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The Legal Intelligencer Duane Morris was looking and thinking nationally in 2007 with a strategy that focused less locally and more on high-end markets. And firm leaders feel its most recent profits per equity partner figure proves the strategy is working. The firm’s gross revenue grew by 11.4 percent from $336.6 million in 2006 to $375 million in 2007. Revenue per lawyer (RPL) increased by 7 percent from $600,000 to $642,000. The average compensation per all partners grew by 6.2 percent from $501,000 to $532,000. Firm Chairman John Soroko said he is proud of reaching what he considers an important benchmark in the profits per equity partner (PPP) metric. The figure grew by 9.9 percent from $728,000 in 2006 to $800,000 in 2007. That number, he pointed out, puts the firm in a slightly different tier than several other similar-sized firms in Philadelphia. Soroko said lateral recruits are looking at that number more and more, likening it to a law firm stock price. While stock prices don’t tell someone everything they’d need to know about a company, he said they are a good indicator. According to Chairman Emeritus Sheldon Bonovitz, 27 percent of the firm’s revenue in 2007 was inter-practice generated and 20 percent was inter-office generated. Bonovitz handed over the reins of the firm to Soroko in early 2008 after 10 years of leadership. Bonovitz had said a few years ago that he’d like to be closing in on 1,000 lawyers within the next few years and said last year that the firm would be close to 700 attorneys by the end of 2007. While the headcount grew by about 4 percent to 584 full-time equivalent attorneys for 2007, Soroko said Duane Morris currently has between 660 and 670 attorneys. The equity tier decreased by about 3.9 percent from 128 equity partners in 2006 to 123 in 2007. The non-equity tier jumped by 22.3 percent from 157 non-equity partners to 192 in 2007. Bonovitz said there were no de-equitizations and Soroko pointed out that most firms of Duane Morris’ size and scope have about 20 to 22 percent of their attorneys in the equity tier. Bonovitz said he would be concerned if that number went below 15 percent or even 20 percent. Duane Morris currently has 21 percent of its attorneys in the equity tier. The firm did a lot of lateral recruiting in 2007 and those recruits are generally brought in at the non-equity level, he said. There is no difference, he said, between equity and non-equity partners except for compensation, which works on an open system. Soroko said some non-equity partners have higher compensation than certain equity partners. The firm’s growth has been focused in higher-rate markets such as New York, Chicago, Boston and Washington, D.C., while it was a bit slower in Philadelphia. While Bonovitz said the firm didn’t make a point to slow growth in Philadelphia, the firm is looking at laterals with big books of business and they tend to be in those other markets. “Those people are not in Salt Lake or Denver,” he said. Soroko pointed out, however, that the firm strives to have each office on equal footing. Duane Morris is a national firm that happens to be headquartered in Philadelphia, he said. Not hitting the 1,000-lawyer mark wasn’t for a lack of trying. Bonovitz said the firm has been in talks with a few groups of 30 or more lawyers. He said they came close with a few groups that would have made a “dramatic” difference on the headcount. Duane Morris is currently talking to a 25-lawyer practice, he said. Lateral recruiting and merger efforts will be ramped up at the firm in 2008, and Bonovitz said he would be open to merging with a firm that would have to be smaller than Duane Morris but could be around 300 or 400 lawyers. “The time to capitalize on recruiting and merger partners is when you feel solid and confident and other firms are a little more cautious,” he said, calling the strategy counterintuitive. Duane Morris has been hiring corporate associates, for example, that other firms have been letting go. Bonovitz said it’s a great time to amass top talent. The firm feels confident in its position going into 2008 because of what Soroko and Bonovitz said was its strong diversification of practice areas. “I think we’ve got the diversification of our practice that will see us through tough times,” Soroko said. Bonovitz said he was “pleasantly surprised” that the corporate practice is as active as it was in 2007. In talking to the firm’s private equity fund clients, he said it seems as though the middle-market funds were flat in the first quarter, which is par for the course. It is the very large funds that are “way down,” he said, but Duane Morris represents more of the middle-market funds. The firm does represent a lot of real estate developers and that practice is a “little on the downside,” but the bankruptcy group is picking up and litigation is steady, Bonovitz said. He pointed to the firm’s employment law and construction litigation practices as two areas it has bolstered as other firms look to scale back those practices. He said they are now much busier for the firm. Duane Morris’ intellectual property filings and patent prosecutions are also very high, Soroko said. He said the practice, which is the third largest in the firm, had a strong year in 2007. The firm’s Washington, D.C., office also had its strongest year to date in 2007, contributing to the firm’s overall growth in gross revenue. There was not a substantial boost in 2007 in the firm’s revenue from its contingent fee program. Duane Morris spent the last three to four years investing in that work and anticipates seeing the payoff in 2008 and 2009, Bonovitz said. He said it’s a trend within large firms to take on more contingent fee cases. Duane Morris’ program devotes 4 percent of the firm’s billable time to contingent fee work. For the firm’s expected $450 million in total recorded time for 2008, Bonovitz said that would mean about $18 to $20 million in time spent on those matters. The firm will only take large commercial cases with a minimum fee of $1 million. There must be a 75 percent probability of success as determined by the firm’s attorneys and contingent fee committee, and an opportunity to get three times the firm’s recorded time. Seasoned attorneys within the firm, generally in the trial practice group, review the cases and make a proposal to the committee, which then decides whether to take the case. The lawyers working on the case get paid at their normal rate, so there is no bonus at the end if the case is won, Bonovitz said. He said the program is consistent with the firm’s entrepreneurial spirit and helps fill any gaps in the trial practice that can see peaks and troughs. Both Soroko and Bonovitz said the firm was no more conservative in its budgeting for 2008 than in prior years. Soroko said they didn’t build in any “bogey factor” because of the economy, but just anticipate having to work a little bit harder to meet its mark. Bonovitz said that as far as he knows, the firm has never missed a budget. Duane Morris will look to continued growth in 2008 in terms of both revenue and headcount. Soroko said any merger opportunities would probably come in markets where the firm already has offices, such as New York, Washington or on the West Coast. Bonovitz said the firm has to have a greater presence in Asia aside from its Vietnam and Singapore offices. He said there are a lot of synergies between legal work in Asia and the firm’s intellectual property and energy practices. Duane Morris brought on a group of attorneys in New York in 2007 that focus a part of their practice in South America, particularly Brazil. Bonovitz said the firm would more likely open an office in South America than in a more mature market like Germany. There’s an even greater need to look into international expansion now that the dollar is weak, he said.

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