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11/17/20 - Energy Law is Changing
As reported by Law.com As the energy industry moves beyond oil, gas and power, and all signs point to more federal regulation in the space, firms active in that sector are pivoting to fit the market, broadening their traditional energy practices instead of backing away. Paul Hastings is one firm doing just that, as it recently added two San Francisco partners from Baker Botts, with practices that span energy, environmental and infrastructure. Chris Carr and Navi Dhillon bring an energy practice to Paul Hastings that’s far broader than oil and gas or power, an increasingly common development for firms watching developments in the energy sector. “They add depth to our department in certain areas—such as renewable energy which we are heavily involved in already—and they add breadth, because they represent some natural resources industries we have not previously represented,” said Peter Weiner, head of the environment and energy practice at Paul Hastings, who splits his time between San Francisco, Los Angeles and Sacramento. Paul Hastings isn’t the only firm with a well-established energy practice hiring laterals and broadening the practice. Reed Smith—which recently brought on Ryan Purpura, the former head of McGuireWoods‘ energy practice in Pittsburgh, along with several others, and Hogan Lovells partner Kevin Keenan, who has a shipping and energy practice, in Houston— is also preparing for a shift in focus. Prajakt Samant, the London-based chair of Reed Smith’s energy and natural resources industry group, said everyone is talking about a transition away from oil and gas and fossil fuels. But Samant stresses it’s a transition, not a transformation. “It’s not going to happen overnight. It’s a 20-to-30-year proposition,” Samant said. Reed Smith’s view is that today’s market reality is tomorrow’s opportunity, as clients position themselves for a future that will include new technology and renewables, Samant said. “Part of the notion of an energy transition is you are increasingly going to get companies that have not thought about renewables investing more and more money into it,” he said. Hydrogen is a hot new area, with a number of Big Law firms very recently launching practice groups, including Baker Botts, Pillsbury Winthrop Shaw Pittman and K&L Gates. King & Spalding is another that’s done work in the hydrogen arena for a while, but officially launched its practice in February. “I have seen the trend accelerating on the embrace of renewables on the power-generation side … and more recently hydrogen began to appear in every discussion,” said James Bowe, a partner in Washington, D.C., who co-heads the hydrogen practice with Houston partner Scott Greer. King & Spalding has already been involved in some hydrogen-related projects, and he expects that work to increase. “To some degree, we need to be where the clients are going and ideally we need to be there when they are getting there,” he said. A Piece of the Action Weiner said the name of Paul Hastings’ energy sector practice group tells the story—it’s the environment and energy practice, because the firm does a broad range of work in both interrelated areas. Carr said moving to Paul Hastings is a “tremendous opportunity” for him and Dhillon, because there will be so much infrastructure development over the next few years, and because the firm has a reputation for innovation and creativity, which is “the way we like to practice.” Dhillon also said he likes his new firm’s approach to new energy. “Chris and I do a tremendous amount of work in the renewable energy space in particular, and helping clients, agencies and other interested parties balance how to … transition to renewable,” he said. He said their clients include private equity firms, tech companies, developers, public companies with a focus on energy, major renewable developers in wind and solar, and public agencies on large-scale projects. In a written statement, Baker Botts said this about the departures: “We appreciate Chris and Navi’s contributions during their time at the firm, and we wish them the very best in their next endeavor.” Lawyers expect more focus on regulatory issues once Joe Biden is sworn in as president. While acknowledging that a Biden presidency will “impact the regulatory ecosystem” in the energy sector, Dhillon said the energy transition work they do is so broad that it transcends an administration. Houston firm consultant William Cobb also expects more regulatory and environmental work under a Biden administration, and said firms should prepare for that. “If I were a managing partner and I was looking down five years, there’s going to be a lot of money, a lot of tax money, invested in solar and wind, all of the alternative fuels,” he said. “There’s going to be a ton of money invested there and I’d like a piece of the action.” “I’m still going to keep my petroleum groups,” Cobb said, but if “some oil company is now investing in wind farms or solar, I want them to be my clients.” R
 
10/05/20 - Law Firm Merger Activity Appears to be Bouncing Back
By Dylan Jackson | October 01, 2020 at 01:54 PM Law firm combinations seem to be slowly returning after a dismal second quarter, reflecting the sluggish but steady recovery many firms are experiencing amid the novel coronavirus pandemic. According to an Altman Weil report released Thursday, Q3 saw 20 law firm merger announcements, a sharp increase from the seven mergers that took place in Q2, and a slight one compared to the 17 combinations in Q1. Roughly 90% of the Q3 mergers included a firm with 20 or fewer lawyers and 65% were between two small firms in the same state. “Law firm merger activity is starting to bounce back,” Altman Weil principal Tom Clay said in a news release. “Most deals are between smaller firms seeking to fortify themselves in a COVID-weakened legal market, but midsize and larger law firms are beginning to reengage in strategies to acquire smaller firms.” You Can't Manage It If You Don't Measure It Dentons made the largest Q3 combination when it merged with 96-lawyer Salt Lake City firm Durham Jones & Pinegar—a continuation of it’s “Project Golden Spike” and its first merger since the firm announced that plan last fall. Dentons also made the only international combination, acquiring the 18-attorney East African Law Chambers firm in Dar es Salaam, Tanzania. The uptick in combinations comes as law firms ease themselves out of austerity measures instituted earlier in the year, when the pandemic forced governments to close businesses and unemployment spiked. Dozens of Big Law firms have since reversed pay cuts and brought back furloughed employees—although several have laid off attorneys and staff, as well. A handful of law firms have even taken the extra step of doling out $7,500 to $40,000 fall bonuses to their associates, reigniting a new iteration of the annual associate bonus wars. Despite the Q3 bounce, the number of mergers this year is significantly lower than it was in 2019—a trend reinforced in Wednesday’s merger report by Fairfax Associates, which counts mergers when they’re executed as opposed to when they’re announced. Fairfax found that while mergers were slightly more frequent in Q3 than they were in the previous quarter, Q2 has historically been a slow period for mergers. In an average year, there are typically 43 completed mergers in the first three quarters. This year, there have been just 32. “The decline in the number of mergers this year has been driven by a number of pandemic-related factors,” Fairfax said in a news release. “However, many firms remain committed to growth and expansion and are continuing to explore merger options. As a result, we anticipate that merger activity will resume to more typical levels in 2021.”
 
