X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Benjamin Fox was in the right place at the right time. In law school at the University of Virginia in the late 1990s, Fox says, a trip to his mailbox yielded more than the usual mix of bills and junk mail. “You were continually getting letters telling you that you’d gotten a raise, which was perplexing in that you hadn’t done any work, other than going to Veni Vidi Vici,” says the veteran of summer programs at Atlanta-based King & Spalding and Washington, D.C.-based Sutherland Asbill & Brennan. Now a month into his job as a first-year associate at Atlanta’s Bondurant, Mixson & Elmore, Fox says he’s spent three years watching pay at firms where he’s worked rise from $68,000 to more than $100,000. Base starting pay at Bondurant is $102,500. And Fox isn’t complaining: “I love my job.” Fox’s entry into law firm life came at a juncture when, depending on your perspective, the threat or promise of associate raises had Atlanta in an uproar. Associates all but picketed. Consultants warned. Clients grumbled. Partners bucked, then paid up. And as pay rose at firms around the city, so, too, did the number of dire predictions. Partner profits would tumble under the weight of the pay increases. Firms would collapse. Firm culture would be trampled by stampeding billable hour requirements, and associates would be worked to death. Rates would skyrocket. Small firms and public service groups would be unable to recruit new lawyers. And what’s happened so far, a few months into the big raise of ’00? Not much, say 36 partners, associates, government and public interest lawyers around Georgia. Yet. DOING THE MATH A little math shows that the gloom-and- doom predictions this spring were more than much ado about nothing. They were much ado about a lot of money. At Powell, Goldstein, Frazer & Murphy, for example, the raises will cost around $3 million, says David G. Ross, managing partner for professional development. At Sutherland Asbill & Brennan, raises will cost about $2.2 million, according to Managing Partner James L. Henderson III. Though he says it’s too early to predict impact on partner pay, a cut is “always possible,” he acknowledges. Nineteen other leaders at firms around Georgia also say it’s too early to gauge how the raises will affect profits. Firms collect much of their income at year-end, and those receipts haven’t yet arrived. One thing’s for sure. It will be expensive. Robert E. Saudek, Morris, Manning & Martin’s managing partner, estimates the 12-month tab at his firm between $1.8 million and $2 million. At Holland & Knight’s Atlanta office, the cost is about $1 million, says A. Summey Orr III, the office’s managing partner. Thanks to a series of pay hikes earlier this year, he says, “at one point in February our associate salaries were increasing at a rate of $1,600 per day. … We haven’t raised salaries in almost four months. I’m starting to feel like a miser hanging onto all these bags of money.” Joking aside, he says Holland & Knight’s firmwide 2000 budget was constructed in anticipation of escalating pay. “We expect that notwithstanding associate raises, we will be able to increase partner profits this year.” WAIT AND SEE Arnall Golden & Gregory’s managing partner, William H. Kitchens, pegs raises at his firm at more than $1 million. “We’re having a good, solid year. I’m optimistic, but it’s a big number. We’ll just have to see,” he says of the raises’ possible effect on partner pay. Smaller firms are paying up, too. At labor and employment boutique Ford & Harrison, raises at the firm’s offices in four states and the District of Columbia cost roughly $750,000, according to principal C. Lash Harrison. He says the firm has been able to keep its profit per partner headed up, but adds, “Obviously, it can’t go on forever. We can continue to move forward because of increased productivity, but there’s a limit to that.” At intellectual property boutique Thomas, Kayden, Horstemeyer & Risley, combined salary increases total about $600,000, according to partner Jeffrey R. Kuester. “Will we make less than we made last year as partners?” he asks. “I hope not. But we don’t know that. I think early estimates are that we will do as well as we did last year, but a lot can change in four months.” Needle & Rosenberg, another intellectual property boutique, will pay out approximately $400,000 extra, says principal William H. Needle. And at Bondurant Mixson, hiring partner Michael B. Terry estimates raises at $250,000. “I doubt that it will cause partner profits to go down,” he says, “but there will be less of an increase.” Greg M. Nitzkowski, the Los Angeles-based firmwide managing partner of Paul, Hastings, Janofsky & Walker, readily acknowledges that raises are expensive. “Sure, I’d love to pay associates a nickel an hour,” he says. “But they’re worth a lot more than that and they make extraordinary contributions to the firm.” Nearly 400 of his firm’s 749 attorneys are associates. They’re spread between four states, the District of Columbia and two foreign