Forecast for 2012: Cautious optimism
By MATT CHANDLER
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The recession may be in the rear view mirror, but the ripple effects continued in 2011. Unemployment remained high and the housing foreclosure crisis, highlighted by the implosion of the law firm of Steven J. Baum, took center stage.
Civil legal service agencies were flooded with new clients while funding fell across the board, leaving groups such as Legal Services for the Elderly and Disabled forced to turn people away.
Still, there was cautious optimism among legal professionals. With business steady in most practice areas, some firms were showing growth and the dark cloud that has hung over the region seemed to be dissipating.
So what do the experts predict for 2012?
Art Russ Jr. is president of the Erie County Bar Association and an attorney with Phillips Lytle LLP. He says 2011 was "stable" for the legal industry but among the challenges ahead is a saturation of attorneys in Western New York.
"Back in 1970, the population in Erie County was 1.2 million people and there were about 1,000 attorneys," he says. "Today there are 1 million people in Erie County and there are 4,500 lawyers."
He says there's concern in the legal community as to whether there is enough business to maintain such a high number of attorneys as the population continues to decline.
"There are a lot of people working out of their houses. There are attorneys who are working part-time," Russ says.
"So, sure, there is that concern," he adds
Asked what he sees as the greatest challenge, he pointed to "do-it-yourself" legal websites including legalzoom.com. They pose a threat to business, he says, especially solo practitioners who specialize in preparing wills, real estate deals and other paper transactions.
"It's the biggest elephant in the room," he says. "You can prepare your own will. You can set up any kind of business in New York state for $99, and they have separation agreements."
According to Russ, as more people turn to the Internet, business will shift from local attorneys to legal websites.
That could spell trouble locally, he says, adding, "They are going to be a tremendous threat to the next generation of general-practice neighborhood lawyers."
Another thing on people's minds in 2012: bankruptcy trends.
Jeffrey Freedman has been specializing in bankruptcy law for 35 years and says that although individual filings in 2010 were down 20 percent in the Buffalo and Rochester markets, it may not be any cause for celebration.
As filing fees increase and regulations make filing for bankruptcy more difficult, many people are choosing not to file.
"They just give up," he says. "They still can't pay their bills but, in many cases, they just ignore the collection letters and hope that the debtor doesn't sue them."
Even though the number of filings is down, it doesn't translate to stronger financial times.
He also points to banks and other lending institutions tightening their belts as a contributing factor.
"It used to be, if you were breathing, you could get a car loan," he said. "Now they are much tougher. The same is true for credit card offers and mortgages. Banks are lending smarter, so less people are getting in over their heads."
According to Freedman, it's impossible to predict whether banks will loosen restrictions and increase lending in 2012, possibly fueling more trouble. Overall, however, he says to expect things in the world of bankruptcy to continue on a similar course as 2011.
Freedman's firm also handles Social Security disability claims. He expects that to be a strong growth area in 2012 as "an aging population" struggles with health issues and job losses.
"If you are an employer, are you going to hire someone in their mid-50s with a medical condition or a healthy, young person in their 20s?" he says. "Most employers are going to hire young, and it makes it increasingly difficult for older workers to survive if they have a disability."
Gary Schober has seen a lot of economic ups and downs in more than three decades as a lawyer. As president and CEO of Hodgson Russ LLP, he prefers to take a long-term look at things rather than speculate on what may or may not happen in the short term.
"Uncertainty is the key word as we start looking at 2012," Schober says. "We have obviously come a long way from the great recession, and business is better than it was during the 30 or so months we were in the recession. But despite the improvements, it still feels like everything is very shaky."
The global economy plays a big role in what might happen locally in the year ahead, he adds.
"If the Europeans could solve their problems, I think that would do a great deal toward stabilizing the world. If they do not, I can easily see the confidence that has slowly built back up over the last year quickly eroding," he says.
Although he sees business moving forward, most firms seem to have one eye open, as if expecting bad news.
Says Schober: "It's like, 'We can't be content to just accept that things are getting better and the economy is getting stronger.' And I think a lot of that can be traced back to Europe."
Asked what law firms can do - for that matter, businesses in general - to plan for 2012, he said Hodgson Russ follows a model that doesn't change with swings in the economy and other factors.
"We keep our eye on the long term and we try as best as we can to make judgments that are in the firm's long-term best interest," he said.
"It could be easy to make reactionary decisions based on what you see right in front of you, but we have always avoided any temptation to do that and instead focus on what will make us stronger down the road."