09/09/20 - Law Firms are Rallying Back from the Pandemic
As reported by the American Lawyer Thanks to “solid performance” over the summer, Hogan Lovells will reverse pay cuts for U.S. associates that were instituted on June 1, with the restoration retroactive to that date, effectively making the associates whole for that three-month period. The pay restoration applies to associates, counsel, attorneys, specialists and knowledge lawyers in the U.S., Mexico and Brazil. In Asia-Pacific region, Dubai and the U.K., the annual May salary review and discretionary bonus awards for associates and counsel that were postponed will now be conducted in September and compensation adjustments will be reversed retroactive to May 1. The firm also announced this morning that decisions regarding bonuses, for those eligible at the end of 2020, will be made in the “normal course of business, applying the normal standards.” Additionally, for business services personnel and personal assistants in the Americas, Asia-Pacific, Dubai, the U.K, and Africa, and for some people in Continental Europe, the annual May compensation review and bonuses were deferred, but this salary and bonus review will now take place after the third quarter. The firm will maintain some austerity measures instituted in June instituted when the COVID-19 pandemic made business prospects uncertain. Equity partners will continue to see reduced draws and bonus payments through the end of the year, while the compensation reduction for nonequity partners and senior counsel will be reviewed later in the year. Hogan Lovells CEO Miguel Zaldivar wrote in a statement on Friday that the firm took action to restore pay for some after looking closely at performance over the last three months. “Having looked carefully at our work over the summer, we have seen a solid performance and now is the time to start a step-by-step approach to reverse some of the prudent measures we implemented earlier this year around compensation. This is a strong testament to the work which we have all been doing under very challenging conditions and we are looking towards a continued solid performance through to the end of the year,” he wrote. The 10% pay cuts for all U.S. associates making more than $100,000 were part of an austerity package that Hogan Lovells announced in May that also included reductions to equity partners’ monthly draws by 15% to 25%. Equity partners also deferred half of any profits from the first quarter, ordinarily paid in August, to December. Base compensation for nonequity partners was reduced by 15%, and most nonpartner attorneys, including associates, received a 10% salary cut. The most highly compensated counsel and specialists, and all senior counsel, received a 15% cut, according to that May announcement. Hogan Lovells is among a number of large firms that have recently announced pay restorations, as the effects of the pandemic on business become more clear. Some have announced those austerity measure rollbacks alongside layoffs. Read More:
 
06/03/20 - Product Liability Cases Rose, Medical Devices and Pharma Hit Hardest
As reported by Law.com Product liability lawsuits continue to rise in federal courts, with a noticeable uptick in cases, particularly against pharmaceutical and medical device manufacturers, according to a report released Monday. The findings of Lex Machina’s 2020 Product Liability Litigation Report show that the total number of product liability cases shot up to 56,041 in 2019, compared to 43,567 in 2018. Even when excluding cases associated with multidistrict litigation, which makes up a large share of product liability lawsuits, there were 5,261 product liability filings in 2019, up from 4,943 in 2018, and the highest volume since 2010, the starting point of data in the report. “We do think there might be a slight upward trend in product liability case filings,” said Rachel Bailey, legal data expert at Lex Machina. She cautioned, however, that many of the cases could end up transferred into multidistrict litigation and, as a result, might “overwhelm the statistics.” “That’s one of the features of the report we find the most useful: being able to look at whether MDL associated cases are relevant or not,” she said. The report found that pharmaceutical and medical device manufacturers faced the largest number of product liability lawsuits, contributing 2,011 cases in 2019, down slightly from 2018 but far above the average since 2010. The top corporate defendant hit with product liability cases was Johnson & Johnson, which faced 70,924 lawsuits from 2015 to 2019, many from multidistrict litigation over its baby powder and blood thinner Xarelto. Johnson & Johnson’s Janssen subsidiaries and various divisions of Bayer AG, which owns Monsanto, which was hit with thousands of lawsuits over its Roundup herbicide, made the entire top 10 list. Outside the area of medical device manufacturers and pharmaceutical firms, however, the top defendants were Volkswagen Group of America Inc. and The Boeing Co. The findings follow a 2018 product liability report from Lex Machina, which looks exclusively at federal courts and does not account for appeals or changes to the judgments. At that time, filings involving medical devices and pharmaceuticals were dropping, from 53,066 in 2013 to 29,146 in 2016. Drug and Medical Device Product Liability DeskbookBook FDA-regulated products now account for an estimated one-fifth of overall economic activity in the U.S. They have also been the focus of a litigation explosion. T... In Monday’s report, both vehicle and aircraft cases continued to increase, with dozens of lawsuits against The Boeing Co. over the crashes of its Max 8 aircraft in 2018 and 2019. The other shift came in asbestos, where product liability cases rose for the first time last year since 2013. Here are some other findings from the report: Where Did Firms File Cases? When including cases associated with multidistrict litigation, the district with the largest number of product liability filings was the Eastern District of Louisiana, with 47,538, where U.S. District Judge Eldon Fallon ranked No. 1 in the nation at 31,012 lawsuits filed in the past five years—nearly all part of the multidistrict litigation over Xarelto. Coming in at No. 2 was the District of New Jersey, where nearly half of the 37,521 cases filed were in multidistrict litigation alleging Johnson & Johnson’s talcum powder caused ovarian cancer. At No. 9, the Northern District of Florida had 6,533 new filings—but that could change this year, as the court is home to multidistrict litigation involving 3M earplugs used in combat. As of May 15, about 7,790 lawsuits had been filed in that docket, according to the U.S. Judicial Panel on Multidistrict Litigation. “One thing we’re watching for are those 3M earplug cases because they are so massive in 2020,” said Bailey. “Some of these statistics are really going to change in 2020.” Excluding cases associated with multidistrict litigation, the top district was the Central District of California, which had 1,620 cases. Which Firms Handled The Cases? The top firms filing product liability cases were New York’s Weitz & Luxenberg, which brought 6,848 lawsuits from 2015 to 2019, including those associated with multidistrict litigation. Beasley, Allen, Crow, Methvin, Portis & Miles filed 6,470 cases, and Aylstock, Witkin, Kreis & Overholtz, 6,503. When excluding multidistrict litigation, Bracewell topped the list at 514 cases. The top defense firms were Shook, Hardy & Bacon, which handled 27,249 lawsuits filed in the past five years, followed by Faegre Drinker Biddle & Reath, with 26,690 cases. When excluding multidistrict litigation, Kirkland & Ellis came in No. 1 with 976 lawsuits. How Did Cases End? The report found that 92% of product liability cases resolved through a procedural order, most due to a transfer to multidistrict litigation. “This is the only practice area that has such a higher percentage where the cases are resolving with the MDL,” Bailey said. When excluding multidistrict litigation, 28% ended in procedural rulings, which includes remand orders, and 66% ended in settlement. “It’s something obviously other than substantive that causes the case to be dismissed,” Bailey said. “Sometimes, it could be going to arbitration or something like that sends it elsewhere. In most cases, it is a remand, but we’ve never seen such a large percentage in all our practice areas.” Total damages awarded in product liability cases were $132 million in 2019, the lowest since 2013. In 2016 and 2017, total damage awards were more than $913 million and $1 billion, respectively, largely influenced by jury verdicts against DePuy Orthopaedics over its Pinnacle hip implants. DePuy is a unit of Johnson & Johnson.
 
