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http://www.law.com/jsp/article.jsp?id=1163066728127http://www.law.com/jsp/article.jsp?id=1163066728127'NLJ 250' Shows Strong Law Firm Growth Continuing
Leigh Jones
The National Law Journal
11-13-2006

The nation's largest 250 law firms grew by 4 percent in 2006, a figure that was just shy of last year's gains but still reflected a sound legal economy.

The results of the 2006 NLJ 250, The National Law Journal's 29th annual survey of the nation's largest law firms, revealed that 121,423 attorneys worked at those firms this year, some 4,752 more attorneys than last year.

In 2005, the top 250 law firms had 116,671 attorneys, which represented a 4.4 percent increase from 2004, when firms grew by 1.5 percent. In 2003, firms expanded by 1.6 percent.

The increase in the number of attorneys at the top 250 firms indicates that firms continue to boost their ranks to meet the demands created by a strong business economy.

The survey measured attorney populations at the nation's largest firms between Oct. 1, 2005, and Sept. 30, 2006. This year, the cutoff point for law firms to make the NLJ 250 was 172 attorneys. In 2005, the smallest firm on the list had 165 attorneys.

MORE PARTNERS

Partner totals showed solid growth this year, climbing by 5.1 percent compared with last year. Law firms reported that they had 48,954 partners, as opposed to 46,563 last year, when the number of partners rose sharply by 4.6 percent.

At the same time, the average number of attorneys designated as nonequity partners this year surged by a resounding 16 percent. This year, the average number of nonequity partners at firms identifying attorneys in that category was 51, compared with 44 attorneys last year.

Also showing a gain was the number of associates, which rose by 4.8 percent. This year, firms reported 61,648 junior attorneys, compared with 58,805 last year, when the number of associates rose by 4.6 percent.

The average number of lawyers identified in the "other" category, meaning that they were nonpartner and nonassociate attorneys, rose by 2 percent. This year, the average number of "other" attorneys was 43; last year, it was 42.

In general, this year's results reflect a "healthy legal economy" spurred by strong mergers and acquisitions activity and "big-ticket" litigation, said Ward Bower, a principal with Altman Weil, a law firm consultancy. He added that the climb in the partner population most likely stemmed from the large numbers of associates who were hired during the dot-com boom of the late 1990s and who now are climbing the law firm ladder. "It's a little bit of a hiring bulge coming through the system," he said.

The slight downturn in attorney population growth this year compared with last year appeared to reflect an economy that is rolling along but not bounding ahead. Sluggish home sales and high energy prices early in the year dampened enthusiasm, but record stock market performance later in the year and relatively stable inflation and interest rates brightened prospects.

In 2006, law firms continued to reconfigure themselves to meet the needs of their high-yield clients through mergers, which played a key role in the rankings this year.

Some of the larger couplings included Bingham McCutchen with Washington's Swidler Berlin; Pittsburgh-based Buchanan Ingersoll with Klett Rooney Lieber & Schorling, also in Pittsburgh; Boston-based Edwards & Angell with Palmer & Dodge, also in Boston; Palo Alto, Calif.'s Cooley Godward with Kronish Lieb Weiner & Hellman, also in Palo Alto; Philadelphia's Fox Rothschild with Roseland, N.J.-based Grotta Glassman & Hoffman; and New York's Kelley Drye & Warren with Washington's Collier Shannon Scott.

Lisa Smith, vice president of Hildebrandt International, a professional services consultancy, said that the total number of law firm mergers this year -- 52 by the end of the third quarter of 2006 -- is ahead of last year's tally of 49 mergers. In addition, she said, law firms of all sizes engaged in merger activity. "The mix is not all that different," Smith said.

She predicts mergers to remain strong next year, even as the number of high-profile target firms may be shrinking. "The market seems to regenerate itself," she said.

Smith said that she has observed "some uptick" in law firm merger activity in the last few months. Indeed, after the NLJ 250 survey was closed, Orrick, Herrington & Sutcliffe, ranked 26th, agreed in principle to merge with New York-based Dewey Ballantine, ranked 70th to create a firm of more than 1,500 attorneys.

