The nation's largest law firms expanded by a robust 5.6 percent in 2007, a year that demonstrated growth well ahead of 2006's gains and one that for the first time knocked a long-reigning leader from the No. 1 position.
The results of the 2007 NLJ 250, The National Law Journal's 30th annual survey of the nation's largest law firms, show that a total of 128,213 attorneys worked at those firms this year, compared with last year's attorney census of 121,423.
The 5.6 percent increase in 2007 represents the largest growth among NLJ 250 firms since 2001, when the census ballooned by 8.2 percent. Last year, firm growth slowed to 4 percent, compared with 4.4 percent in 2005.
Also this year, Baker & McKenzie was knocked out of the top spot for the first time since 1978, the inaugural year of the survey. DLA Piper, with 3,623 attorneys, won highest ranking this year.
The increase in the number of attorneys at the top 250 law firms indicates that firms continued to bolster their ranks to meet the needs of clients, whose demands were fueled by strong business opportunities.
The results were based on attorney census information covering the period between Oct. 1, 2006, and Sept. 30, 2007, which was provided by the nation's 300 largest law firms. This year, the cutoff point for law firms to make the NLJ 250 was 172 attorneys -- the same cutoff point as in 2006.
A relative newcomer to the upper tier of the list, DLA Piper made its debut into the top 25 just five years ago but bounded up the ranks to hold the No. 2 spot in 2005 and 2006.
This year, it surpassed long-standing leader Baker & McKenzie, which had 3,335 attorneys. Thirty years ago, Baker & McKenzie had 434 attorneys and paid its starting lawyers $22,000 annually.
DLA Piper's strategy has been to follow a "two-page plan," which essentially has called for the firm to mirror its own clients' consolidation and globalization, said Frank Burch, joint chief executive of the law firm.
"It really wasn't very complicated," he said. "We've worked hard to wrap ourselves around institutional clients."
Burch added that core practices -- corporate and finance, real estate, litigation and government affairs -- have served as a platform for the law firm's other departments.
Regarding Baker & McKenzie's decline by 5.7 percent, a firm spokeswoman attributed the slip to a "technical change" in its "basis for reporting." She said that the firm's partnership ranks had grown by 11 percent during the last two years.
Associate growth among the NLJ 250 law firms this year outpaced last year's tallies and surpassed the growth of partners as well. The number of associates rose by 5.3 percent, compared with 4.8 percent associate growth in 2006. Law firms in 2007 reported that they had 64,885 associates working for them, while 61,648 associates were employed by NLJ 250 law firms in 2006.
Partner totals still showed healthy increases, though not as strong as associate numbers. The number of partners climbed by 4.6 percent in 2007, when some 51,191 partners worked at the nation's largest 250 firms. Law firms reported 48,954 partners in 2006, when partner growth equaled 5.1 percent, compared with totals in 2005.
WOMEN'S NUMBERS GROW
The number of women attorneys reported by law firms also showed a brisk uptick. In 2007, women attorneys equaled 41,558 of the attorneys among NLJ 250 law firms that broke down their numbers by gender, a 6.6 percent increase. Last year, 38,998 of the attorneys were women.
The average number of women partners among NLJ 250 in 2007 was 39.3 and the average number of women associates was 120.7.
The average number of nonequity partners rose sharply, by 8.2 percent, this year. It was 55.2, compared with an average of 51 in 2006. Last year, the average number of nonequity partners was a notable 16 percent above that of 2005. Nonequity partners are those who do not hold an ownership interest in a law firm.
Also this year, the percentage of equity partners among the total number of attorneys equaled 29 percent and the percentage of nonequity partners among the total number of partners equaled 29 percent.
The average number of lawyers this year identified as part of the "other" category -- meaning those who were nonpartner and nonassociate attorneys -- was 49.5, compared with an average of 43 in 2006, a 15.1 percent increase.
In 2007, law firm mergers continued to play a significant role in the legal services market, as firms looking to expand their reach and breadth of practices sought partners domestically and abroad.
Even some of the largest firms continue to contemplate whether they are big enough to serve their clients, said Bill Brennan, a law firm consultant with Altman Weil.
"There's more to come," he said, adding that law firms remain far behind other professional services firms, including accounting, investment banking and consulting, in terms of consolidation.
