As the number of firms declaring that they’ll match Cravath’s new bumper associate salary brackets continues to grow, in-house lawyers from some of the world’s biggest organisations have begun to question what the ‘Cravath effect’ will mean for the fees law firm clients are charged. Earlier this week, Bank of America global general counsel David Leitch sent an email to law firms expressing his concern that the 12.5 per cent industry-wide salary raise was not justified by the market: ‘While we respect the firms’ judgement about what best serves their long-term competitive interests, we are aware of no market-driven basis for such an increase and do not expect to bear the costs of the firms’ decisions,’ he wrote.
Work redistribution
Public Storage chief legal officer Lily Hughes took Mr Leitch’s comments one step further, suggesting that clients will likely reevaluate the way they distribute their outside legal work if the pay raise is reflected in their hourly rates. ‘As rates percolate, this might give more opportunity to smaller regional and mid-sized firms,’ she said. Lecorpio general counsel Doug Luftman also suggested that the pay raise, if reflected in hourly rates, might accelerate the popularity of automated and AI legal technologies with in-house legal teams: ‘All of this is going to accelerate the use of information tools and software,’ he told Corporate Counsel.
Sources: Wall Street Journal; Corporate Counsel; Bloomberg BigLaw Business
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