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Who needs Regis Philbin, anyway? At least that’s what they must be saying at many D.C.-area law firms these days. To no one’s great surprise, the top firms in the region got bigger and richer last year. In some cases, a whole lot richer. The most extreme example is the D.C. office of New York’s Skadden, Arps, Slate, Meagher & Flom, where per-partner profits soared to $1.4 million from $1 million in 1998. Kind of makes the grand prize on “Who Wants to Be a Millionaire?” look like chump change, especially after taxes. Seventeen of the 20 top-grossing firms in the D.C. metropolitan area had profits per partner of at least $500,000 last year. And, as one big-firm partner noted, that’s the take for the average partner. In 1998, only nine firms registered that kind of profit; in 1990, only three firms, Skadden among them, could offer their partners that kind of wealth. With one exception, the firms included in Legal Times‘ annual survey of revenues and profits at the D.C.-region’s 20 highest-grossing firms are the same as last year. And that exception — the dropping of D.C.’s McKenna & Cuneo from the list — is due to a change this year in how Washington-area revenues and profits were calculated. McKenna & Cuneo, though based in the District, derives nearly half of its revenue from offices in California, Colorado, and elsewhere. Only the billings within the D.C. metropolitan area were counted for purposes of this year’s D.C. 20. In fact, the Top 20 list is little changed from 1990, despite the passage of 10 years and the change in methodology. Only four firms from 1990 are not on this year’s list, and only one from the Top 10 in 1990 is not on it today: D.C.’s Dow, Lohnes & Albertson. Replacing McKenna is the D.C. office of Cleveland-based Jones, Day, Reavis & Pogue, at No. 19 with revenue of $89 million and profits per partner of $725,000. Jones, Day has been among the top 20 in past years. In fact, five of the top 20 firms hail from other cities: New York’s Skadden (3); Dallas’ Akin, Gump, Strauss, Hauer & Feld (5); Philadelphia’s Morgan, Lewis & Bockius (8); Chicago’s McDermott, Will & Emery (11); and Jones, Day (19). PREMERGER FILINGS To the chagrin of several firms, much of last year’s merger mania is not reflected in this year’s survey results because the mergers occurred after the survey deadline. For example, Howrey & Simon announced its merger last year with Houston-based patent firm Arnold, White & Durkee. But the 78 Arnold, White lawyers didn’t officially come onboard until this February. As a result of that merger, plus the addition in April of a 25-member antitrust group from D.C.’s Collier, Shannon, Rill & Scott, Howrey estimates that this year’s revenue in the Washington market will be about $155 million, a figure that would have ranked the firm third in this year’s survey, ahead of Skadden. For 1999, Howrey ranks sixth in the market, with revenue of $139 million in the Washington, D.C., area, and profits per partner of $576,000. “Last year was sort of a transition year for us,” says Howrey’s new managing partner, Robert Ruyak. “We were doing a lot of strategic planning.” The firm also opened an office in San Diego, Calif., now staffed with seven lawyers. Two other firms that completed mergers last year, but too late for inclusion in the survey, were Baltimore competitors Piper & Marbury and Venable. Piper combined with Chicago’s Rudnick & Wolfe. In 1998, the two firms pulled in a combined $240.5 million nationwide. Venable merged with D.C.’s Tucker Flyer and calculated that combined revenues in the Washington market would have been $83 million last year, just $5 million shy of the cutoff. PROFITS LAG BEHIND REVENUES Twentieth-ranked Swidler Berlin Shereff Friedman reported $88 million in Washington revenue last year. While Swidler’s revenue nationwide was up 8 percent last year, its profits per partner were flat, a phenomenon experienced by several firms, including Shaw Pittman and Crowell & Moring. In Swidler’s case, there was no hardship involved. Despite being last in revenue, Swidler ranked second in profits per partner at $800,000, behind Skadden and just ahead of the D.C. office of McDermott, Will, which tallied $765,000 profits per partner. Swidler’s managing partner, Barry Direnfeld, attributed the flat profits to several one-time expenses, among them integration costs associated with the 1998 merger with New York’s 80-lawyer Shereff, Friedman, Hoffman & Goodman. The firm also moved into new offices in New York, which required a major build-out, installed a new accounting package, and added new software. The merger “is going to be fabulous, but there were costs,” Direnfeld says. “Having said that, we are operating at a very high level of profitability. It requires a lot of effort to maintain that level. Frankly, we think we’ve had a great year.” It also didn’t hurt Swidler to have had rainmaker Richard Fields on board for almost the whole year. Fields, whose insurance coverage group reportedly generated $50 million in billings, left in December to launch an Internet start-up. Shaw Pittman also cited expansion costs as the primary reason for its relatively flat profits per partner last year. Even though the firm’s national revenue was up nearly 15 percent, from $110 million in 1998 to $126 million last year, profits were up just 2 percent, to $515,000 per partner. Akin, Gump also showed a gap between revenue — up nearly 17 percent in the Washington area — and partner profits, which were up about 8 percent. The firm had several big expenses last year, according to chairman R. Bruce McLean. For example, the firm added 14 lawyers here, renovated its offices in Dupont Circle, and expanded into all 12 floors of the building. It also installed a new Windows NT computer system. “We had a good, strong increase in D.C.,” McLean says, although the firm’s revenue nationwide grew by 20 percent, outpacing the D.C. office. In the Washington region, Shaw Pittman reported $117 million in revenues, ranking it 10th in the D.C. 20. “Last year was a year of major