Is virtual firm Scale LLP the wave of the future?

(Reuters) – Years ago, when my husband was a Big Law litigation associate, we took our kids on a vacation to Disney World. Each night after everyone else went to bed, he stayed up until all hours working, using the hotel bathroom as his “office” so he wouldn’t disturb us.

There was no client emergency, no looming trial, just the constant pressure to work all the time, including nights, weekends and on vacation.

It’s hardly news that Big Law tends to be all-consuming. But is it possible to have a sophisticated, high-end private practice — and a life outside of work? It’s practically the holy grail of the legal profession.

Therein lies the lure of Scale LLP.

The nearly 50-lawyer firm is among the most high-profile in a new crop of so-called virtual or “distributed” law firms that are experimenting with alternative business models.

My Reuters colleague Sara Merken has been following such firms, which also include FisherBroyles; Potomac Law Group; Rimon Law; Taylor English Duma and Culhane Meadows. All reported that they boosted their hiring last year.

At Scale, which has its roots in Silicon Valley, lawyers have no billable requirements or pressure to work any set hours. They are masters of their own destiny.

It sounds great, yes. Except they also have no salary or benefits.

Instead, firm lawyers pocket 80% of the fees collected from their clients, with the remaining 20% going to Scale for malpractice insurance, software, support staff and (limited) office space.

Per Scale’s website, firm lawyers typically charge $400 to $600 an hour.

If a Scale lawyer refers a matter to a colleague, the lawyer doing the actual work gets 60% of each billable hour collected, while the attorney who originated the business gets 20%.

For lawyers looking for a consistent, steady income or who need an employer’s health coverage, such an arrangement is a non-starter, nor would it work for newly-minted law school grads, who are almost surely in no position to generate business.

I caught up with managing partner David Reidy to talk about who is joining Scale and why.

“One big category is talented lawyers who want to practice at the highest level but don’t have 2,000 billable hours to give,” Reidy said, whether it’s due to parenting small children, health issues, caring for aging parents or “god forbid, there are other things they want to do” besides work.

Counsel Stefanie Scott Shah, for example, has a 3-year-old daughter and another child on the way, and said she appreciates the control she has over her schedule and workload.

“As an attorney, you have the ability to choose the cases and clients that are of interest to you, and you have greater influence on how and when you perform the work for those clients,” she told me.

A litigator and outside general counsel to growing companies, she said Scale offers “the flexibility of a small firm or solo shop, but with a network of experienced and accomplished attorneys” for backup as needed.

Indeed, Reidy said another category of Scale lawyers are those with an entrepreneurial bent who were tempted “to go out as solo practitioners, but we caught them before the jump.”

Scale offers “solo economics, but also the brand, infrastructure and community – being part of something,” he said.

A typical Scale lawyer earns in the low to mid six-figures for working 9 to 5, Reidy told me. (Or 5 to 9, or whatever hours the lawyer prefers.)

For some, like counsel Matthew Herlihy, joining Scale actually resulted in a sharp increase in compensation.

Herlihy moved to Scale at the beginning of the year from 1,000-lawyer Gordon Rees Scully Mansukhani and told me he has seen a 300% bump in pay.

The key is that he had a book of business — clients that followed him to Scale. Big Law firms typically siphon off the lion’s share of fees generated by more junior lawyers (Scale estimates at least 75%). Instead, Herlihy said he’s reaping the benefits of the business he generates.

“This is the most lucrative place to practice for attorneys with their own book of business,” he said.

On top of that, he can drop off his son at daycare when it opens at 9:05 a.m. without worrying about higher-ups wondering why he’s not glued to his laptop or phone.

Law firm consultant Lisa Smith of Fairfax Associates told me she thinks that “we will see more virtual/distributed firms going forward.”

Smith noted that the “pandemic showed that law firms can operate very effectively in a remote work environment. It also broke down the perception barriers to the model that might have existed before, both for clients and for lawyers.”

Scale, which Reidy said has received more than 5,000 lawyer applications in the last 18 months, can afford to be increasingly selective about hiring. The firm on its website boasts that its lawyers have previously practiced at Am Law 100 firms including Wachtell, Lipton, Rosen & Katz; Latham & Watkins; Paul, Weiss, Rifkind, Wharton & Garrison; Cooley; Skadden, Arps, Slate, Meagher & Flom; Sullivan & Cromwell; Sherman & Sterling; DLA Piper and more.

Last week, the firm added two former McGuireWoods fintech lawyers, Jamie Wells and Alexander Gershen.

To be eligible for consideration, the firm on its website says would-be partners must “be prepared to demonstrate a transferable book of at least $300,000 of originations per year” and also to be ready “to identify at least one anchor client and articulate a clear business development plan at association.”

However, the firm also says it is also “willing to accept attorneys from senior in-house positions with no demonstrable book as counsel.”

Reidy doesn’t see Scale or its brethren replacing traditional law firms. “If you want to be an equity partner at a Big Law firm, go for it,” he said. But he does see Scale offering a new path for lawyers looking for another way to practice law.

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