04/27/20 - Will Working Remotely Continue After Stay-at-Home Orders End?
The COVID-19 pandemic has forced lawyers and staff out of their offices and into their homes, where they now juggle their legal work with child care, household management and plenty of other obligations. But law firms are insisting—at least publicly—that lawyers in spare bedrooms, kitchen islands and basement offices are still delivering their money’s worth. And amid the stresses of a global health and economic crisis, there may be a silver lining for lawyers looking to break their office bonds: Proving their productivity now could make their firms more open to remote work when the emergency is over. “From a technology aspect, most firms adapted quickly,” said Lisa Smith, a consultant at Fairfax Associates. ”People have been pleasantly surprised by a great remote work experience and how reasonably well it has gone so far. She said that in some cases, tools like videoconferencing are allowing lawyers to be in contact with one another even more frequently than if everyone had been in the office. “This is reducing some of the concerns that people may have had that remote work could have a poor impact on teamwork,” she said. “It remains to be seen whether people are able to maintain the same level of productivity. But what we’re seeing is a lot more openness to the idea of [remote work].” Jena Valdetero, co-leader of Bryan Cave Leighton Paisner’s data privacy and security team, said that even with all of the disruption the COVID-19 pandemic has brought, her currently remote team was delivering to clients at top capacity. Global Independent Law Firms Forum 2020Event Annual conference bringing together the leaders of independent law firms from around the world, from 40+ jurisdictions. “We have been going gangbusters here, and we still are really busy—being a team of people working privacy and security issues, we’re working full time remotely,” she said last month. “There’s been a shift in recent years where more and more of our clients are also working remotely and dealing with child care issues. It can be a bonding experience, especially right now. I’m really hoping what will come out of this situation is more normalizing of remote working experiences.” Even as some states move to reopen their economies, law firm leaders say they’re currently in no hurry to reopen their offices’ doors, and that their remote work situations are sufficient. Still, in the long run, Kent Zimmermann, a consultant at Zeughauser Group, said the nature and degree of each firm’s transformation after the crisis will depend on the values and culture they had in place before the pandemic hit. “I have the sense that face time and being in the office is more culturally important in some firms than in others, and I’m not confident that this crisis is likely to make firms do a U-turn on their culture in that regard,” he said. “On the other hand, firms that were already moving in the direction of increased flexibility say this crisis—and the ease with which their teams have worked remotely—has caused their thinking to evolve. They feel this could be the right time to accelerate their remote-work plans and use less office space over time.” Indeed, Smith pointed out that some law firms could be more open to remote work in the future to cut down on office square footage, which has already been trending downward in recent years. “Thinking about it in terms of space and occupancy, there are a number of firms thinking about this in terms of how they can reduce their footprints,” she said. “One of the obvious plusses is decreasing real estate expenses, which is helpful in a highly competitive environment where enhanced financial performances give firms a leg up in recruiting,” Zimmermann said, adding that more flexible work options can attract lawyers looking to balance high performance at work with a more balanced lifestyle. That’s not to say there aren’t limitations to the value of remote work, even for those whose practices allow it—or outright drawbacks. More limited mentorship opportunities are one factor. “The perception among some is that when people are less often in the office together, in the same place, it can be an impediment to mentoring and training opportunities for up and coming talent,” said Zimmermann. “There are questions about the extent to which not being in the same place for a prolonged period can affect collaboration, both in serving clients as well as doing business together.” Gretta Rusanow, head of advisory services at Citi Private Bank’s Law Firm Group, said recent surveys from her team have addressed some of these concerns with managing partners, who have been focusing on maintaining a sense of community and mission in the industry’s new, remote reality. Some of the solutions firms the firms are adopting—including increased communication and transparency from management, more emphasis on mentoring and one-on-one checkups, and even group workout classes—could provide a blueprint for how firms could keep remote lawyers engaged even in normal times. “This whole experience has proved you can continue a business without traveling to every meeting, without doing every meeting in person, or without having everyone in the office at the same time,” Rusanow said. “The tools we’re using in increased capacity now, such as videoconferencing, are not new. I think what we’re all learning through this is while it is preferable to do things face to face, these tools have enabled everyone to continue working.”
 
03/25/20 - Baker & Hostetler Makes Dallas Launch Official
Baker & Hostetler officially announced its Dallas debut this week, adding four more partners in the city for a total of 16 lawyers. Including the newest group, composed of partners from four different firms, Baker & Hostetler now has nine partners working in Dallas, its second Texas location. The firm has been hiring Dallas lawyers over the course of several months, but did not confirm its plans to open an office until now. Baker & Hostetler has been interested in expanding into the Dallas market for a while because it has a number of clients with headquarters, operations or other legal needs in the city, firm chairman Paul Schmidt said in a statement. He said despite the disruption caused by the new coronavirus and efforts throughout the United States to contain its spread, the firm felt it was important to move forward with announcing the office launch. The newest Dallas laterals are M&A partner Todd Thorson, who came from Winston & Strawn, litigation partners Tamara Baggett from Barnes & Thornburg and David Anderson from Wick Phillips, and tax partner Matt Hunsaker from Baker Botts. They joined in February. Earlier this year, corporate partner Ryan Gorsche joined the firm from Kirkland & Ellis, along with Robert Schroeder, Jordan Bethea and Patrick Rose, all from Wick Phillips. White-collar litigator Shawn Cleveland, who now leads the office, joined Baker & Hostetler in September 2019 from Winston & Strawn. In interviews Tuesday, Baggett and Thorson each said they were attracted to Baker & Hostetler’s wide practice offerings and collaborative culture, and that it was a good fit for their respective practices. Cleveland said the firm had planned to open the office during the first quarter of the year. While many of the lawyers were actually hired weeks ago, Cleveland said the firm held off on officially announcing the new office to “make sure we had all of our core teams in place.” The firm’s permanent space will be ready in the fall, he said. He expects the group to grow to as many as 50 lawyers over the next two years. The Dallas office opened in temporary space Feb. 21, but the lawyers and staff started working remotely March 12 because of the coronavirus, Cleveland said. The firm’s Houston office opened in 1990. Cleveland said the Dallas group now includes lawyers in M&A, private equity, data, and complex litigation including white-collar defense and tax. The firm plans to add more lawyers in those practices in Dallas and also expand with health care, privacy and data security and related areas, intellectual property, labor and employment and bankruptcy. “We are actively looking and expect to have more lawyers hired soon,” he said. Cleveland declined to identify the Dallas group’s clients, as did Baggett and Thorson, but Cleveland said their industries include engineering, energy, automotive, airline, telecommunications and defense contracting industries.
 
02/07/20 - The Texas Job Market Remains HOT!
Showing that Texas remains a hot destination for out-of-state firms, Shearman & Sterling is continuing its rapid expansion in the state, building a new Dallas office. Shearman, which opened in Austin and Houston in 2018, is expected to launch the Dallas office with an M&A group from Jones Day, according to three legal recruiters and a former Jones Day lawyer. The group includes at least three partners, two sources said. The Am Law 50 firm confirmed its plans to open a new location in the city, but a spokeswoman for Shearman declined to discuss any hiring for the new office, or details on timing. Shearman’s advance into Texas is another example of intense interest among Big Law firms in the state’s legal market. Close to half of all Am Law 200 firms that were not founded in the state have at least one Texas office. Jones Day was among the first non-Texas firms to establish a foothold in the state in the 1980s. Five M&A partners in Jones Day’s Dallas office did not immediately respond to calls seeking comment on the planned move. A spokesman for Jones Day also did not immediately respond. In a statement, David Beveridge, senior partner at Shearman, said the Dallas office is the latest step in the firm’s U.S. expansion strategy. “This office will complement our teams in Texas and work seamlessly with our broader transactional teams in New York, the Bay Area and globally,” Beveridge said. He added that having a presence in Dallas positions the firm “on the ground” in a fast-growing market, where dozens of Fortune 500 companies in the energy, transportation, technology, telecommunications and health care industries are headquartered. Dallas is also home to many private equity firms, he noted. Shearman moved into Texas in March 2018, when it added a group of Austin lawyers from Andrews Kurth Kenyon, which soon afterward merged with Hunton & Williams. Two months later, it launched in Houston with lawyers from Baker Botts, Thompson & Knight and Jones Day.
 
