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The last year of the 20th century will go down as a banner year for Washington-area law firms, with the strong economy fueling record-breaking revenues and profits. Indeed, 2000 introduced a completely new phrase into law firm lexicon as firms from both coasts claimed to be “turning away business” in a robust market where demand for legal services exceeded firms’ capacity to provide them. Growth in the region’s high-tech sector particularly benefited those area firms with strong IP and corporate practices, such as D.C.’s Hogan & Hartson; Dow, Lohnes & Albertson; and Shaw Pittman. More traditional Washington firms — Arnold & Porter; Wilmer, Cutler & Pickering; and Covington & Burling among them — saw antitrust practices flourish with corporate mergers facing close scrutiny at home and abroad. But for some area partners eyeing their pocketbooks, 2000 may also be remembered for what might have been. Unexpected increases in associate salaries cut into projected profits; fledgling venture capital funds failed to take off; and looking at the stock market’s recent drops, it’s hard not to wonder whether the galloping growth that area law firms have enjoyed for nearly 10 years may be over, or at least slowing down. “I think the economy is slowing and there are a number of firms that ought to be considering their survival strategies,” says law firm consultant Peter Zeughauser. “For a lot of firms that took a hit in their economics to keep up with associate salaries, that’s going to cause problems.” D.C.’s largest firms boosted associate pay approximately 25 percent in early 2000 as a response to similar moves made by firms in Silicon Valley and New York. In an attempt to recoup the higher cost of compensation, many local firms implemented more rigorous billable-hour requirements along with the new pay scales, demanding more work for salaries that now start at approximately $125,000. Other firms moved away from lock-step salaries altogether, adopting more individualized compensation schemes tied to performance or practice specialty. Over the long term, the increased expense of associate compensation is likely to affect the way firms hire lawyers and staff projects, says R. Bruce McLean, chairman of D.C.’s Akin, Gump, Strauss, Hauer & Feld. “It really isn’t just the money,” McLean says. “What went on with associate salaries has our firm thinking about how we deliver services and ways to improve our efficiency.” Rapid growth was another hallmark of 2000 for area law firms. Recently merged firms like Howrey Simon Arnold & White and Piper Marbury Rudnick & Wolfe focused on the integration necessary to take advantage of their new platforms. Meanwhile, other firms with an eye toward expansion took a more piecemeal approach, picking up small regional firms and hot boutiques. Shaw Pittman added more than 100 new lawyers through acquisitions in 2000, says managing partner Paul Mickey Jr. Most notably, the firm absorbed 35-attorney Fisher Wayland Cooper Leader & Zaragoza, a D.C.-based telecommunications boutique in February. Akin Gump surpassed 1,000 lawyers firmwide after a series of acquisitions, including the recent addition of 60 lawyers from Los Angeles’ Troop Steuber Pasich Reddick & Tobey. And Hogan & Hartson bolstered its New York office by adding Manhattan’s 40-lawyer Davis, Weber & Edwards. Conversely, lawyers at smaller and midsize firms faced difficult decisions about their future in a market dominated by large firms with multiple offices. In a slowing economy, the pressures facing firms of less than 250 lawyers are likely to intensify, Zeughauser warns. “I think we’ll see the continued acceleration of firms folding,” he says. “Firms in that middle range relying on work that is not truly high-end are a dying breed.”

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