THE BIG WILL GET BIGGER

In addition, 20th-ranked Reed Smith announced that it was merging with Chicago's Sachnoff & Weaver, also creating a law firm of about 1,500 lawyers. Also, Kirkpatrick & Lockhart Nicholson Graham, in the 23rd spot, recently announced that it was in talks with No. 99 Seattle-based Preston Gates & Ellis, which, if completed, would result in a law firm of about 1,400. Further, Day, Berry & Howard, ranked No. 166, announced its plans to merge with Pitney Hardin, a 170-attorney firm based in Florham Park, N.J.

STRATEGY OVER PITY

Law firms have learned lessons from the abundance of mergers in the last few years, Smith said. Five to seven years ago, geography and size for size's sake often were the motivators of law firm consolidation. But firms now take a much more "strategic" approach, she said, making sure that they have the client base to support consolidation and compatible firm cultures to sustain collaboration. She added that the days of the so-called pity mergers, in which one firm scoops up a firm in trouble, are gone.

"These days they're being driven for the right reasons -- about serving clients," she said.

The growth leaders this year among all NLJ 250 firms showed hefty gains, with wholesale mergers resulting in the biggest expansions. Topping the list of firms that grew the most was 75th-ranked Edwards Angell Palmer & Dodge, which, through its merger, created a firm some 50 percent larger than Edwards & Angell's size last year.

The second-biggest gainer was 68th-ranked Buchanan Ingersoll & Rooney, again representing an expansion through merger, which ballooned by 41.8 percent. In merging to become Cooley Godward Kronish, Cooley Godward grew by 29 percent and jumped into 71st place.

Other growth leaders included Fox Rothschild; Los Angeles-based Quinn Emanuel Urquhart Oliver & Hedges; Kansas City, Mo.-based Polsinelli Shalton Welte Suelthaus; Washington's Covington & Burling; San Francisco's Littler Mendelson; Orrick, Herrington & Sutcliffe; and New York-based Fried, Frank, Harris, Shriver & Jacobson. Except for Fried Frank, which swelled by 19 percent, those firms grew between 20 percent and 25 percent

THE BIGGEST DROP

The biggest decline occurred at Chicago's Gardner Carton & Douglas, which dropped by 44 lawyers and plunged by 18 percent to the 217th position. Last year the firm was ranked 173rd. It now has 195 attorneys. Some observers have questioned the firm's stability, though its leaders insist that the firm is sound. And there have been reports that Gardner Carton has been in merger talks with Philadelphia's Drinker Biddle & Reath, but, at least so far, a consolidation has not materialized. The firm declined to comment for this story.

Also experiencing a big reduction in size was Thelen Reid & Priest, which decreased to 378 attorneys this year from 454 last year, for a 16.7 percent drop. The firm, which ranked 114th this year, took the 79th spot last year.

The firm has announced a merger with Brown Raysman Millstein Felder & Steiner of New York. Thelen Reid did not return phone calls seeking comment for this story.

Other firms with sizable downturns this year were Cleveland-based Calfee, Halter & Griswold; New York-based Shearman & Sterling; Pillsbury Winthrop Shaw Pittman; Holland & Knight; Philadelphia's Wolf, Block, Schorr and Solis-Cohen; New York's Strook & Strook & Lavan; Chadbourne & Parke, also based in New York; and Pittsburgh-based Eckert Seamans Cherin & Mellot. Declines among those firms ranged from 8 percent to 12 percent.

NEW FIRMS

A departure of 10 law firms from the list this year made room for 10 new firms. The firms that dropped off the list were The Cochran Firm; Austin, Texas-based Brown McCarroll; Pitney Hardin; Chicago's Neal Gerber & Eisenberg; Palmer & Dodge; Seattle-based Lane Powell; St. Louis-based Lewis, Rice & Fingersh; Steptoe & Johnson PLLC, with offices in West Virginia; Los Angeles-based Jeffer, Mangels, Butler & Marmaro; and Kansas City, Mo.-based Shughart Thomson & Kilroy.