01/07/20 - Report Finds that Changes are Coming to the Legal Industry!
Changes to the legal market over the past year carry significant risks for law firms that fail to adapt, according to a new study on the state of the industry as firms head into 2020. The report, issued by the Center on Ethics and the Legal Profession at Georgetown University Law Center, Thomson Reuters’ Legal Executive Institute and Peer Monitor, said key trends include the changing role of clients, the emergence of non-law firm legal competition and law firm innovation in response to those shifts. In the dozen years since the Great Recession, the report said, clients have taken “decisive” control of the legal market: Instead of deferring to outside law firms, they’re now recruiting more competitively for outside counsel and requiring law firms to operate more cost effectively and accountably, with stricter budgeting and billing. The researchers note that clients are handling more work in-house, and they’re demonstrating “increased reliance on legal operations professionals to manage outside counsel relations,” while creating “virtual teams” of attorneys from multiple firms to handle particular projects. Also during the past few years, alternative legal service providers have increased their share of the legal market. ALSPs took in $10.7 billion in global revenue in 2017, according to a global survey by Thomson Reuters, Saïd Business School at Oxford, Georgetown Law and Acritas. That’s up significantly from the $8.4 billion estimate in the groups’ first survey, using 2015 data. Large alternative legal service providers are expected to grow by 24% in 2020. Marketing the Law Firm: Business Development TechniquesBook Sally Schmidt's book, Marketing the Law Firm: Business Development Techniques, is a bible, a must-read, and a springboard to law firm marketing for any new or season. Corporate reliance on non-law firm competitors has been increasing, the report found, and alternative legal service providers are increasingly being used by law firms themselves—65% of Big Law firms used them for e-discovery services, 52% used them for litigation and investigations support, and 50% used them for legal research services. The Big Four accounting and auditing firms also have been key players in expanding alternative legal services. Deloitte launched a legal management consulting program, a strategic alliance with Berry Appleman & Leiden and an alliance with Epstein Becker Green, the report noted. PwC launched a law firm in 2017 to help clients with international matters and started a flexible staffing service. KPMG launched a new unit to support in-house attorneys, and EY acquired DLA Piper-funded legal service provider Riverview Law and legal process outsourcing firm Pangea3 from Thomson Reuters. These “revolutionary changes,” the report warned, “will likely erode future performance if firms fail to take account of a new model for law firm services that appears to be rapidly emerging.” However, researchers also found ways in which some law firms have innovated to adapt to a changing industry. Some firms have increased the number of business professionals in the C-suite, and many now have a chief operating officer, chief financial officer, HR director, chief technology officer and others who interact more frequently with client-facing teams or clients themselves. In addition, large law firms especially have become more tech-savvy in areas such as human resources, compensation decisions and project management training and support. Firms have also accommodated more effective pricing strategic and have begun using data more aggressively to assess partner performance and client profitability. Law firms have also begun outsourcing more work—particularly e-discovery, nonlegal research, litigation and investigation support, document review and coding and legal research. Other law firms have begun taking a “blended” approach, combining traditional legal services with professional expertise in new subsidiaries such as Allen & Overy’s Advanced delivery Solutions. In terms of traditional law firms’ financial performance, the study found that most key metrics improved from 2017 to 2018, including demand, worked rates, fees worked and head count growth. However, productivity decreased from the previous year. The demand for law firm services in 2019 decreased slightly from the previous year, following two years of growth. Certain practice areas, such as litigation, real estate, labor/employment, bankruptcy and corporate, have seen increased demand in the previous year, while patent litigation, patent prosecution and tax have seen decreased demand, the report found. Also in the previous year, firms are increasing their head counts—largely in the technology transactions and licensing, general corporate and M&A practice areas—while patent litigation, bankruptcy and regulatory practices are shrinking in size. On average, lawyers have worked a stable number of weekly hours, according to the report, about 123, with associates working the most hours and of counsel working the fewest.
 
12/11/19 - A Very, Very Good Year for Law Firms?
As reported in The American Lawyer Signs are pointing to another healthy year for law firm revenue, even if 2019 isn’t on track to match last year’s performance, according to a new report from Wells Fargo Legal Specialty Group. Surveying 123 firms, Wells Fargo found that revenue grew 6.3% in the first nine months of this year, marking an improvement from midyear figures. That’s roughly on track with what Citi Private Bank’s Law Firm Group found with its own report, released earlier this month. “This year is shaping up to be a very, very good year for the industry, just not as good as what the industry experienced last year,” said Joe Mendola, the legal specialty group’s senior director of sales. Eighty-five percent of the firms Wells Fargo surveyed told the bank they anticipate meeting or exceeding their 2019 Although revenue, demand and rates have grown across the industry, Wells Fargo found that law firms at the top of the Am Law 200 grew faster across those three metrics than those clustered at the bottom. Industry-wide, demand grew by 2.8%—a drop compared to last year’s 3.3%—and rates increased by 4.4%. Firms within the Am Law 50 saw their revenue grow by 7.3%, with 36% percent of those firms projecting revenue increase of 10% or more. Their demand was up 3.4%, while ”rate increases were greatest for the largest firms in the Am Law 1-50, consistent with historical trends,” Wells Fargo found. By contrast, Am Law law firms ranked 51 to 100 and 101 to 200 saw revenue grow by 5.5% and 3.2%, respectively. Only 20% of the firms on the Am Law 200 are anticipating revenue growth of 10% or more, while 13% of them are projecting their revenues to drop by 5% or more. Demand for firms ranked 51 to 100 and 101 to 200 grew by 2.2% and 1.7%, respectively, both of which are below the industry average. “There’s no question we’re seeing greater stratification,” Mendola said. One potential cause of the stratification is that, right now, transactional work is a particular revenue driver, and some of those deals require the services of large law firms with international footprints, he added. Wells Fargo is anticipating a “relatively healthy” 2020 for law firms even as the institution is expecting a slowdown in U.S. GDP growth and ongoing geopolitical uncertainty. They’re not the only ones—in-house legal departments have said they’ve already begun to cut back on their total law department spending in anticipation of an economic recession within the next two years. And Big Law’s newest partners have relayed to ALM Media that they’re worried their firms are not prepared a recession. But Wells Fargo noted that “most firms have healthy balance sheets and access to financing and are well positioned to weather a downturn and/or take advantage of opportunities or potential dislocations should they arise.” Law firms are also planning to raise their rates by 5.5% next year. “Frankly, [the legal industry] has handled a little bit of slowdown in the economy better than other industries,” Mendola said.
 
