Weathering The Storm

April 28, 2008
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GRAND RAPIDS — It is generally known that the Michigan economy is suffering. It is also acknowledged that health and life sciences have brought aid to West Michigan in the form of jobs. But, what is not always evident is the stability, and in some aspects, growth of the law industry.

Paul Isley, associate professor of economics at Grand Valley State University’s Seidman College of Business, observed that professional and business services groups locally have seen very little change in the number of jobs since 2000.

The number of people working in law professions in the Grand Rapids area has not fluctuated for the past three years and continues to represent approximately .4 percent of the work force.

Financial services in the Grand Rapids area have actually seen a 10 percent increase in jobs since 1999, but there has been some fluctuation in those numbers, which Isley suggests shows there could be some job instability in that field. During the same time frame, in the Grand Rapids area, manufacturing has lost 19,000 jobs, and health care and education combined have added 15,000.

The addition of health care and education jobs “diversifies our work force, which means we are less susceptible to any one industry having a downturn,” said Isely.

“Manufacturing is always nice because you’re producing things but selling it to people outside the area, so you’re bringing money in, where a lot of these service activities are actually moving money around West Michigan as opposed to bringing money into West Michigan. There’s a difference there, and that’s true of the legal operations, as well.”

Isley noticed that while most industries saw a decrease in wages from November 2004 to April 2006, professions related to law saw a 14.5 percent increase. The U.S. Department of Labor describes law professions as lawyers, judges, magistrates, paralegals, legal assistants, title examiners, extractors, searchers and legal support workers.

He said the increase has been national, and speculated the local increase could be due to the ability of legal professionals to change areas with relative ease.

“To keep a lawyer here probably requires an increase in wages, otherwise they’ll say, ‘Fine. I’m going to go someplace else and I’m going to earn the same amount of money or more.’ Whereas somebody who’s doing machining work is basically tied to the area if they have debt, or they’re going to have to try to figure a way to move to a location where that (type of work) is occurring,” said Isley.

Jeff Ammon, managing partner at Miller Johnson, has seen an increase in lawyers moving to other firms in the past 10 years, but not many leaving the area.

“We get a lot of inquiries from lawyers who have been practicing in a larger metropolitan area like Chicago wanting to come to West Michigan, either because they have some family connection here or they’ve spent some time here,” said Ammon. “They want a more balanced lifestyle but don’t want to sacrifice a sophisticated law practice, and they can do that here in Grand Rapids.”

The Grand Rapids Bar Association has seen a slow but steady increase in membership over the past few years. In 2006, membership was at 1,374, and now in 2008 is at 1,490, representing roughly 68 percent of eligible attorneys in the Grand Rapids area.

The trend is true for some law schools, as well. Ave Maria School of Law in Ann Arbor brings in 70 percent of its students from out-of-state. After graduating, however, 40 percent of students seek to stay in-state. The Thomas M. Cooley Law School in Grand Rapids has attracted an increasing number of out-of-state students.

Cooley opened in Grand Rapids about five years ago and has been offering a full 90-credit program since 2006. In that time, the school’s out-of-state enrollment has gone from 161 during the September 2005 to March 2006 school year, to 522 for the same time period of 2007-2008, and has been placing students in local law firms.

Miller Johnson is coming off a record year for business and profits. Ammon attributes the company’s success to paying attention to the market and to its clients.

“Every one of us tries to stay in touch with his or her client,” said Ammon. “Finding out what the clients are seeing in their industry: If a client tells you, ‘Look, the price of wheat is going up, so it’s going to cost us more to make our products; here’s how we see our strategic plan shifting,’ you listen to those clients and you figure out what their businesses are doing. Then with that information, we try to figure out what legal needs that presents. Is it something different than what we’re doing now? How is what we’re providing now going to have to change?”

The amount of work has not changed much, Ammon said, matching Isley’s findings, but Ammon said the type of law practice has shifted. He observed that there has been less activity in the merger and acquisition area, but still sees some strategic acquisitions by clients who are looking for new opportunities to merge into other markets by making bargain purchases. However, as the economy slows, said Ammon, so does that type of work.

Other sectors in law where Ammon has noticed a decline in workload include public securities, some banking institutions, mortgage-related work, and national credit market work.

“A lot of that stuff is very, very quiet. There’s a lot of consolidation in those industries,” said Ammon. “That means the people who were providing a lot of those ongoing services don’t have anyone to provide them to, because their clients are either in bankruptcy, not growing or shrinking, and they just don’t need the lawyer services.”

Ammon commented that the down economy has made certain types of dispute much more critical, because clients are less able to sustain a loss that they would otherwise have been able to overlook. The areas of litigation, employee benefits and creditors’ rights have all seen growth.

The legal business is dependent on the market, and if a firm is able to have some luck predicting where that market is going and staff accordingly, the firm should experience some success, said Ammon.

“Some sectors of the economy are stronger than others,” he said. “If you are positioned well in those industry segments, you’re doing well.”

According to Ammon, Miller Johnson has had extensive work in estate planning, family law, governmental investigations, protecting clients from fraud and embezzlement, and other areas that are not generally affected by a down economy.

He expects caseloads will increase in certain segments of manufacturing, health care and consulting work, and also that mergers and acquisitions may pick up. The Family and Medical Leave Act brings new regulations about which Ammon expects employer clients will need advice.

Legal Aid of Western Michigan, a nonprofit organization offering free legal assistance in non-criminal, non-fee generating matters to seniors and low-income persons, has seen similar trends to that of Miller Johnson with an increase in foreclosure and collections matters.

Executive director Michael Chielens believes most of the foreclosure cases have been caused by people being taken advantage of by mortgage lenders, not reading the fine print of their contracts and getting into bad mortgages, but he said the workload has stayed the same.

“The demand of law probably hasn’t changed,” said Chielens. “But the types of cases certainly change year to year.” 

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