Last year was a modest one for Washington’s largest law firms, with most reporting single-digit gains in revenue and profits per partner while keeping partner ranks relatively steady.
Seven of the region’s 10 largest firms, based on the number of attorneys working locally, reported overall revenue growth between 1 and 9 percent. Most also saw single-digit growth in profits per equity partner in 2011 compared with 2010, with one, Arnold & Porter doing far better, as profits per partner jumped 25 percent to $1.4 million from $1.1 million for the year.
Falling back was Crowell & Moring, which said profits per partner fell nearly 7 percent to $842,000 from $902,000 in 2011 compared with the previous year.
The figures were self-reported by law firms to the American Lawyer, which collects and publishes the financials of the top 100 law firms. Two of Washington’s 10 largest firms, Skadden Arps and Wiley Rein, do not report financial information to the publication.
Most firms either held steady with their number of equity partners, or grew by a handful. The exceptions were Hogan Lovells, Crowell & Moring and Finnegan, which had 10, six and four fewer partners, respectively, in 2011 than in 2010.
Finnegan managing partner Barbara McCurdy said the drop in the firm’s equity partner headcount was not a factor in the nearly 10 percent rise in profits per partner, and that some highly paid equity partners nearing retirement went to a reduced schedule in 2011, and no longer fit the definition for equity partner.
“If these partners were included in [The American Lawyer] definition of an equity partner, our profits per partner actually would be higher for 2011,” she said.
While revenue is an indicator of a firm’s market share and long-term economic success, profits per partner is largely considered the industry standard for measuring a law firm’s profitability.
Despite a healthy year, some firm leaders say the days of pre-recession growth are over.
“We’re still not back to the way the world was in 2007 and quite frankly, we don’t expect that it will,” said Bruce McLean, chairman of Akin Gump Strauss Hauer & Feld. “For the law business, 2001 to 2007 was a very good period. There was a lot of demand for legal services ... that demand situation has changed dramatically and we don’t expect it’s going to return to that level in the foreseeable future.”
Akin Gump reported the highest profits per partner out of the Washington firms, with equity partners earning nearly $1.7 million in 2011. Both revenue and profits per partner inched up about 5 percent between 2010 and 2011, which McLean attributed to major matters in the firm’s international trade, public policy and regulatory practices, including representing the Coalition for 21st Century Patent Reform in the passage of patent reform, and a lobbying campaign that helped push the U.S.-Korea Free Trade Agreement through Congress.
Arnold & Porter stood out as the only firm in the group to see double-digit growth in both revenue — up 15 percent from $555 million to $639.5 million — and profits per partner.
“We had growth in our work across a broad range of areas including litigation, government investigations and some of our intellectual and antitrust areas,” said Arnold & Porter chairman Thomas Milch. “We were fortunate we were busy in a number of different sectors in 2011 and we’re cautiously optimistic about 2012.”
Arnold & Porter attorneys had their hands in several high-profile matters in 2011, including acting as antitrust counsel for AT&T in its failed merger with T-Mobile, and handling litigation and regulatory work arising from the Lehman Bros. bankruptcy reorganization.
Crowell & Moring was the only major firm that reported to see profits per partner fall in 2011, which chairman Kent Gardiner said was largely due to the pending nature of several large litigation matters the firm is handling on an alternative fee basis – including so-called success fees that don’t flow to the firm until after a matter is completed successfully.
“Profitability has become a multi-year event,” he said. “Many big matters that have continued through 2011 and into 2012 are not yet completed. A substantial contributor to having a drop in profits per partner in 2011 was that these matters are still open.”
Gardiner cited the firm’s September 2011 trial victory in a trade secrets case on behalf of client DuPont as an example: a Richmond jury awarded DuPont nearly $920 million, but the matter is not entirely resolved because the window for an appeal is still open and enforcement of the award is pending, he said.