11/10/19 - Four-Day Work Week Implemented by a Law Firm
Walter Benenati, managing partner and founder of Orlando, Florida-based Benenati Law, kicked off 2019 by shortening the workweek at his 24-employee firm to four days. He regards it as one of the best decisions of his life. Fridays are spent with his family, taking his 3-year-old daughter to gymnastics and cooking a late brunch. His employees use Fridays to run errands and go to doctor appointments they previously had to either squeeze into the workday or take a precious day off. The four-day workweek is getting another look following news that Microsoft reported a 40% increase in productivity after the company instituted the abbreviated week in a trial project. The shortened week is also getting a nod from the United Kingdom’s Labour Party, which has absorbed the policy into its political platform. Walter Benenati Like Microsoft, Benenati has seen positive results from his shortened workweek. The personal injury and bankruptcy lawyer says he is as competitive as they come—a necessity because personal injury giant Morgan & Morgan is based in the same city. But the firm has not suffered as a result of the shortened week. Monthly retention numbers haven’t dropped, and office morale and productivity are up, he said. “I always want to be the one getting all the business, but I realized it’s so important to be able to pick up your kid and see your wife on Friday,” Benenati said. “Productivity is better because everything needs to be done by Thursday and people are fully refreshed after a three-day weekend.” The firm’s employees do not work fewer hours per week than they would if they worked five days. Its five attorneys, as well as 14 of its 19 staff, work 10-hour days instead of the typical eight, starting at 8 a.m. and ending at 6 p.m., to ensure billing doesn’t drop and “everybody still gets their 40 hours,” Benenati said. Four staff members and one case manager work the traditional five-day week because they preferred to work until 5 p.m., Benenati said. And every Friday, one attorney is rotated in to field any consultations or incoming work. Marketing the Law Firm: Business Development TechniquesBook Sally Schmidt's book, Marketing the Law Firm: Business Development Techniques, is a bible, a must-read, and a springboard to law firm marketing for any new or season... Get More Information To be sure, large firms may not have the same level of flexibility as Benenati’s firm to implement an abbreviated week, and experts see little chance of a four-day week becoming the legal-industry standard. But a shortened week does address some of the biggest mental health and morale challenges law firm employees face. Chief among these is the stigma surrounding taking time off. Vacation time, flexible work hours and paid parental leave have become near-standard as firms have looked to recruit top-flight young talent and retain women attorneys. But these resources often go untapped, said Lauren Rikleen, president of the Rikleen Institute for Strategic Leadership. “One of the biggest problems right now with the way flexibility is provided in the profession is that it always comes with a stigma attached,” Rikleen said. “We live in a world where flexibility is a lot easier to implement than people feel it is, yet we still hear issues around the stigma concern that comes with it.” In most work environments, attorneys who have a flexible schedule size up their workload by comparing it with colleagues who work a different schedule. But an environment in which people have a uniform day and an abridged week eliminates the comparison and weakens the stigma, she said. “We know that there’s no one-size-fits-all but the intriguing thing about this model is that it reduces the one barrier of flexible scheduling because everybody has this schedule and nobody is seen as less committed for not participating,” Rikleen said. Debbie Epstein Henry, a legal consultant and co-founder of Bliss Lawyers, finds the Friday rotational schedule implemented by Benenati intriguing. For years, Henry has argued that attorneys should be more open to “job shares”—a work scheme standard among doctors as well as in-house, not-for-profit and government attorneys. Employing a job share schedule in which two attorneys are up-to-speed on the same matters and fill in for each other allows attorneys to enjoy their vacation or parental leave without guilt and the need to constantly check phones and emails—a much-maligned aspect of the job that Henry refers to as the inability to go “off call.” “Attorneys used to go to the ends of the earth where they couldn’t get cell-service to finally be able to unplug,” Henry said. “Cell service is too good now, and there needs to be an effective mechanism to allow attorneys to be off call.” Henry said job-sharing arrangements are even easier at big law firms, as such firms already staff multiple attorneys on matters. Under job sharing, two mid-level associates would be assigned to the same big case and both would be tasked with consuming and memorizing the relevant facts and case law. They would both be copied on all the emails and they would attend the same meetings. When one of the associates needs to go on vacation, having the other fill in allows the attorney to enjoy the time away and take time off guilt-free, as both attorneys are already caught up on the case. This idea, Henry believes, can be applied to almost any employment situation. Naysayers are likely to insist that the practice of law is unique and these work arrangements cannot work the way they do in other businesses. But Henry doesn’t buy that argument. “If it works for matters of life and death, as with doctors and nurses, why wouldn’t it work for attorneys?” she said. But, again, nobody has illusions of widespread adoption of a four-day week in the legal profession, regardless of its merits. “Law firms aren’t going to be trailblazers,” said Nathan Peart, a consultant at Major, Lindsey & Africa. “Look at how long diversity is taking, even though there’s client backing for it.” Peart said flexible scheduling is a great thing for lawyers, but he says that flexibility should lie with the individual, not the firm. He also noted that Microsoft Japan’s policy relied heavily on better technology and efficiency practices that can be adopted by firms without going to a four-day week—keeping meetings to less than 30 minutes, for example. “Maybe not everybody would want Friday off. Maybe Wednesday or Monday would be better for some,” Peart said. “Investing more in technology and group cooperation and policies could achieve the same results.”
 
