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These days, it pays to be low tech. That seems to be the mantra among California’s top law firms, judging from The Recorder‘s 2nd annual California 40 report on the state’s top-grossing law firms. Related chart: The California 40 By the Numbers Hammered by the sour stock market and dismal economy, California’s elite technology firms continued their slide in 2002. The survey shows that firms like Wilson Sonsini Goodrich & Rosati, Gray Cary Ware & Freidenrich and — of course — the now-defunct Brobeck, Phleger & Harrison sank in both revenue and profitability last year. For the second year in a row, Brobeck had the biggest drop in profits of any firm, down 38 percent. Gray Cary, Fenwick & West and Thelen Reid & Priest all saw profits per partner drop in the neighborhood of 10 percent. Brobeck was unable to recover from its downward spiral. Faced with heavy debt, a failed merger attempt and an avalanche of partner defections, the firm disbanded in February. While tech firms were buffeted by the economic downturn, firms with diversified practices, particularly those with strong litigation departments and an international presence, were able to boost their revenues and profits. Latham & Watkins grew its ranks of lawyers by nearly 20 percent in 2002 and boosted its revenues by nearly 18 percent, topping the list at $906 million. Gibson, Dunn & Crutcher grew revenues 6 percent and profits 7 percent, while O’Melveny & Myers topped the $1 million mark in profits per partner for the first time. In the Bay Area, Orrick, Herrington & Sutcliffe saw profits per partner jump 14 percent, to $875,000 — the highest in Northern California. Other old-line San Francisco firms that saw profit growth included Heller Ehrman White & McAuliffe, which had a 10 percent increase in profits per partner; Pillsbury Winthrop, up 6.8 percent; and Morrison & Foerster, up 3.7 percent. While Cooley Godward’s revenues dropped 15 percent in 2002, unlike other tech firms, it nudged up its profits by 2.8 percent. The news wasn’t all bad for Northern California players. San Francisco’s Sedgwick, Detert, Moran & Arnold, which has been trying to shed its emphasis on low-margin insurance work, saw a 24 percent jump in revenue. Howard, Rice, Nemerovski, Canady, Falk & Rabkin rode PG&E bankruptcy work, among other things, to a huge year in 2002. In Southern California, L.A.’s litigation-heavy Munger, Tolles & Olson bumped its revenue by 19 percent. Irell & Manella, which is about half litigation, also moved up, with a 14 percent increase, and Manatt, Phelps & Phillips continued to show steady growth. All of the financial information on the accompanying chart was reported by Recorder staff. We have included revenues and profits for 30 firms; revenues only for the other 10. We have surveyed only California-based firms that number more than 100 lawyers — there may well be a few mid-size firms that have taken in more revenue than No. 40 on our list. In the vast majority of cases, firm management has provided us with the financial information reported here. In a few cases we have constructed informed estimates. It is our policy not to identify the firms that refuse to cooperate. Having seen in recent years the kind of manipulation that goes on with publicly traded companies, we are not blind to the possibility that some law firms — which after all are privately held and not subject to SEC sanctions — might be goosing their numbers. We have to the extent possible checked and double-checked the numbers with current and former partners, industry experts and others in a position to know. The head count, revenue and profit numbers are all as of Aug. 31, 2002. The print version of the California 40, distributed toRecorder readers Aug. 11, includes snapshots of all 40 firms, with data onlateral partners, associate salaries and diversity, as available. To ordera copy of the print version, call 800-587-9288 or click here to order online.

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