So, last week’s big blogosphere news was that the DLAPiper, the world’s largest law firm has announced a mandatory minimum $200,000 annual cover charge for clients. New clients unwilling to commit to spending $200,000 annually on fees won’t be served, while existing clients who don’t meet the minimum billings requirement may be asked to leave. Ron Friedmann at Prism Legal believes that the minimum charge is legal. Ron writes that there are hidden costs when large firms handle lots of small matters, because of the inefficiencies that occur when lawyers switch from one project to another. In addition, Ron notes that DLAPiper’s minimum cover represents an intentional effort to position itself as a “bet the farm” kind of firm, rather than a law factory. On the other hand, John Wallbillich of Wired GC expresses some concern that a mandatory minimum will put a damper on associates’ client development efforts, since most of the matters they’re likely to bring in won’t make the $200,000 cut. Or, the policy may encourage associates to take their 3 small clients whose billings total $150,000 and leave DLAPiper to start a virtual firm, where they can keep most of what they earn.
What these commenters haven’t considered, however, is that for large clients, DLAPiper’s cover may actually represent a bargain. After all, we don’t know what clients will actually receive in exchange for the $200,000 minimum. It may be that DLAPiper will offer $300,000 worth of service to clients who are willing to lock in and pre-pay the $200,000 minimum. Between the cash-flow benefit of receiving $200,000 up front and use of offshoring or second-tier contract lawyers in house, DLAPiper could still earn a decent profit, even while providing a “volume” discount.
Meanwhile, DLAPiper’s minimum cover proves a boon for solos and small firms, who never had much of a shot at the $200k matters to begin with. After all, most solos and small firms can make a feast of DLAPiper’s $199,000 crumbs. So here’s my message to DLAPiper: if you want to evict those low-rent clients, we solos and small firms stand ready to take them in. Sure, they won’t have the luxury of a global brand or fancy office, but they’ll find high-quality, streamlined service and most importantly, lawyers who are grateful for their patronage.