09/09/19 - Cottage Industry Develops Around Lawyer Well-Being
As reported by Law.com The demand to treat lawyers facing substance abuse or mental health issues is skyrocketing. It hasn’t gone unnoticed. A cottage industry appears to be developing around the field of well-being services for lawyers, partly sparked by an American Bar Association pledge last year to which more than 100 big firms, law schools and corporate legal departments have signed on, agreeing to take steps to prioritize well-being. Some services are run by doctors and other professionals who physically meet with lawyers. Others services offer wellness training through video conferencing with coaches or around-the-clock access to doctors through an app. Some providers are marketing their services to help firms meet the pledge. Mental health experts express caution to vet the services carefully, especially for more nontraditional treatment services, wary of anyone looking to gain a quick profit on the movement. Patrick Krill, an attorney and drug counselor who led the pledge campaign, said it would “go against the spirit and intent of the ABA pledge” to view the list of signatories “as a marketing list” for vendors. “It’s critical for lawyers, legal employers and law firms to vet” resources, he said. Still, Krill and others said it’s helpful that legitimate resources are emerging to help lawyers and firms cope with the devastating high rates of substance abuse, depression and anxiety in the industry. Law firms will have to spend some money to meet the pledge goals, Krill said, as it’s likely they don’t have internal resources for the types of training, support or counseling that lawyers and staff may need. Lawyer-Geared Programs Even traditional clinical providers are seeking to curate programs around lawyers. Dr. Sarah Church, a clinical psychologist who specializes in the treatment of alcohol and substance use disorders, left the Albert Einstein College of Medicine in New York last year and opened a group psychotherapy practice, Elevate360, with five other psychologists. Church said she was surprised when she opened her practice doors that many patients were attorneys. No other profession appears as frequently in her practice, she said. Now she’s seeking to launch a group psychotherapy practice in New York tailored to attorneys and others in the legal field who are in recovery after alcohol or substance use disorders. This treatment group would provide support and offer skills and strategies for preventing relapse and coping with stress and negative moods. Meanwhile, other services are offering attorneys videoconferencing, apps and other tech tools to reach lawyers on the go. For instance, Happy, a lawyer-created app, just launched—connecting users with more than 2,000 peers who are trained to be “compassionate listeners,” ALM reported last month. Another service, Healthpiper, which calls itself a virtual mental health provider, wrote in a recent LinkedIn post that it was “poised to help lawyers in their industry-wide campaign to address mental health” and linked to the ABA’s own efforts. The program offers an app in which users can meet with a doctor via video chat, agree on a treatment and have medication shipped to their door, while participants can text message with the doctor through the secure app. The program offers a combination of cognitive-behavior therapy and medication for depression and anxiety. Fred Kipperman, chief operating officer of Healthpiper and a lawyer himself, said the app allows doctors and patients to have an ongoing dialogue. Kipperman said Healthpiper’s customer base is much broader than lawyers, but he believes Healthpiper can be particularly helpful to legal industry professionals. “We want to be one of many treatment options that lawyers can choose that’s right for them. We’re not trying to be a one-stop shop for everybody,” he said. Kipperman said participants can be assured of Healthpiper’s own credentials by its participating doctors with board certification. He noted that its founder, by Dr. Joshua Freedman, a graduate of Yale Medical School, is a clinical professor of psychiatry at UCLA and a supervising psychiatrist at the UCLA Mood Disorder Clinic. Another service, Life Cross Training (LIFE XT), also isn’t shy about advertising its services to help firms meet the ABA pledge. Its website says: “Avoid lawyer burnout outlined in the ABA Wellbeing Pledge….Contact LIFE XT now for help achieving your pledge goals!” LIFE XT, which formed seven years ago, offers law firms one-on-one coaching with lawyers and staff through video-conferencing, for the goal of “increasing resilience to stress and maximizing joy, meaning, and productivity,” the program says. Law firm participants meet with LIFE XT coaches on a video call about five times in a four-month timeframe, while also being guided by written, video and audio practices in between coaching, said LIFE XT founder, Nate Klemp, who was previously an assistant professor of political science and philosophy at Pepperdine University. As an example, coaches teach meditation tools, how they can integrate meditation in their schedule and make it into a long-term habit, Klemp said. LIFE XT isn’t suitable for everyone, Klemp said, adding when coaches encounter a participant experiencing anxiety or depression, they recommend participants seek medical treatment. But “for a lot of attorneys,” Klemp said, “they’re just looking for ways to be more optimal and to get tools that will help them be more resilient and manage stress more effectively — that’s our sweet spot.” With a pledge like the ABA’s, Klemp said, “there are always going to be people interested in taking action and firms that are wanting to help. I don’t think there’s anything inherently nefarious that is serving a demand,” Klemp said, adding that LIFE XT has been working with firms long before the 2018-written pledge. Klemp also noted that LIFE XT uses 13 assessment tools to measure the effectiveness of the program, by polling participants before and after the coaching. The company has worked with about seven law firms in the last few years, including Seyfarth Shaw and previous work with Kirkland & Ellis. (The firm’s chairman, Jeffrey Hammes, was on the board of LIFE XT’s main investor, venture capital fund Abundant Venture Partners.) Speaking from his own experience, Brett Bartlett, a Seyfarth Shaw partner, said LIFE XT’s program helped him change the way he looks at the legal profession and develop more coping mechanisms. Bartlett and Klemp declined to provide details on LIFE XT’s prices to firms, but Bartlett called its services “a material investment” at Seyfarth. “It is not something that a firm’s partners would simply shrug at,” Bartlett said. “It’s intended to be a broad-reaching initiative. The return of the investment is a little challenging to track but we feel the monetary investment we have put into it has indeed paid off.” Red Flags Krill, who declined to comment about any particular service provider and doesn’t endorse any single program, recommends lawyers and law firms conduct due diligence by asking about a service’s prior experience working with legal industry professionals and asking other law firms and lawyers whether they’ve had good experience with any particular resource. If a business is purporting to offer mental health services, quasi mental health or addiction treatment services, but they don’t have licensed clinical staff, that’s a red flag, Krill said. Meanwhile, Krill said, it’s “important for lawyers to recognize that their coach is not their therapist.” In an era of digital start-ups, resources can come and go quickly, making vetting even more imperative. One service that was being marketed to law firms, Annum Health, was a digital startup that called itself an alternative to rehab for heavy drinking. The service closed in January, citing an “unforeseen change in our financial circumstance,” according to healthcare industry site MedCity News. Bartlett, at Seyfarth, said he’s not concerned about “the fly-by-night lower end folks coming in and ruining” the new awareness of mental health priorities in the legal industry. “I think they’re going to be strained out by the lawyers’ natural resistance to this kind of new mindset in the first place,” he said, adding he hasn’t noticed “a surge of con men or bad business people.” Ultimately, once a wellbeing resource is vetted by a law firm and agreed upon, Bartlett said, it’s important that those at the top of the firm champion it. “If there’s not adoption of what’s being offered, if there’s not championship or credibility, then it (could) fall flat on its face,” he said.
 
07/24/19 - Law FIrms Begin to Think and Act with an Holistic Focus
As reported in the American Lawyer When it comes to running a well-rounded law firm, leaders can’t treat issues such as profitability, diversity and pro bono individually. To be their best, they have to think and operate holistically. The American Lawyer’s annual A-List ranking doesn’t measure size or profits. Rather, it highlights the best of the best law firms for their commitment to a variety of financial and cultural markers: revenue per lawyer, pro bono work, associate satisfaction, racial diversity and gender diversity among the partnership. The last metric was added to our calculation in 2017 to recognize firms for supporting women and making them partners. How does your firm’s performance compare to peers & competitors? Get the A-List Data exclusively on Legal Compass. But it’s not enough for firms to keep associates happy or to dedicate a few extra hours to their pro bono commitments. To make the A-List, all of these issues have to share top priority. “They’re a part of the firm culture, and we’re not treating these as siloed barometers of firm success,” Benjamin Klubes, managing partner of Washington, D.C.-based Buckley, says of the five metrics. “They’re interrelated in many ways.” Buckley jumped nine spots to move onto this year’s A-List at No. 17, improving in three of the five categories, most notably associate satisfaction, which increased by 20.5 points. Becoming a well-rounded firm isn’t about leadership handing down directives, Klubes says. Rather, it requires having a broad consensus about firm values. “Our overall and long-term success is a function of our culture, where all of these things are important,” Klubes says. Bradley Butwin, chairman of O’Melveny & Myers, which cracked the top 10 for the second year in a row and moved up two places to No. 7, agrees. His firm doesn’t really think in terms of one-off initiatives. Instead, it uses resources such as affinity groups, engagement surveys and a two-way communication policy to continually give colleagues a voice and give everyone at the firm something to work toward. “They’re part of our everyday vocabulary, and they’re ingrained in our DNA and our firm strategy,” Butwin says of the A-List metrics. “[These issues] are not relegated to the side. We expect everyone to participate, and we make that expectation very explicit.”
 