An abundance of wholesale mergers contributed to the greatest gains in individual law firm growth. The biggest merger by percentage gain was the one between New York-based LeBoeuf, Lamb, Greene & MacRae, which had 713 attorneys a year ago, and New York-based Dewey Ballantine, which had 544 attorneys a year ago. The creation of the new firm Dewey & LeBoeuf represented a 96.1 percent increase for the larger firm of the two, LeBoeuf Lamb. The combined firm, ranked No. 11 on this year's NLJ 250, has 1,398 attorneys.
Another big gainer was Day Pitney, the 400-attorney law firm established by the combination of Connecticut firm Day, Berry & Howard and New Jersey's Pitney Hardin. The merger brought together Day, Berry & Howard's commercial transaction and litigation strengths with Pitney Hardin's broad range of practice areas that include utilities regulation and estate planning. The deal resulted in a 59.4 percent growth for Day, Berry & Howard, the larger of the two firms. The firm was ranked No. 113 on the NLJ 250 this year.
Also growing by 59 percent was Thelen Reid & Priest, which combined with Brown Raysman Millstein Felder & Steiner. The combination, Thelen Reid Brown Raysman & Steiner, ranked No. 70 on the list with 600 attorneys, and boosted Thelen Reid's presence in New York and Brown Raysman's presence in California.
Philadelphia-based Drinker Biddle & Reath's merger with Chicago's Gardner Carton & Douglas represented a 44.3 percent growth for Drinker Biddle, and provided the firms with 658 lawyers in 12 offices. The firm is ranked No. 59 on the list.
Last year, Gardner Carton & Douglas had the biggest percentage decline in lawyers among the NLJ 250 firms. In 2006, it lost 18 percent of its attorneys.
Kirkpatrick & Lockhart Nicholson Graham merged with Seattle-based Preston Gates & Ellis to form a 1,381-attorney firm. The new firm, Kirkpatrick & Lockhart Preston Gates Ellis, ranked No. 13 on the NLJ 250. The merger represented a 41.2 percent increase for Kirkpatrick & Lockhart, the larger firm, which had 978 attorneys before the combination.
Another firm making big strides in 2007 was Reed Smith, which grew by 39.4 percent, largely due to its merger with London-based Richards Butler, which had 250 attorneys, and its merger with Chicago-based Sachnoff & Weaver. The additions helped Reed Smith break into the top 10 firms for the first time this year. [See related story, "Reed Smith follows its clients onto the world stage".]
Other law firms that expanded significantly this year were 224-attorney Washington-based McKee Nelson, which grew by 30.2 percent; 314-lawyer Richmond, Va.-based Williams Mullen, which climbed by 28.7 percent; San Francisco-based Littler Mendelson, a 649-attorney firm that grew by 23.1 percent; and 285-attorney Stites & Harbison, which grew by 21.8 percent.
SOME GOT SMALLER
By contrast, several firms experienced significant declines in 2007. The biggest drop by percentage occurred at Adams and Reese, which has its largest office in New Orleans. The firm's size fell by 15 percent, from 301 attorneys to 256.
The decline was partly a result of a newly implemented strategic plan, said Adams and Reese managing partner Charles P. Adams Jr. The plan required the firm to scale back its less profitable practices, he said. He added that the firm ushered out attorneys who had "pockets" of less successful work within practice groups across the board.
Adams did not attribute the decline to continued challenges in the Gulf Coast region following Hurricane Katrina. The law firm has several offices in the area.
"I'm very optimistic about our region," said Adams, who practices out of the Jackson, Miss., office.
Declining by 13.1 percent was New York-based Kenyon & Kenyon, from 222 lawyers in 2006 to 193 in 2007. Milwaukee's Michael Best & Friedrich shrank by 12.2 percent, from 255 attorneys in 2006 to 224 this year. Dipping 11.6 percent this year was Chicago's Lord, Bissell & Brook, which lost 38 attorneys, bringing its total to 290. The firm merged with Dallas-based Locke, Liddell & Sapp after the closing date of the survey. The merger created a law firm of about 700 attorneys.
Showing a loss of 131 attorneys was Wilmer Cutler Pickering Hale and Dorr. That amounted to a reduction of 11 percent and took the firm from 1,181 attorneys in 2006 to 1,051 this year. In response to a request for an interview about the decline, a firm spokeswoman said that the firm's census actually was 1,154. The firm submitted updated data that came in too late to include in the NLJ 250 charts.
