Law Factory Illustrated? Fragomen, Del Ray
Law firms thinking about their business and operating models need to consider which practices and matters rise to the level of “bet the farm.” Clients willingly spend on such matters, tolerating generous staffing and high costs. Much legal work, however, is cost sensitive and might be better handled by a “law factory”. A good example of what LawFactory could look like is AmLaw 200 firm Fragomen, Del Rey, Bernsen and Loewy, LLP.
Last week a WiredGC post, The End of the Full Service Law Firm?, commented on the recent move by CMS Cameron McKenna to transfer its immigration practice to immigration specialty firm Fragomen. John Wallibach characterizes the transfer as
- “breathtaking” because CMS acknowledges it rather not do some work.
- “notable” because the move calls into question the idea of the full-service global law firm.
- “inevitable” because “[s]ome work cannot support higher fees and the fatter margins some firms covet.”
This got me curious about Fragomen. I found and read The Am Law Second Hundred-2008: Feasting on Leftovers Fragomen, Del Rey takes work that few firms want, uses a rate structure that most firms fear, and makes a fortune (The American Lawyer, 1 June 2008). Reading it, I see that Fragomen has many characteristics that I believe Law Factories need:
- Focus on a single practice: with 250 lawyers, it is much bigger than its next biggest immigration firm competitor at 35 lawyers.
- Handle high volumes: it has handled 50,000 immigration transactions annually for 3 years.
- Keep overhead low: its offices are not fancy (and until a then-recent move, the offices sounded pretty shabby).
- Leverage non-lawyer professionals: the firm has more than 500 paralegals, putting the ratio to lawyers at more than 2:1.
- Work on fixed fees: 95% of its work is charged on a flat fee basis.
- Take legal technology seriously: the firm has provided web-access to case files for more than 10 years; its paralegals have access to a digital best practices library of key flowcharts.
- Keep lawyer pay in check: new associates earn $125k, not $160k and do not come from top-tier schools.
- Be global: the factory is global with 15% of work outside the USA.
Law Factory does not mean low profits. The article reports that Fragomen shows “that a profitable business model doesn’t have to be built around high fees.” It notes that with “average partner compensation of $1.89 million and revenue per lawyer of $1.085 million, it rubs shoulders, financially speaking, with Irell & Manella; Munger, Tolles & Olson; and Williams & Connolly.”
While the article is three years old, a visit to the firm’s website suggests that, if anything, factory elements are even more so today. The lawyer directory lists about 250 lawyers and the About / Overview page reports “more than 1,000 immigration professionals” which puts the ratio of professionals to lawyers at more than 3:1.
Does Fragomen offer lessons? I certainly think so. BigLaw partners will rush to find how Fragomen differs from what they do. Of course distinguishing immigration from other practices is easy. More helpful, however, would be partners who strive to see the similarities and apply what works so well for Fragomen to their own practices.
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