06/18/19 - An Examination of Mental Health in the Legal Profession
As reported in the American Lawyer Long before the American Bar Association challenged the country’s law firms last September to do more to support attorney mental health, legal industry experts had been sounding the alarm over high rates of depression, substance abuse and suicide in the profession. Has Big Law answered the call? Nine months after the ABA launched its program, the number of signatories has grown to over 90 law firms, in addition to more than 20 corporate law departments and law schools. These firms have agreed to follow a seven-point framework aimed at improving mental health and combating substance abuse, with measures such as increasing educational efforts, providing confidential access to experts and resources, and disrupting the centrality of alcohol at firm events. This push followed growing evidence of a profession in crisis. A 2016 study published in the Journal of Addiction Medicine found that 21% of licensed, employed attorneys qualify as problem drinkers, 28% struggle with some level of depression, and 19% demonstrate symptoms of anxiety. Problem drinking, in particular, occurs at a far higher rate among lawyers than in the general population. While a number of law firms already had programs in place, and others have responded to the ABA drive, their efforts are likely to collide with the deeply rooted ethos that lawyers, particularly in big firms, are expected to work onerous hours and keep the costs to themselves. Against that backdrop, there’s fair grounds for concern that these efforts are little more than window dressing—a way for firms to check a box and show they are making a difference while avoiding the more complex process of a true reckoning. To get a sense of what this new commitment to mental health outcomes actually looks like, at least on paper, Law.com surveyed every law firm in the Am Law 200. Forty responded, and of these firms, 27 also have their names on the ABA pledge. Tellingly, of those 40 respondents, only five came from outside of the Am Law 100.
 
02/18/19 - Inside Law Firms' Best Results in a Decade
The law firm industry last year posted its best results in more than 10 years. Post-recession highs in demand and billing rate growth drove strong revenue growth—critical in a year where expense growth accelerated. As a result, the industry saw the strongest net income and profits per equity partner growth we’ve seen since 2007. Am Law 50 firms and niche/boutique firms outperformed the rest of the industry on average, and the Am Law Second 50 were not far behind. And while dispersion remained, the good news is that we saw a larger proportion of firms enjoy demand growth. Even among the Am Law Second Hundred firms, whose performance as a group lagged the other segments, an increased proportion of firms saw demand improvement. With strong inventory growth at year-end, the industry is well-positioned for a strong start to 2019. These results are based on a sample of 191 firms (75 Am Law 100 firms, 54 Second Hundred firms and 62 niche/boutique firms). Thirty-seven of these firms fit our definition of either “international” (between 10 and 25 percent of lawyers based outside the United States), or “global” (at least 25 percent of lawyers based outside the United States). Firms with less than 10 percent of lawyers based outside the United States are classified as either “national” (less than 50 percent of total lawyers based in headquarter office) or “regional” (more than 50 percent of lawyers based in headquarter office). Citi Private Bank provides financial services to more than 600 U.S. and U.K. law firms and more than 35,000 individual lawyers. Each quarter, the Law Firm Group confidentially surveys firms in the Am Law 100 and the Second Hundred, along with smaller firms. In addition, we conduct a more detailed annual survey and produce the Law Firm Leaders Confidence Index semiannually. These reports, together with extensive discussions with law firm leaders, provide a comprehensive overview of financial trends in the industry as well as forward-looking insight. Revenue growth of 6.4 percent was greater than the 4.5 percent growth seen the previous year. Underlying demand growth picked up in the fourth quarter of 2017 and carried that momentum into 2018, building each quarter through the first nine months. In the fourth quarter, demand growth slowed somewhat, due in part to the high bar set by 2017’s strong fourth quarter, but we also heard anecdotally that market choppiness affected demand levels. Even so, 2018 demand finished up 2.3 percent, compared to 0.7 percent in 2017. The only year in recent memory that came close was 2014, when the industry benefited from a rebound in mergers and acquisitions and reported 1.9 percent growth. Lawyer billing rate growth was also strong, up 4.3 percent, compared to 3.7 percent in 2017, and the strongest increase we’ve seen since 2008. Even with this strong increase, we only observed a marginal decline in accrual realization, suggesting that the market tolerated this greater than usual rate increase. The only notable drag on revenue growth was a 0.6 percent lengthening of the collection cycle, following a 1.5 percent slowdown the previous year. We’ve heard from some law firms that clients have been increasingly slowing their payments. Lawyer head count grew 1.4 percent, on top of 2017’s 1.9 percent. Equity partner head count, however, continued to drop—down 0.6 percent compared to 0.3 percent the previous year. This continued the trends over the past decade of actively managing equity partner head count, as well as the steady increase in leverage. Further testament to the strong overall performance for the law firm industry last year was that while firms increased head count, they also saw lawyer productivity improve 1 percent—the first improvement since 2014. Looking at expenses, the pace of growth increased for the second consecutive year, up 6.1 percent, compared to 4.5 percent in 2017 and 3.4 percent in 2016. Not surprising, 2018’s expense growth was driven primarily by an increase in lawyer compensation expenses—7.7 percent compared to 6.5 percent the previous year—reflecting not only the increase in salaried lawyer head count, but also the impact of the second mid-year associate salary increase in the past three years. Overhead expenses also picked up quite a bit—4.9 percent compared to 3.1 percent the previous year—driven by technology, real estate and other infrastructure investments. It’s worth noting that last year’s lawyer compensation and overhead expense increases were both the highest in at least 10 years. Despite increasing by the highest percentage in a decade, expense growth was still less than revenue growth, so profit margins improved. By comparison, in 2017 revenue and expense growth were the same. As a result, 2018 net income improved by 6.9 percent and, with the modest decline in equity partner head count, profits per equity partner were up 7.5 percent. On the strength of the increases in demand and billing rates, as well as the slowdown in collections, year-end inventory was up 7.1 percent, higher even than the strong 6.1 percent increase reported at the end of 2017. Last year’s increase was well-balanced between increases in both accounts receivable (7.6 percent) and unbilled time (6.5 percent), which suggests that collections should be fairly strong well into the first quarter and perhaps beyond. Behind the industry averages, while we continued to see performance dispersion, a greater proportion of the industry enjoyed growth—61 percent of firms enjoyed an increase in demand, and 74 percent an increase in PPEP (versus 56 percent and 68 percent, respectively, in 2017). In addition, volatility in performance from one year to the next actually decreased. Measured by alternating years of growth and decline and based on a common sample of 146 firms that reported to us in 2017 and 2018, we noted that 37 percent of firms experienced reverse trends in demand performance, down from 45 percent in the prior two-year period. Furthermore, 41 percent of firms enjoyed two consecutive years of demand improvement, compared with only 31 percent during the prior two-year period. The same was true for PPEP—only 44 percent of firms experienced volatility, compared with 51 percent during the prior two-year period, and slightly over half (51 percent) of firms enjoyed two consecutive years of increase, compared with only 42 percent in the prior two-year period. This increased percentage of firms enjoying improvement, coupled with a reduction in volatility, should help reduce some of the anxiety that can come with swings in performance. Looking at the results by revenue size, for the third year in a row, Am Law 50 firms saw greater revenue growth (7.7 percent) than the other segments, driven by the strongest increases in both demand (2.9 percent) and lawyer billing rates (4.6 percent). Despite expense growth of 7.6 percent that almost matched revenue growth, this segment recorded impressive profitability gains—7.8 percent in net income, and 8.4 percent in PPEP. They are also well-positioned ahead of the other segments heading into 2019 with by far the strongest inventory growth (8.7 percent). Within the Am Law 200, while the spotlight continued to shine most brightly on Am Law 50 firms, Am Law Second 50 firms also had a very solid year. Demand grew 2.2 percent and lawyer billing rates were up 3.7 percent, driving revenue growth of 4.8 percent, while net income and PPEP grew 6.8 percent and 5.7 percent, respectively. The only notable drag on performance was a slowdown in the collection cycle. On the bright side, this slowdown contributed to a 6.1 percent growth in inventory, suggesting that Am Law Second 50 firms should also have a strong start to 2019 collections. The experience continued to be very different for Am Law Second Hundred firms, with revenue growth of only 2.2 percent. After managing profit margin improvement in 2017, this was the only segment to see revenue growth lag expense growth (2.9 percent) last year. Although the Second Hundred firms managed a modest 0.3 percent improvement in demand after enduring a 0.9 percent decline the previous year, lawyer billing rate increases of 2.8 percent lagged all other segments. Net income and PPEP growth of 1 and 3.3 percent, respectively, were also well behind all the other segments. It should be noted, however, that true to the pattern of dispersion we’ve witnessed in the industry, not all of the Am Law Second Hundred firms struggled, with 43 percent reporting growth in demand last year, compared to 40 percent the previous year. Outside of the Am Law 200, the niche/boutique firms recorded strong increases in both net income and PPEP (8.9 percent and 8.7 percent, respectively). These firms saw revenue growth of 6.8 percent, second only to the Am Law 50, on the strength of balanced growth in demand (2.2 percent) and billing rates (3.2 percent), and further benefited from a 1.6 percent improvement in the collection cycle. As is becoming increasingly evident, revenue performance isn’t necessarily a matter of size—it’s also about brand and perceived value. Although these firms came relatively close to matching the largest firms in terms of lawyer compensation expense growth (8.2 vs. 9.4 percent), due in large part to having the greatest increase in lawyer FTE (2.2 percent) of all the segments, the big difference was that these smaller firms only increased overhead by 3.3 percent, compared with 6.2 percent for the largest firms. With 5 percent growth in inventory, these firms should expect a good start to 2019 collections. When we examine the results by geographic reach, global and international firms outperformed national and regional firms in revenue growth on the strength of comparatively stronger underlying demand and lawyer billing rate growth. But they also had greater expense growth—in both lawyer compensation and overhead expenses. Despite the expense growth, global firms saw the greatest net income growth of all the segments (7.6 percent), and international firms the greatest PPEP growth (8.2 percent), following a reduction in equity partner head count. Both also had greater growth in inventory than the other two segments, paving the way for strong first-quarter 2019 collections. Although national and regional firms lagged in terms of revenue growth, they were the only two segments to see improvement in their profit margins. By reducing equity partner head count, they also enjoyed very solid increases in PPEP of 7.8 and 6.8 percent, respectively. The law firm industry has begun 2019 with strong inventory growth, rate increases and activity levels. With expense pressure likely to accelerate, strong top-line growth will be an imperative. As we wrote in the 2019 Citi Hildebrandt Client Advisory, we project another strong year in top-line growth for the industry, in the range of 6 to 7 percent, with dispersion continuing across and within market segments, and likely leading to further consolidation. While we don’t anticipate a downturn in 2019, Citi’s view is that this is likely to occur in 2020. With the investments firms have been making in both overhead and lawyer head count, it’s reasonable to wonder whether firms are headed toward some uncomfortable belt-tightening in 2020, if not later this year. Perhaps the biggest expense management opportunity for firms is to look at the composition of their leverage models and determine whether they are profitable at every level. Looking at 2019 and beyond, the market will favor firms that have the strongest brands, deepest client relationships and the most efficient service delivery and leverage models. John Wilmouth is a senior client advisor in Citi Private Bank’s Law Firm Group, and Gretta Rusanow is head of advisory services. Citi Private Bank is a business of Citigroup Inc., which provides its clients access to products and services through bank and nonbank affiliates of Citi
 
