Marci Eisenstein of Schiff Hardin. HANDOUT.
Marci Eisenstein of Schiff Hardin. HANDOUT. ()

A traumatic departure of more than 20 partners and a $32 million contingent fee earned in 2015 conspired to send gross revenue plummeting to $222 million at Schiff Hardin last year.

The financial report by the Chicago-based firm is its first since the January 2016 walkout of a prominent group of lawyers led by former chairman Robert Riley, former managing partner Ronald Safer and partners Patricia Holmes and Joseph Cancila Jr., all of whom formed Riley Safer Holmes & Cancila, a new firm with offices in Chicago, New York and San Francisco.

It was always going to be difficult for Schiff Hardin to repeat its financial performance in 2015, because that year the firm earned a one-time contingent payment of $32 million for its work representing The Flintkote Co. on a $575 million asbestos-related payment it received from its former owner, Imperial Tobacco Canada Ltd., through a Chapter 11 reorganization plan.

Factoring that fee out from 2015’s results, the firm’s gross revenue fell only 9.3 percent in 2016, while Schiff Hardin’s revenue per lawyer would have ticked up 1.6 percent. The firm’s profits per partner would have grown 3.1 percent without the Flintkote fee.

But comparisons are one thing. Figures are another. In 2016, Schiff Hardin’s revenue per lawyer was $786,000 and profits per partner were $846,000. The number of lawyers employed by the firm fell 11 percent, to 282. Equity partner ranks fell 16 percent, to 79.

Schiff Hardin managing partner Marci Eisenstein, who was named the firm’s first female leader in early 2015, said she was satisfied with the firm’s performance despite the drop in gross revenue. She noted that Schiff Hardin tried 25 cases last year, including 11 being handled by its intellectual property practice, led by Imron Aly, who joined the firm in 2014 from Winston & Strawn, and Sailesh Patel. (Schiff Hardin also helped secure a $20 million settlement for a former partner in a medical malpractice case.)

“We’ve had action, but not this level of activity that I can remember in the 38 years I’ve been here,” Eisenstein said in an interview Thursday at the firm’s headquarters in Chicago’s iconic Willis Tower. “So that is compelling.”

She said Schiff Hardin often receives phone calls from other law firms expressing interest in a merger, but that the firm is currently committed to remaining independent. She said she expected “focused growth” in 2017 and that the firm’s practice group focus this year would be on IP, environmental and construction project work.

“A lot of people would love to date us, and maybe take it further,” Eisenstein said. “I do get calls. And I pick up the telephone. But generally our focus right now is we want to remain independent. We really love what we do here. And the measure of that is how well we came through what we faced [last year].”

To cut costs following the departures, Eisenstein said the firm is subleasing space in Atlanta, Chicago, New York and Washington, D.C. Last month Schiff Hardin closed its Dallas office, with Dorsey & Whitney picking up about 15 lawyers from the firm and also assuming its lease in the city. The Dallas group joined Schiff Hardin in 2014.

“In the end it was a situation where it just didn’t end up being a good cultural fit form the perspective of either us or the folks there,” Eisenstein said about the Dallas departures.

Eisenstein, who had been managing partner for less than a year when the Riley Safer group left the firm, said she learned a lot about law firm leadership in the days after the announcement of that 22 partner exodus. She said it was important that she speak to Schiff Hardin’s partnership and the firm’s staff, even though she didn’t always have the answers to their questions. Like, “Will we all keep our jobs?”

“I had to say, ‘We don’t know. We are evaluating the situation,’” Eisenstein said. “What I didn’t want to say was, ‘Yes,’ and then be proven wrong.”

There were layoffs following the departures, including seven first-year associates and staff members who worked for both partners who left and did not leave, as reported by Above The Law in a memo sent by Eisenstein. That memo also said the firm was focused on “our profitability, an effort which began last year and is ongoing.”

In an interview with Chicago Lawyer magazine in 2014, former managing partner Ron Safer called managing a firm to raise profits per partner “a rationalization.”

“I well understand the rationalization, which says we have to be highly profitable to attract people to the law firm or we won’t be able to employ anybody,” Safer said. “Frankly, it is just that—a rationalization. Our doors are wide open. We managed to muddle through the recession [and] in 2012 [had] ‘only’ $865,000 average profits per partner. Nobody is having a lot of tag-day sales for our partnership. And our law firm is thriving. So I think you can stay true to your values and be profitable even in this highly competitive, contracting market.”

Asked about that view toward profitability in an interview, Eisenstein said, “We think that paying attention to those issues is what helps us preserve our culture. We need to be able to attract people here so we can get great people and invest in our community, and that’s what I’m trying to accomplish here.”

