Temporary legal staffing firm Lexolution LLC has opened a Century City office to capitalize on the economic downturn.
The New York-based company’s move west comes as more and more companies need to watch costs but still need to get legal work done, so they are increasing their use of temp attorneys.
That’s what makes this the magic moment for temporary legal staffing companies. For example, Lexolution, which specializes in document review, charges one-sixth to one-third of what a major firm would bill for the service.
“The prognosis is very good for this industry in a down economy,” said Nora Plesent, the company’s co-founder.
What’s more, general counsels at corporations such as American International Group Inc., Citigroup Inc., JPMorgan Chase & Co. and Merck & Co. Inc. are increasingly requiring that the large firms they use staff a project with not only firm partners and associates, but also temporary lawyers.
“Not only are law firms looking to hire contract attorneys to pass on lower rates to their clients, but companies are taking on an active role in demanding that their outside firm keep fees down,” Plesent said.
Temporary or contract attorneys typically work with firm lawyers on a client’s case in a variety of practice areas, and the work they do ranges from performing due diligence on merger and acquisition deals to writing legal briefs.
Lexolution’s bread and butter is document review. In the digital era, attorneys working in the discovery stages of litigation have been forced to spend hours reviewing thousands of digital documents, including e-mails, voice-mails and instant-messages.
Robert Maylor, a former Lexolution contract attorney who now serves as director of marketing for the company’s Los Angeles office, spent 10 months in 2007 reviewing 300,000 documents involving an antitrust case.
“The project was writing memos that summarized the documents we were reviewing,” said Maylor, who was temping for Morgan Lewis & Bockius LLP on the case. “It’s the stuff you see in movies, a room filled with big boxes.”
For routine but time-intensive tasks such as document reviews, temp lawyers can save money. Depending on the level of work the lawyer does, Lexolution’s temporary attorneys bill $50 to $90 per hour. At some of the city’s largest firms, associates bill upward of $300 per hour.
“Having O’Melveny associates conduct a document review is not economically feasible,” said David Herron, a partner in the Los Angeles office of O’Melveny & Myers LLP.
Bernard Gaffaney, general counsel for Long Beach-based Pioneer North America Inc., a consumer electronics company, said the use of contract attorneys by the outside firms he works with is something he views as a necessary cost-saving measure.
“If you are talking about partners and senior associates, it doesn’t make sense for them to do something that can be done at a cheaper billing rate,” Gaffaney said.
Sector growing
Lexolution was founded in New York by Plesent and business partners Scott Krowitz and Richard Osman in 2001.
The company opened a Washington D.C. office two years later, in 2003, with a fourth partner, Karen Stempel. All four are former practicing lawyers.
Since 2001, Lexolution has evolved into a $40 million a year business. That growth, combined with increasing requests by clients to staff projects in their West Coast offices, prompted Lexolution to open the Century City office.
The temp sector has been growing for the past several years.
Los Angeles-based Rhumbline Legal Solutions opened its doors in 2000. The founders of Rhumbline, which does both permanent and temporary legal staffing, said the company has grown over 60 percent each year since 2001.
That growth is compounded by the rising rates of first-year associate salaries, which have reached a high of $160,000 plus yearly bonuses. A temp attorney’s salary could be comparable, but only if he or she worked full time at the highest rate.
“You get a better bang for your buck contracting out lawyers,” said Richard Hammond, co-founder of Rhumbline.
Lexolution’s L.A. database has just started, with resumes of more than 1,000 lawyers and paralegals. The offices in New York and Washington have about 10,000. Lexolution can provide temporary lawyers on the same day a client requests them. The staffing service could also spend a week putting together a larger team of attorneys to work on a big case.
The resumes of contract attorneys can vary, but the majority of Lexolution’s temporary attorneys are members of the bar and have had significant legal experience.
Plesent said candidates she sends to clients often have chosen to not pursue the partnership track at a law firm, but still want to work in the legal sector. In Los Angeles, Pleasant said she often sees contract attorneys who are trying to launch careers as actors or standup comedians.
John Childers, a Los Angeles-based legal consultant with Hildebrandt International Inc., said using temps for document review helps shield beginning attorneys from mind-numbing grunt work that could drive them to quit a firm.
“Firms are also becoming more intentional about how they staff matters in terms of optimally servicing clients and developing lawyers,” Childers said.
Associates are often attracted to large law firms with the expectations of working on interesting client matters. But when an associate spends the majority of their time reviewing documents from one case, it can become a challenge to retain them.
“The use of contract attorneys keeps associates off of long-term document production projects, which have sent a number of large firm attorneys running,” Childers said.
Associates with aspirations of making partner one day are shielded from tedious document review projects, and often gain management skills by overseeing the team of contract attorneys working on a matter. And when an associate manages a group of 50 or more contract attorneys, industry insiders said the associates are learning skills that aren’t otherwise developed at the firm.
“Associates who can learn how to manage document reviews get skills that will help them learn how to run cases later on their own,” Herron said.