03/25/20 - Baker & Hostetler Makes Dallas Launch Official
Baker & Hostetler officially announced its Dallas debut this week, adding four more partners in the city for a total of 16 lawyers. Including the newest group, composed of partners from four different firms, Baker & Hostetler now has nine partners working in Dallas, its second Texas location. The firm has been hiring Dallas lawyers over the course of several months, but did not confirm its plans to open an office until now. Baker & Hostetler has been interested in expanding into the Dallas market for a while because it has a number of clients with headquarters, operations or other legal needs in the city, firm chairman Paul Schmidt said in a statement. He said despite the disruption caused by the new coronavirus and efforts throughout the United States to contain its spread, the firm felt it was important to move forward with announcing the office launch. The newest Dallas laterals are M&A partner Todd Thorson, who came from Winston & Strawn, litigation partners Tamara Baggett from Barnes & Thornburg and David Anderson from Wick Phillips, and tax partner Matt Hunsaker from Baker Botts. They joined in February. Earlier this year, corporate partner Ryan Gorsche joined the firm from Kirkland & Ellis, along with Robert Schroeder, Jordan Bethea and Patrick Rose, all from Wick Phillips. White-collar litigator Shawn Cleveland, who now leads the office, joined Baker & Hostetler in September 2019 from Winston & Strawn. In interviews Tuesday, Baggett and Thorson each said they were attracted to Baker & Hostetler’s wide practice offerings and collaborative culture, and that it was a good fit for their respective practices. Cleveland said the firm had planned to open the office during the first quarter of the year. While many of the lawyers were actually hired weeks ago, Cleveland said the firm held off on officially announcing the new office to “make sure we had all of our core teams in place.” The firm’s permanent space will be ready in the fall, he said. He expects the group to grow to as many as 50 lawyers over the next two years. The Dallas office opened in temporary space Feb. 21, but the lawyers and staff started working remotely March 12 because of the coronavirus, Cleveland said. The firm’s Houston office opened in 1990. Cleveland said the Dallas group now includes lawyers in M&A, private equity, data, and complex litigation including white-collar defense and tax. The firm plans to add more lawyers in those practices in Dallas and also expand with health care, privacy and data security and related areas, intellectual property, labor and employment and bankruptcy. “We are actively looking and expect to have more lawyers hired soon,” he said. Cleveland declined to identify the Dallas group’s clients, as did Baggett and Thorson, but Cleveland said their industries include engineering, energy, automotive, airline, telecommunications and defense contracting industries.
 

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