Dentons' dollars dispute
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Jenner & Block LLP’s profits per equity partner surged 31 percent.
Latham & Watkins LLP became the world’s top grossing law firm.
And Kirkland & Ellis LLP, Chicago’s largest law office, cemented its status as the richest partnership, with profits per equity partner topping $3.5 million for the first time.
The results from The American Lawyer’s annual financial report showed strong performances for many law firms with large Chicago offices.
At the Am Law 100 firms with the 15 largest offices in Chicago, profits per equity partner rose 9.3 percent on average. That outpaced the broader Am Law 100, where that figure grew 5.3 percent as a whole.
Gross revenues among the Am Law 100 increased 4.6 percent from 2014. At The Am Law 100 firms with the 15 largest offices in Chicago, revenue rose 6.1 percent on average. The Chicago group also saw revenue per lawyer grow 5.3 percent on average, compared to 3.7 percent for The Am Law 100 as a whole.
Chicago is a law firm’s kind of town, apparently.
Jenner & Block
The city’s average-beating was aided by the performance of 101-year-old Jenner & Block, Chicago’s seventh largest office.
The litigation powerhouse’s profits per equity partner, slightly more than $1.6 million, rose more on a percentage basis than any of the other 99 firms. So, too, did the growth of its revenue per lawyer, which surged 23 percent to top $1 million. The firm’s gross revenue climbed 14 percent to $408 million.
Jenner & Block also led all 15 firms in the Chicago group in the growth rate of compensation per partner. Latham & Watkins’ revenue grew the most, at 14.3 percent — barely edging out Jenner & Block.
“We are privileged to have a terrific client base who has expressed confidence in us,” said Terrence J. Truax, Jenner & Block’s managing partner.
One crucial client in that regard has been General Motors Co.
Firm Chairman Anton R. Valukas was picked early last year to lead GM’s internal probe into ignition switch malfunctions that led to more than a dozen deaths. Valukas, who was the court-appointed examiner for the Lehman Brothers bankruptcy, has often earned sprawling matters that boost the firm’s bottom line.
Last year, two headline-grabbing matters that lawyers at the firm handled included large transactions for Archer Daniels Midland and an investigation of the George Washington Bridge lane closure in New Jersey.
The firm also opened its first international office in London this year. Truax said that was the plan for years, but the firm’s financial success provided “more confidence” to make the move.
“We’re committed to a set of core values for our firm. We’re committed to this concept of excellence that’s non-negotiable. And a commitment to our clients,” he said.
“And staying true to those values is what we believe will be a recipe for success in years ahead.”
Latham & Watkins
Latham & Watkins made perhaps the biggest news in The Am Law report by overtaking DLA Piper as the highest grossing law firm. It brought in $2.6 billion in revenue last year.
Revenue per lawyer jumped 12.2 percent to $1.25 million.
“It was sort of a perfect storm of success,” said Bradley E. Kotler, the firm’s Chicago office managing partner. “We hit what we have been putting together for years.”
Kotler said the firm benefited from “white-hot” demand for its high-end transactional and litigation practices.
Some highlights: Lawyers in the Chicago office represented Orbitz Worldwide in its sale to Expedia. They represent the Illinois High School Association in its defense against a class-action lawsuit pertaining to concussions. And they successfully got a class-action fraud lawsuit dismissed for the former CEO and CFO of Furniture Brands International Inc.
The firm’s strategy to staff large matters with lawyers across the globe also paid off, he said.
Latham & Watkins opened its Chicago office in 1982 and today has 161 lawyers here, says the Chicago Lawyer magazine annual survey that will be released next month. Despite having more than 2,000 attorneys, the Chicago office is the firm’s fifth largest by headcount. Its largest office is in New York with roughly 350 lawyers.
That spread of lawyers is a crucial part of the firm’s strategy, Kotler said. Lawyers must trust and rely on their colleagues across continents.
“We are the same level of quality throughout the firm, and we sort of pride ourselves on that,” Kotler said.
Winston & Strawn
Winston & Strawn LLP set records for revenue and profitability, said Managing Partner Thomas P. Fitzgerald. The firm’s revenue was $785.5 million.
Its growth in revenue per lawyer (8 percent), profits per equity partner (20 percent) and compensation per partner (12 percent) also stood out. Those growth rates were all in the top three of the 15 firms in the Chicago group.
Fitzgerald said the firm’s litigation and corporate transaction practices were both busy year-round. And a number of lateral acquisitions the firm made in 2013 began to pay dividends.
That included four intellectual property litigators from the well-regarded IP firm Finnegan, Henderson, Farabow, Garrett & Dunner LLP. The firm also brought in nine equity partners to its Houston office.
Continuing their investments, earlier this year the firm added nine partners from Pillsbury, Winthrop, Shaw, Pittman LLP’s structured finance practice.
“You can’t achieve what we achieved without having performance across the board,” Fitzgerald said.
The firm was also able to set records because it has responded to structural changes in the legal services market, he said.
While its high-end services continue to be in-demand, its associate ranks are facing a different reality. The firm, like many others, has whittled its first-year hires in half from pre-recession highs. In total, the firm has shrunk from 1,000 lawyers to roughly 800; another common theme for firms.
But Fitzgerald said the tension in the legal market is not between firms’ or lawyers’ desires to fill timesheets and client demands for efficiency.
“The tension is, so far, all of our clients’ demands result in less lawyers,” he said.
“And the client is always right. If it’s in their best interest, then it is in our best interest. I don’t view it as tension. … If it means we have less lawyers, then we have less lawyers. If it means in the future that our clients want us to do something different that requires (having more lawyers), then we will do that. That’s the way I view this. Our job is to adjust and to satisfy them. We’re in the service business.”
Other notables
Kirkland continued its climb to the highest heights of The Am Law rankings.
Among all 100 firms, it ranked No. 4 in profits per lawyer; No. 5 in gross revenue; No. 6 in revenue per lawyer and No. 6 in profits per equity partner.
The results also included some negative numbers.
Locke, Lord LLP — which acquired Edwards, Wildman, Palmer LLP this year — was the lone firm in the Chicago group to report a dip in revenues per lawyer, which fell 4.5 percent.
McDermott, Will & Emery LLP was the only firm in the Chicago group to report a drop in profits per equity partner, with a 1 percent dip.
However, revenue per lawyer grew 4 percent. The firm’s gross revenue grew 2 percent to hit $900 million.
Jeffrey E. Stone, co-chair of McDermott, said he, like many others, considers revenue per lawyer the more important metric. At McDermott, that figure has grown in each of the past five years, he said, to a level that is “significantly higher” than it was pre-recession.
“A profits per partner metric is an unsophisticated metric because it can be so easily manipulated,” Stone said. “I think it tells you very little about the true economic health of a law firm.”
He said another telling figure — and one that law firms’ clients are more familiar with — is the business’ change in revenue relative to expenses. On that front, Stone said McDermott’s revenue has grown faster than its expenses in every year except one since 2010.
“We’re growing revenue at the same time we are cutting expenses,” Stone said. “That’s what great businesses do.”