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The Economic Downturn's Impact On The Legal Industry

Updated: Jun 15


As the economy tanked early in the pandemic particularly in areas of consumer spending, business has been soaring for the legal industry. While this increase in business has remained steady the last few years, we are now experiencing the inevitable economic impact of surging prices, low supply, and delays.


Anyone who has lived through decades of economic cycles will tell you that the times of growth don’t last forever. And when the growth stops, there won’t be room for everyone to benefit. Uncertainty in an economic downturn can be overwhelming, but can also be ripe for new opportunities.


So, what will happen to law firms when a recession hits?


Some law firms might see an uptick in the need for their services, bypassing their competitors and become market leaders during the chaos. Winners are able to adapt to reality quickly, and take advantage of opportunities that have unexpectedly emerged.


The uptick in legal services, in part, has to do with shifts in practice demand. During the last recession, deal-oriented practices became vulnerable, including capital markets, M&A, real estate finance and other transaction-based practices. Corporate law saw a downturn in favour of bankruptcy law. With fewer business transactions taking place, clients have less need for lawyers who manage paperwork, and seek out legal advice directly impacting their bottom line. Shifts in demand of legal work are nothing new, and cyclical. We will again see changes when the economy recovers. If the current trends indicate a need for change in current career paths, these changes might indicate opportunity.


The pandemic has permanently propelled the law profession into new territory, technology. New capabilities developed during national office closures enabled legal teams to be more productive and dynamic. In this new tech-enabled world, law firms grew their legal operations teams, increased their geographical scope, and sought out new revenue streams. Many firms became more valuable. For example, firms and attorneys who focused on specialist areas like data breach incident response, cybersecurity, or employee retirement law have seen extreme growth both in revenue and in market share.


There will be an increase in the need for alternative legal services providers, such as alternative dispute resolution firms. In recent years, the need for these services providers have significantly increased due to the overwhelmed courts and an ever-increasing backlog of cases. Governing bodies are making room in the courts for criminal cases, imposing mandatory mediation and arbitration for civil actions, usually those in which the sole relief sought is a money judgment. Health care providers and health plans are also invited to initiate dispute resolution processes for certain out-of-network medical bills under the federal No Surprises Act, in 2022.


Mediation and arbitration services are beneficial to clients because they put an end to ongoing legal battles in a timely, mutual beneficial, and effective manner. They also address the need for quick and effective settlement.

Pacific ADR has been formed to provide mediation, arbitration and other ADR services at the highest professional level and at a reasonable cost to our clientele. We are passionate about what we do and strongly believe that empowering litigants to make reasonable settlement decisions in mediation is almost always better than casting one’s fate to the civil justice system. Contact our offices at 206-825-4414 or info@pacific-adr.com.

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