Also experiencing notable declines in attorney totals this year were Atlanta's Powell Goldstein; Kilpatrick Stockton, also based in Atlanta; Minneapolis-based Robins, Kaplan, Miller & Ciresi; Columbus, Ohio-based Porter Wright Morris & Arthur; and Heller Ehrman.
Thirteen firms that made last year's list did not make the cut in 2007. [See related story, "Turnover featured firms from the South, Midwest."] One law firm absent this year was Dallas-based Jenkens & Gilchrist, ranked No. 156 in 2006. It closed its doors in 2007 after paying the Internal Revenue Service $76 million for its role in promoting fraudulent tax shelters. The firm, which reported 268 attorneys last year, had eight offices.
Other law firms fell off the list because they merged with larger shops. Those firms included Brown Raysman Millstein Felder & Steiner; Preston Gates & Ellis; Dewey Ballantine; and Gardner, Carton & Douglas.
Still others shrank below 172 attorneys, which forced them completely off the list. The highest-ranking firm last year that fell from the list this year was Boston-based Sullivan & Worcester, which came in at No. 219 in 2006 with 192 attorneys. The firm dipped to 170 attorneys this year.
Also slipping off the list was Coughlin Stoia Geller Rudman & Robbins, ranked No. 234 last year. In September, former name partner William Lerach pleaded guilty to a federal conspiracy charge and acknowledged that he and others had agreed to conceal secret payment arrangements with named plaintiffs in class actions. In 2006, Lerach's firm, a securities class action operation, made its debut in the NLJ 250 and opened an office in New York, its 10th location at the time. The firm did not participate in the NLJ 250 survey this year, and numbers on its Web site indicate that it would not have made the list.
Additional law firms sliding off the NLJ 250 this year were Miami-based Adorno & Yoss, which also submitted data too late for inclusion this year; Portland, Ore.-based Bullivant Houser Bailey; Chicago-based Clausen Miller; New Orleans-based McGlinchey Stafford; and Atlanta-based Morris, Manning & Martin.
The disappearances of those firms made room for 13 law firms new to the list. Debuting at the highest spot was Miami-based Shutts & Bowen, ranked No. 213 with 198 attorneys. Its census was based on information provided by the National Association for Law Placement. Twelve other firms also made the list for the first time.
Making it into the top 10 this year for the first time was Reed Smith, which came in at No. 10. Besides Reed Smith, the top 10 law firm that experienced the greatest percentage growth was Latham & Watkins, which expanded by 11.8 percent with the addition of 230 lawyers. Mayer Brown, ranked No. 9 in 2007 and in 2006, boosted its attorneys numbers by 11.2 percent through the addition of 158 lawyers.
Only one firm in the top 10 declined in attorney numbers and that was Baker & McKenzie, which lost 200 lawyers.
Landing in the top 20 this year were No. 11 Dewey & LeBoeuf and Kirkpatrick & Lockhart Preston Gates Ellis, which ranked No. 13, compared with No. 23 in 2006. Falling out of the top 20 were McDermott, Will & Emery, slipping from 17th last year to 21st this year, and Wilmer Cutler Picker Hale and Dorr, falling from 12th to 22nd.
Vaulting up the list the most slots was Day Pitney. Before the merger between Day, Berry & Howard and Pitney Hardin, Day Berry was ranked No. 166. It took the No. 113 spot this year.
Despite this year's strong gains overall, next year may well bring a slowdown, said Brennan, with Altman Weil. Ripples from the mortgage debt crisis, the war in Iraq and escalating tension with Iran are all poised to undercut the economy, Brennan said.
In addition, large law firm operations are in a state of flux, he said, as firms re-evaluate traditional ways of doing business -- highly leveraged partners depending on the billable-hour model -- to comport more closely with client demands.
"The legal profession has insulated itself for a long time from the forces of marketplace," he said.
With healthy inbound and outbound investments, a robust economy and a business-minded climate, Dubai is increasingly becoming home for American law firms. A number of firms opened offices in the United Arab Emirates business hub this year, while others beefed up their attorney ranks to meet growing client demand in the region.
RELATED CHARTS (free registration required):
Directory of NLJ 250 branch offices: Lists by firm the total number of attorneys in each city where the firm has offices.