Legal News

CEO Ruyak Partly Blames Contingency-Fees, Discovery Vendors, for Howrey?s Fall

By Ashby Jones

Well, it appears the end of Howrey is no longer some event that would take place in the indefinite future.

No, it’s pretty much upon us.

The WSJ’s Vanessa O’Connell is reporting that the law firm’s partnership will hold “a series of votes” in coming days on winding down the firm. She talked to firm CEO Robert Ruyak (pictured), who told her that the votes could result in dissolution of the firm.

Ruyak declined to provide the specific timing of the votes. One person familiar with the matter said several partner meetings were scheduled for Wednesday.

Howrey, which once employed as many as 750 attorneys and uses the slogan “In Court Every Day,” had built what many corporations described as “go-to” litigation and intellectual property practices in the U.S. and Europe.

But starting in late 2008 and 2009, “the [litigation] market started to change dramatically,” Ruyak said, bringing unsettling swings in the law firm’s profits, and subsequently, a painful exodus of its partners.

One of the factors affecting profitability was the move by clients to pay for litigation using new alternative billing and contingency arrangements.

As clients began looking to lower their legal costs, the firm took on a growing proportion of work on a contingency or partial contingency basis-shifting a big portion of its business into what Ruyak described as “future recovery.”

“What we found is that partners at major law firms have very little tolerance for change and very little tolerance for fluctuation in profits,” he said. “You couple that with free agency, which exists where partners – without much risk to them – can change firms quickly and rapidly . . . . it’s difficult.”

Another challenge was the rise of third-party document-discovery specialists that could provide litigation support services at substantially lower rates, he said. Howrey, a law firm with many offices in big cities, and thus, higher costs and couldn’t compete, he added.

A law-firm merger “never was an option,” he said.

Full post as published by Law Blog - WSJ.com on March 09, 2011 (boomark / email).