A traumatic departure of more than 20 partners and a $32 million contingent fee earned in 2015 conspired to send gross revenue plummeting to $222 million at Schiff Hardin last year.

The financial report by the Chicago-based firm is its first since the January 2016 walkout of a prominent group of lawyers led by former chairman Robert Riley, former managing partner Ronald Safer and partners Patricia Holmes and Joseph Cancila Jr., all of whom formed Riley Safer Holmes & Cancila, a new firm with offices in Chicago, New York and San Francisco.

It was always going to be difficult for Schiff Hardin to repeat its financial performance in 2015, because that year the firm earned a one-time contingent payment of $32 million for its work representing The Flintkote Co. on a $575 million asbestos-related payment it received from its former owner, Imperial Tobacco Canada Ltd., through a Chapter 11 reorganization plan.

Factoring that fee out from 2015’s results, the firm’s gross revenue fell only 9.3 percent in 2016, while Schiff Hardin ’s revenue per lawyer would have ticked up 1.6 percent. The firm’s profits per partner would have grown 3.1 percent without the Flintkote fee.

But comparisons are one thing. Figures are another. In 2016, Schiff Hardin ’s revenue per lawyer was $786,000 and profits per partner were $846,000. The number of lawyers employed by the firm fell 11 percent, to 282. Equity partner ranks fell 16 percent, to 79.

Schiff Hardin managing partner Marci Eisenstein, who was named the firm’s first female leader in early 2015, said she was satisfied with the firm’s performance despite the drop in gross revenue. She noted that Schiff Hardin tried 25 cases last year, including 11 being handled by its intellectual property practice, led by Imron Aly, who joined the firm in 2014 from Winston & Strawn , and Sailesh Patel. ( Schiff Hardin also helped secure a $20 million settlement for a former partner in a medical malpractice case.)

“We’ve had action, but not this level of activity that I can remember in the 38 years I’ve been here,” Eisenstein said in an interview Thursday at the firm’s headquarters in Chicago’s iconic Willis Tower. “So that is compelling.”

She said Schiff Hardin often receives phone calls from other law firms expressing interest in a merger, but that the firm is currently committed to remaining independent. She said she expected “focused growth” in 2017 and that the firm’s practice group focus this year would be on IP, environmental and construction project work.

“A lot of people would love to date us, and maybe take it further,” Eisenstein said. “I do get calls. And I pick up the telephone. But generally our focus right now is we want to remain independent. We really love what we do here. And the measure of that is how well we came through what we faced [last year].”

To cut costs following the departures, Eisenstein said the firm is subleasing space in Atlanta, Chicago, New York and Washington, D.C. Last month Schiff Hardin closed its Dallas office, with Dorsey & Whitney picking up about 15 lawyers from the firm and also assuming its lease in the city. The Dallas group joined Schiff Hardin in 2014.

“In the end it was a situation where it just didn’t end up being a good cultural fit form the perspective of either us or the folks there,” Eisenstein said about the Dallas departures.

Eisenstein, who had been managing partner for less than a year when the Riley Safer group left the firm, said she learned a lot about law firm leadership in the days after the announcement of that 22 partner exodus. She said it was important that she speak to Schiff Hardin ’s partnership and the firm’s staff, even though she didn’t always have the answers to their questions. Like, “Will we all keep our jobs?”

“I had to say, ‘We don’t know. We are evaluating the situation,’” Eisenstein said. “What I didn’t want to say was, ‘Yes,’ and then be proven wrong.”

There were layoffs following the departures, including seven first-year associates and staff members who worked for both partners who left and did not leave, as reported by Above The Law in a memo sent by Eisenstein. That memo also said the firm was focused on “our profitability, an effort which began last year and is ongoing.”

In an interview with Chicago Lawyer magazine in 2014, former managing partner Ron Safer called managing a firm to raise profits per partner “a rationalization.”

“I well understand the rationalization, which says we have to be highly profitable to attract people to the law firm or we won’t be able to employ anybody,” Safer said. “Frankly, it is just that—a rationalization. Our doors are wide open. We managed to muddle through the recession [and] in 2012 [had] ‘only’ $865,000 average profits per partner. Nobody is having a lot of tag-day sales for our partnership. And our law firm is thriving. So I think you can stay true to your values and be profitable even in this highly competitive, contracting market.”

Asked about that view toward profitability in an interview, Eisenstein said, “We think that paying attention to those issues is what helps us preserve our culture. We need to be able to attract people here so we can get great people and invest in our community, and that’s what I’m trying to accomplish here.”