When managing partners of law firms large and small gathered in the same room last week at Patterson Belknap Webb & Tyler, the inevitable question arose: Will business get any better?
A straw poll conducted at the meeting revealed "guarded optimism," according to a New York State Bar Association task force. Of the 21 law firm leaders who participated in the survey, only two said they expected legal business would decrease in 2011, with the rest predicting flat to modest growth. More than half expected to hire the same or slightly more first-year associates than they did in 2010.
The task force on the future of the legal profession conducted the poll last Tuesday during a meeting of managing partners at the offices of Patterson Belknap. The answers reflect the sentiments of bankers, consultants and managing partners, some of whom attended the meeting, that business conditions are gradually improving but growth remains a challenge.
"It's a slower recovery than everyone would like," said Judith Lockhart, managing partner of Carter Ledyard & Milburn, who attended the State Bar's meeting.
The 21 managing partners who took the straw poll hailed from a wide range of firms around the state, with 12 coming from firms with more than 100 lawyers. Six represented firms with fewer than 25 lawyers.
Law firm leaders in attendance included Brad Karp, chairman of Paul, Weiss, Rifkind, Wharton & Garrison, and Stephen J. Dannhauser, chairman of Weil, Gotshal & Manges, according to lawyers who attended. Neither responded to requests for comment.
Other more robust surveys of law firms in recent weeks have likewise suggested that growth in the legal sector remains a challenge. Thanks in part to a resurgence in the capital markets early in the year, firms nationally with around $2 million in profits per partner saw gross revenue for the first six months of the year increase 6 percent to 8 percent compared to the same period in 2009, said Jeffrey Grossman, national managing director with Wells Fargo Wealth Management.
Conditions were tougher for firms further down the profits scale, with other Am Law 100 firms reporting flat revenue, said Grossman, who conducts a quarterly survey of law firms. Grossman said any optimism about business is focused on profits, where overall net income was up 25 percent to 35 percent, he said. But those profits are largely the result of reduced expenses.
"The optimism has come from the fact that they cut expenses, not from the top line," Grossman said.
A report last month by consulting firm Hildebrandt Baker Robbins showed that demand for legal services as measured by growth in billable hours remained flat compared to 2009. Demand in New York was down 1 percent compared to a year earlier, according to Hildebrandt, which analyzes billable hour data from 120 firms in the Am Law 200. Data collected in the two months since show similar trends, said Mark Medice, program director for Hildebrandt's Peer Monitor.
"We're in an interesting stage right now," Medice said. "There's some amount of optimism and some amount of skepticism."
An analysis of midyear financial results of 187 large-to-midsize firms nationally by the law firm group of Citi Private Bank found that "revenue was virtually flat, and demand was down slightly," Dan DiPietro and Gretta Rusanow of Citi wrote in an article this month in The American Lawyer, a New York Law Journal affiliate. Inventory grew by less than 1 percent, according to Citi, a finding that matched the experience of some managing partners.
"While demand is up some, there's not the type of backlog there once was," said Paul S. Pearlman, managing partner of Kramer Levin Naftalis & Frankel, who attended the State Bar meeting.
Kim Koopersmith, the New York-based managing partner for Akin Gump Strauss Hauer & Feld in the United States, said her firm had "definitely seen an increase in corporate work and regulatory work." Koopersmith, who did not attend the State Bar meeting, said she was optimistic about the months ahead, though she said she would prefer more work.
"I'd like to see more growth," she said. "Certainly the growth firms are seeing is less than they had been historically enjoying."