countries, all areas with different pay structures. In Atlanta, salaries rose from a base pay of $77,000 at this time last year to $100,000 with a $7,000 signing bonus now. According to information provided this year by the firm’s New York-based chairman Seth Zachary, associates in years two through 10 got raises averaging almost $30,000 in Atlanta. But even with raises here and in the firm’s other offices, says Nitzkowski, profits won’t slip or stagnate this year. Other firms that are less financially secure, he says, may feel the pinch. For Paul Hastings, that’s the silver lining, because business and legal talent will be up for grabs as firms go under or suffer attrition. Analogizing like a good Californian, Nitzkowski says, “It’s yin and yang.” According to one lawyer, anyway, the Atlanta raises are mostly yin — which Chinese philosophy defines as a passive, dark, negative force. That lawyer, Michael H. Trotter, a Kilpatrick Stockton partner and author of the book “Profit and the Practice of Law,” made some predictions during the height of the associate pay raise announcements. His thesis: The raises might mean the end for some historically important, large Atlanta law firms because the extra expense would cut so deeply into partner profits. Three of the city’s top firms — Troutman Sanders, Long Aldridge & Norman and Trotter’s own firm, Kilpatrick Stockton — already had lower partner profits at the end of the 1990s than a decade earlier, when adjusted for inflation, he wrote. 67 PERCENT JUMP SINCE ’90 By contrast, starting associate salaries at Atlanta firms in 1990 were about $60,000; now the going rate is $100,000. That’s a 67 percent increase during a decade when inflation was about 31.6 percent. In other words, the associate was rising at the expense of the equity holder. “It’s too early to send condolence cards,” Trotter wrote, “but you might want to lay in a supply.” Even six months into the raises, there’s no use for those cards at the big firms. Yet. Two ways to keep condolences in the box are raising billing rates and working associates harder. Many firms raise the rates they charge their clients each January. Because of the timing of the associate raises — rumblings began here in February, and raises began taking effect in the spring — some firms got stuck with higher associate overhead and no graceful way to pass costs along to clients until 2001. Only a few firms — Rogers & Hardin, Arnall Golden & Gregory and Gardner & Groff — said circumstances such as lucky timing or learning that their rates were below market value allowed them to charge clients more even after the associate pay raises. Sutherland Asbill’s Henderson says his firm has been phasing in rate increases this year, and doesn’t expect a larger-than-usual jump in 2001. BIGGER BILLS ARE ON THE WAY Like most firms surveyed, Thomas, Kayden didn’t raise billing rates in response to associate pay increases. But, says partner Kuester, it will. The firm is researching how much it should charge, and Kuester estimates it may be $30 to $40 an hour more. Even so, he says, the new rate structure won’t pay for all the costs of the raises. Kuester says he hopes increased associate billing will do that. So far, he says, associates are billing more in response to what he calls the “olive branch” of higher pay and a better bonus system. Powell Goldstein’s Ross says he, too, has seen an increase in productivity among young lawyers. “I get the sense … that it was kind of sobering for the young associates. This big salary increase, that, hey, they [partners] may expect something in return. They’re taking it very seriously.” Partners and associates at four other firms say hours are up, too, but only one attributed the increase in hours to pay increases. The others said there was simply more work to be done. But partners and associates at 10 other firms ranging in size from about 20 lawyers to more than 1,000 say they haven’t seen any noticeable increase in hours billed or worked. Suzanne Gentes is director of professional recruitment and development at Finnegan, Henderson, Farabow, Garrett & Dunner, the Washington-based intellectual property boutique whose $125,000 pay for new lawyers in Atlanta tops the Daily Report’s charts. The firm hasn’t raised its target billable hours from the 2,000 it expected before the raises, she says. “Most people are right at the target number. I know there’s a sense that we say this but it’s not real.” It is real, she insists, adding that associates have had billables of 165 hours a month for the past 12 months, with no post-raise spike. Even at Jones, Day, Reavis & Pogue, which increased its starting package from $88,000 to $114,000 and gave raises to associates up the line, there’s been no increase in hours, says one associate who asked not to be named. All the raises mean, the associate says, is “More money.” If there’s been any pressure at all to increase billables, the associate adds, “I haven’t seen it. Nobody has mentioned anything to me.” Yet.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.