The term billable hour is often the yardstick by which a lawyer’s success is measured. And among the top law firms, that measure certainly grew last year.
A group of 20 “super rich†law firms significantly outperformed their peers, according to the latest issue of The American Lawyer. For these elite firms, profit per partner rose 5.5 percent in 2013, while per-lawyer revenue increased 4.1 percent.
Over all, the top 100 firms brought in $77.4 billion last year, an increase of 5.4 percent over 2012.
The gains in revenues came in spite of increased cost-cutting by clients and pullbacks on other expenses. Some of the jump in pay can be attributed to a tight lid on hiring. While the overall number of lawyers grew as global firms expanded their ranks, the best-performing firms generally avoided adding more lawyers.
At the same time, a number of firms, including top earners, trimmed their ownership class by jettisoning partners.
“It’s a fair leap to conclude that if fewer firms had reduced their equity partner ranks, even more firms would have suffered profits-per-partner drops,†Aric Press, the editor of The American Lawyer, wrote in an introduction to the financial data. “Cutting partners tends not to be a growth strategy, except on paper.â€
The richest law firms are mostly located in New York, where their main clients are banks and other financial institutions. They employ 18 percent of the 92,000-lawyer work force while earning 26 percent of the total legal fees.
Some of the lawyers at the very top of the heap include partners at law firms like Baker & McKenzie, Kirkland & Ellis and Latham & Watkins. Those partners made an average of about $3 million a year.
While the top-tier firms prospered, the annual American Lawyer list found that three-quarters of the 100 firms expanded at a slower growth rate, with average profits per partner inching up just 0.2 percent, to $1.47 million. As the legal industry becomes more finely segmented, partners in the top-tier firms earned twice as much as other firm partners in the rankings.
The five largest firms in terms of gross revenues were unchanged from 2012: DLA Piper’s total increased 1.7 percent to $2.5 billion; Baker & McKenzie’s rose 4.6 percent to $2.4 billion; Latham & Watkins, up 2.7 percent to $2.3 billion; Skadden Arps, Slate, Meagher & Flom grew 1.1 percent to $2.3 billion; and Kirkland & Ellis increased 4.1 percent to $2.1 billion.
Perhaps not surprisingly, the wealthiest partners were at New York-based firms. Per-partner profit at Fried, Frank, Harris, Shriver & Jacobson rose 24.3 percent, while that figure at Davis Polk & Wardwell jumped 22.5 percent.
Fried Frank’s 119 equity partners took home an average of $1.63 million each, and Davis Polk’s 153 partners earned $2.94 million each â€" although they were not the highest paid. Wachtell Lipton, Rosen & Katz’s compensation for its 81 equity partners was $4.76 million each, down 4.4 percent over last year, according to the American Lawyer figures.
The American Lawyer’s list also grouped together six large international firms, which are organized as loose confederations called vereins under Swiss partnership law, and calculated the performance of their member firms. According to its conclusions, both the average profit per partner sank, by 8.2 percent, and revenue per lawyer dropped, by 4.7 percent for these global firms â€" which also had larger work forces than their counterparts.
