico. Economic reforms intended to spur foreign investment continue to attract major global firms such as Hogan Lowells, which has merged with a prominent Mexican firm that had offices in Mexico City and Monterey.

Houston. It’s not just energy that is attracting new firms but also a booming deal market. Wilkie Farr & Gallagher is one of the most recent to open an office there.

California/Asia. Some of the larger California firms continue to open offices in Asia, as we have been reporting, or send lawyers to various Asian countries.

Cleveland. In its current 700 report, Of Counsel states, “The overall growth of its mid-sized firms represents a trend that emerged from the recession and continues today.”

Law School Trends

Law School Enrollment. Although the American Bar Association’s national report has not yet been released at the time of this writing, there is indication that total enrollment increased in fall 2014 over 2013. However, at many schools, it is still below the levels of several years ago. Meanwhile, as we reported in our Midyear Update, some schools have continued to cut tuition while others have started to introduce changes in the curricula to include courses in technology and, at Yale, a course based around French economist Thomas Piketty’s work, Capital in the Twenty-FirstCentury.

Entry-level Hiring. This had increased roughly 4 percent for the class of 2013 nine months after graduation but it is still below that of pre-recession levels. Since law schools do not create the market, but must respond to the level of entry-level hiring, the future for the class of 2015 with private law firms is still uncertain. General counsel won’t pay for training new associates. Furthermore, as discussed above, general counsel are keeping more work in-house, which could mean the future for more law school graduates may lie with corporate legal departments, not law firms or public service providers. (See “An Insider’s Perspective: What Legal Employers Look for in New Hires,” Wisconsin Lawyer, March 2014.)

Campus Accountability and Safety Act (CASA). Two separate measures were proposed in July 2014 to deal with sexual assault but, unlike patent reform, Congressional passage is not guaranteed.

Other Issues

Legal Services Providers. Although employers have added approximately 2 million jobs this year, the total number of paralegals, legal consultants, processors, and patent agents has declined by 2,000 jobs since January 2014 and by 45,000 jobs since the pre-recession record level set in May 2007. This picture seems inconsistent with the dramatic increase in work now being performed by nonlawyers.

Expanded Role of In-house Counsel. Not only is less work going to outside counsel but in-house counsel in many corporations have gained a major, and still growing, role in corporate governance. Sound familiar? The outside lawyer for many small and family-owned businesses is often also the “trusted business advisor” and a member of the board.But in major corporations, the general counsel is now faced with difficult choices and challenges to his or her independence and, in the words of Paul Hastings partner Bruno Cova, “It is a battleground which is here to stay.”

Nonlawyers. This is one of the biggest changes affecting the legal profession, yet many firms still refuse to recognize and adjust to it. For more than a decade, law firms have been increasingly hiring nonlawyer executives as chief operating officers or to run marketing, technology, finance, and human resources. More recently they have been given responsibility for the cost-effective delivery of certain nonlegal services such as database searches and document management. Now, in the last two years, nonlawyers are being hired to oversee knowledge management and project management.

Uniform Bar Exam. The New York Court of Appeals has postponed its plan to replace the state bar exam with a national one. One of the reasons may have been because the court wanted a standard grading system whereas each of the 14 states that accept the UBE can set its own passing score.

Debt Collection Firms. In July 2014 the Consumer Financial Protection Bureau filed its first suit against a debt collection firm, in Georgia, accusing it of violating federal consumer-protection laws. Legal specialists say this indicates the Bureau’s intent to target similar high-volume firms as well as banks and debt buyers.

Litigation Funding. The historic restrictions on companies that invest in lawsuits in exchange for a cut of the proceeds if their side prevails have been relaxed or even abolished in several states, such as Texas, South Carolina, Massachusetts, and Florida. This follows the trend that occurred beginning more than 10 years ago in the United Kingdom and Australia.

Summary

Starting with the recession, there has been an increasing malaise within the legal profession due to a number of developments – the increasing oversupply of lawyers, increasingly demanding clients, and increasing competition to mention just a few. What they all add up to is change – and uncertainty about the future.

But there is nothing new about change. In fact, there is an old adage, “The only constant is change.”

When I began my consulting practice almost 40 years ago, most of my clients for the first several years were accounting firms, including two of what was then called “The Big Eight.” At that time, public accounting was undergoing many changes and there was considerable uncertainty and concern about the future of the profession. Many of the trends and issues that accountants had to address then were the same as the legal profession has subsequently been facing, including the above, plus services provided by “nonaccountants,” client pressure on fees, and the ownership and management of firms.

The accounting profession addressed the need to change, did change, and has survived, stronger and more profitable than ever. The legal profession can do the same.