investments associated with our expansion,” explains Shaw Pittman’s chairman, Paul Mickey Jr. “We were making substantial investments in growth that have taken us in not much over a year from 300 lawyers to 400 lawyers.” In addition, the firm has opened two offices in the last two years in New York and Los Angeles, Mickey notes. Among the practice groups that joined Shaw Pittman last year were an insurance coverage group from D.C.’s Wiley, Rein & Fielding and a group specializing in nonprofit associations from the D.C. office of Chicago’s Jenner & Block. Early this year, a group of 35 communications lawyers joined the firm from Fisher Wayland Cooper Leader & Zaragoza, along with 11 patent lawyers from D.C.’s Crowell & Moring. “By and large, we are not [yet] realizing any of the new revenue. We are bringing in people without pipelines for the most part,” Mickey says. Three firms saw a drop in partner profits last year, at least partly attributable to adding more partners. Williams & Connolly’s partner profits were down 8 percent to $629,000, although revenue rose by 8 percent to $117.5 million. The firm, which added seven partners between 1998 and 1999, declined to comment. Similarly, McDermott, Will had a 10 percent increase in revenue generated within the D.C. metropolitan area, but nearly a 6 percent drop in per-partner profits to $765,000. Part of the explanation may lie in the firm’s addition of 11 partners in Washington between 1998 and 1999. “We had a terrific year,” says Timothy Waters, partner in charge of the D.C. office. “We committed to substantial expansion of our intellectual property practice several years ago, and that has been an important contributor to growth.” Waters adds that the firm’s antitrust and litigation groups were also busy last year. D.C.’s Arent Fox Kintner Plotkin & Kahn reported the lowest per-partner profits of the Top 20 — $350,000 — down $5,000 from the year before. In 1998, Arent Fox was the second lowest in partner profits after McKenna & Cuneo. Arent Fox’s national revenue was up nearly 7 percent last year to $98 million. In Washington, its revenue was $93 million, placing it 15th among the top 20 firms. Arent Fox blamed its profit dent on expansion. “We added a lot of lateral partners in the final months of last year, where the costs are all upfront and the revenues are all later on,” says Christopher Smith, managing attorney of Arent Fox. Last year, Arent Fox absorbed 15-lawyer D.C. patent firm Nikaido, Marmelstein, Murray & Oram and a six-lawyer trade group from D.C.’s Howrey & Simon. It also added lawyers to its New York office and began paying additional rent because it expanded its D.C. offices. “There is no question there will be a big jump in revenues and profits this year,” Smith says. “Our strategic plan is working very well.” Revenue at D.C.’s Crowell & Moring was up less than 2 percent, the smallest increase among the Top 20. Crowell ranked 15th with D.C.-area revenues of $93 million last year. Profits per partner were unchanged at $500,000. The firm’s managing partner, Herbert Martin, declined to comment. TOP THREE: A VERY STRONG YEAR At the firms with knock-out results last year, partners were hard-pressed, or perhaps reticent, to point to specific reasons for the stellar numbers. Three firms stand out: Skadden; D.C.’s Patton Boggs; and D.C.’s Finnegan, Henderson, Farabow, Garrett & Dunner. Skadden was up 40 percent in both revenue and profits generated in its Washington office. The firm ranked third in the D.C. 20, with $150 million in revenues. In addition to being first in partner profits, Skadden also tops the list in revenue per lawyer at $780,000. Office leader Michael Rogan said that antitrust and tax were among the busiest areas, with cases generated locally as well as by Skadden’s enormous New York-based mergers and acquisitions practice. The firm’s D.C.-based tax and antitrust lawyers worked on several high-profile mergers last year, including the $24 billion merger between Lucent Technologies Inc. and Ascend Communications Inc. The office also did the antitrust work for Honeywell Inc. in its $50 billion merger with AlliedSignal Inc. “The antitrust department is [working] flat-out,” Rogan says. “We have also grown a lot, and we are actively trying to recruit laterals.” Skadden had 192 lawyers, including 49 partners, in its D.C. office last year, up from 164 lawyers, including 43 partners, in 1998. Patton Boggs managing partner Stuart Pape partly credited the firm’s 25 percent growth in national revenue and 28 percent rise in partner profits to a very strong year in litigation and transactions. Patton ranked 17th in the D.C. 20, with $92 million in revenues here. The firm boosted its partner profits to $520,000 from $405,000. Also adding to last year’s coffers were a couple of big wins in cases involving premium billing. Pape declined to identify the clients. “We have had considerable growth over the last couple of years, and we are seeing the benefit of that across all practice areas,” Pape says. He notes that Patton Boggs has nearly doubled in size since 1990, when it had 160 lawyers, compared with today’s roster of 299. The firm grew by 25 lawyers, or 10 percent, between 1998 and 1999. D.C. patent firm Finnegan, Henderson also added about 10 percent to its ranks, growing from 187 lawyers in 1998 to 208 last year. The firm’s overall revenue was up 26 percent, and it ranked 14th among the Top 20 with $95 million in revenue in the Washington market. Finnegan’s partner profits rose 22 percent to $550,000. Chairman Thomas Jenkins attributed the gains to growth in size and to being in the right practice at the right time. “It’s a good time to be an intellectual property lawyer,” says Jenkins, whose firm handles patent litigation all over the country for such clients as the Sony Corp., the Hewlett-Packard Co., and SmithKline Beecham. “It just seems that the whole intellectual property practice — whether it’s patents, trademarks, copyrights, prosecution, client counseling, or litigation — is all very busy.”

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