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Last year was a good year for California law firms, though efficiency may be peaking for some top performers. Most firms with large California presences reported double-digit growth in revenue. Profits per equity partner also soared, with several firms hitting the million-dollar mark for the first time and others edging toward $2 million. But revenue per lawyer was more sluggish, especially at leading firms already in the sky-high, million-dollar range � because, some say, top law firms can’t squeeze much more work out of their attorneys. “[High RPL] means that they’re working hard and they’re getting their rates � that’s the only way you get there,” said Ronald Beard, a law firm consultant with the Newport Beach-based Zeughauser Group. “There’s a limit to how much you can keep pushing hours, rates and realizations.” Gibson, Dunn & Crutcher, which topped this year’s RPL list at $1.05 million, saw an 8 percent jump in revenue but just a 4 percent gain in RPL. It was a similar story for revenue leader Latham & Watkins, which reported a 15 percent increase in revenue, but just a 5 percent bump in RPL, bringing it up to $920,000. Smaller specialty shops, like Quinn Emanuel Urquhart & Hedges, Irell & Manella and Munger, Tolles & Olson, produced the most enviable results, with all three firms pushing RPL over the $1 million mark. Firms with lower RPL saw bigger jumps than firms at the top of the chart. DLA Piper, Morgan, Lewis & Bockius and Pillsbury Winthrop Shaw Pittman all saw double-digit gains in RPL, which had been below the $700,000 mark in 2005. Industry insiders say that’s because there was still room to grow. “If you look at the top firms, that tells you what’s possible, and as the next tier of firms improves its performances, it would be natural to see larger progressions toward that optimum performance,” said Richard Gary, a law firm consultant with Bay Area-based Gary Advisors. Most firms in the Cal Law 25 saw outsized increases in profits per partner, reflecting continued reluctance to add equity partners to the ranks. A few firms shed equity partners, and most added nonequity partners at a far faster clip. The overall economic success of 2006 was driven by a strong year for both corporate lawyers and litigators. On the corporate side, a hot M&A market provided a steady flow of billion-dollar deals. On the litigation side, IP lawyers continued their hot streak, and securities lawyers got a boost from the backdating scandals. High revenues were also aided by the ongoing growth in headcount at several firms, which continued to focus their expansionist ambitions in two places: New York and overseas. Two large mergers were completed late in the year, combining large California and New York firms (though they were not completed in time for the combined results to factor into this survey). Several firms also opened new offices in China and Europe. Orrick opened two new offices in China and doubled the size of its Paris office, helping to increase the firm’s headcount by more than 100. Thelen Reid Brown Raysman & Steiner opened new offices in China and, at the end of the year, in London. “Having a strong New York and international strategy is very important,” said Bradford Hildebrandt, a law firm consultant with Hildebrandt International. “New York is the largest legal center in the world, and London is probably the second most important financial center.” He added that the international market as a whole is “important because so many businesses have a huge part of their business outside the country.” LATHAM & WATKINS Latham & Watkins’ No. 1 spot is the result of another healthy year firmwide, said Scott Haber, the firm’s managing partner in San Francisco. “We had a very strong year across the whole network of offices, with robust M&A and capital markets,” he said. “M&A work was busier globally, and we were right there along with that trend.” Latham’s European and Asian offices were busier this year, with stronger performance in recently added offices such as Shanghai and Munich. In 2006, the firm furthered that international expansion by opening offices in Madrid and Barcelona. In the United States, the firm’s M&A group was busy with numerous billion-dollar deals: the $27.8 billion sale of Harrah’s Entertainment; representing AMD in its $5.4 billion acquisition of ATI Technologies; and representing Watson Pharmaceuticals in its purchase of Andrx Corp. for $1.9 billion. Big-ticket litigation cited by the firm included representing Tenet Healthcare Corp. in the long-running criminal and civil cases. Latham also won a significant sports-antitrust appeal in August when the Eleventh Circuit ruled in favor of Leonard Green & Partners and its affiliate in a case that strengthened antitrust immunity for the organizer of Olympic-level competitions.

With this issue, The Recorder inaugurates the Cal Law 25, ranking by gross revenue the top California-based firms and firms based elsewhere but having at least 20 percent of their attorneys � numbering 150 or more � here.

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