Law firm leaders in Pennsylvania cautious on 2013 outlook

Uncertainty about state of economy, U.S. fiscal problems among top concerns

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A new year does not necessarily mean a new beginning for law firm leaders, who are anticipating a 2013 that looks a lot like 2012.

While Pennsylvania firm leaders have expressed concern about how the nation's financial picture and a resulting timid client base would affect their top line, they are cautiously optimistic that certain practice areas could be busy in 2013.

But that might not be enough to compensate for rate pressures, which could force firms to look at additional cost-cutting measures in 2013, law firm leaders and consultants said.

"It was a very, very hard year," Ballard Spahr Chairman Mark Stewart said of 2012, "and I don't think it's going to get any easier in 2013."

Clients are looking at their legal spending more closely than ever, Mr. Stewart said.

"We keep waiting for an uptick in business transactions, but as long as you've got the uncertainty coming out of the government, people are going to hold back," Mr. Stewart said.

As many firms have reported, Ballard Spahr saw a rise in deals in the fourth quarter of 2012, but Mr. Stewart said the department isn't sure just yet whether that was a tax-driven phenomenon or a sign of what is to come in 2013. What will be busy in 2013, Mr. Stewart said, is the firm's consumer financial services practice and any other area that is heavily regulatory in nature.

White-collar criminal defense, particularly in the financial services area, will also be hot this year, he said.

For many firm leaders, 2013 really hinges on what is happening in Washington.

"To me, 2013 is highly variable based on when, and if, the politically driven uncertainty that really is a cloud over the economy dissipates," said Peter Kalis, chairman of Pittsburgh-based K&L Gates.

"There's an enormous amount of energy ready to be unleashed by our clients. There's an enormous amount of capital on the sidelines. The question that plagues us, and not just in the United States, is when will our political class understand that markets despise uncertainty because it's paralyzing, and it undermines the planning functions."

Mr. Kalis said there are numerous opportunities that clients are ready to jump on, particularly in the areas of energy independence and the technologies being generated by Pittsburgh-based and other research universities.

But there is a cloud of uncertainty -- regarding the debt ceiling in particular -- that is holding that work back, he said.

"Am I pessimistic or optimistic?" Mr. Kalis asked. "I guess I'm too old to be either. I'm just realistic that I think the facts are as plain as day and our elected officials' unwillingness to embrace them is unfortunately also as plain as day."

He said firms would do well to be conservative in this market, because there is no great penalty for that if things go well in 2013 and a potentially severe penalty if the year turns sour.

For Drinker Biddle & Reath Chairman Alfred W. Putnam Jr., the 2012 fiscal year doesn't end until Jan. 31, but he said last year was "OK."

"The marketplace we're in, the legal environment we're in, has been pretty challenging since 2008. ... Our firm has been fortunate, I think, and we've been able to weather most of the storms, but I'm not sure I see it changing that much," he said.

Paula Alvary, a law firm consultant with Hoffman Alvary in Newton, Mass., said most firms are uneasy about 2013. While there is still much to be learned about the coming year, Ms. Alvary said she thinks "it's an unusual firm that anticipates a fully confident, robust 2013. I think most firms are very, very cautious."

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Gina Passarella: gpassarella@alm.com or 215-557-2494. Zack Needles: zneedles@alm.com or 215-557-2493. To read more articles like this, visit www.thelegalintelligencer.com.


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