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The implosion of the financial industry, and subsequently the rest of the economy, will likely lead to a surge in tort claims. According to a Tower Perrin report on the national cost of torts, including defense costs, rose to $252 billion in 2007. This is on the tail of a 5.6% decline in 2006. The latest editions to the tort lawyers "most wanted list" are mortgage brokers, appraisers, and investment banks, who are responsible for the massive real estate and financial bubble that has led to the devastation of the global economy.
On the other hand, a New York Times article, said that in previous economic downturns, law firms were able to exploit corporate failures and protracted legal action to their benefit. However, this time around the big law firms are going out of business, merging with other firms, and laying off lawyers and assistants alike. Two of San Francisco’s oldest firms, Thelen and Heller Ehrman, have collapsed. Two Chicago firms that rank among the most profitable in the country, Sonnenschein Nath & Rosenthal, and Katten Muchin Rosenman have cut dozens of associates. In October, the Bureau of Labor Statistics reported that the legal services industry cut more than 1000 jobs.
As a result, a wave of litigation that involves armies of associates racking up billable hours has yet to materialize. The realization that these big firms have too many attorneys with the wrong kind of expertise in an economy that is in transition. Complicating the situation is the fact that clients do not have the capital to invest in expensive hourly-fee agreements and are demanding flat-fee, fixed-fee, and contingency fee agreements.
The whole world is beginning to cut the fat and tighten its belt in order to remain competitive in a fluctuating economic environment. The future will see growth in environmental law as the new green economy takes root. But for those who make their living on contingency fees, they will find themselves at a competitive advantage, in cases such as medical malpractice suits, to the those in large firms that demand a quota of billable hours for the partners in their firm.