Ten firms new to the list were Chicago's Clausen Miller; Atlanta's Fisher & Phillips; New York's Kasowitz, Benson, Torres & Friedman; San Diego-based Lerach Coughlin Stoia Geller Rudman & Robbins; Phoenix's Lewis and Roca; Morristown, N.J.-based McElroy, Deutsch, Mulvaney & Carpenter; Newark, N.J.-based Sills Cummis Epstein & Gross; Grand Rapids, Mich.-based Warner Norcross & Judd; and Orlando, Fla.'s Broad and Cassel.

Among top 10 law firms, those composing that group this year were the same firms as last year. The only marked change came from White & Case, which fell from fourth in 2005 to sixth this year. Latham & Watkins bumped up one slot this year, to fourth place. Skadden, Arps, Slate, Meagher & Flom of New York also moved up a space, to fifth place, this year.

The increases in attorney totals among the top 10 firms, up 4.4 percent this year, were in line with this year's overall results, a 4.3 percent jump.

THE GROWTH LEADER

This year's growth leader in the top 10 was Greenberg Traurig, although its rank remained unchanged, in eighth place. The law firm upped its number of attorneys by 12.4 percent, to 1,667. Also making big strides in the top 10 was Chicago-based Mayer, Brown, Rowe & Maw, which expanded by 9.1 percent, to 1,410 attorneys. It stayed in ninth place.

Jones Day, sticking to its third-place slot, lost the greatest percentage of attorneys among the top 10 firms, reducing its rosters by 5.6 percent.

The firm in the top 10 that added the largest number of attorneys was the No. 1 firm, Baker & McKenzie, which was home to 226 more lawyers than last year.

Regarding the top 20, Shearman & Sterling fell to 27th place this year, from 17th place last year. The firm decreased by 11.6 percent, to 895 attorneys.

Also falling from the top 20 was Kirkpatrick & Lockhart Nicholson Graham, which dipped to No. 23 this year from No. 19 last year. The firm's total number of lawyers decreased by 34, or 3.3 percent.

Making it into the top 20 this year at No. 15 was Paul, Hastings, Janofsky & Walker, which moved up from the 23d position last year. It increased its size by 111 attorneys, or 11.5 percent. In addition, O'Melveny & Myers rose to 18th this year from 21st last year, by adding 136 lawyers for a total of 1,043.

Another big mover in the top 20 was Kirkland & Ellis, which climbed three slots to 11th and grew by almost 15 percent.

The greatest decline in rank among firms in the top 20 occurred at Holland & Knight, which sank from the 11th spot to 14th. Its attorneys totaled 1,102, compared with 1,224 last year.

SEVERAL BIG JUMPS

Among all the law firms on the list, some experienced huge jumps in their rankings. Besides big moves by Edwards Angell, which vaulted 48 spots to 75th place, and Fox Rothschild, which gained 24 spots to 112th, Best Best & Krieger, based in Riverside Calif., made a giant leap. It powered up 32 places, from the 247th spot to 215th this year.

The advances at Best Best & Krieger were attributable to an increase in work from its public-agency clients, said managing partner Eric Garner. The firm serves as general counsel for about 30 cities in California and represents local government agencies, including water districts, throughout the state, he said. "We're increasingly seen as the go-to firm in California," Garner said.

The firm also focuses on transactional and litigation work for small and midsize businesses. Most of its attorney growth was at the associate level, he said.

Other firms with big gains up the ranks included Charlotte, N.C.-based Parker Poe Adams & Bernstein, which climbed 29 spots to 209th; and Quinn Emanuel, which jumped 23 spots to 135th.

Still other firms slid considerably in the rankings. In addition to big tumbles from Gardner Carton, which slumped 44 spots to 217th, and Thelen Reid & Priest, which spiraled down 35 spots this year to 114th place, San Diego's Luce, Forward, Hamilton & Scripps dropped 29 places to 242, and Boston's Choate, Hall & Stewart declined 28 spots to 227.

But despite those downturns, the overall outlook for the law firms included in the NLJ 250 this year is upbeat, said Altman Weil's Bower.

"There's a good bit of confidence out there," he said.