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The fraying economy is starting to take a toll on even the hardiest law offices, forcing high-profile firms to take the drastic step of laying off associates and prompting others to scale back on hiring. But these fissures are hardly discernible in this year’s rankings of the 100 largest law offices in the Washington, D.C., metropolitan area. The majority of top firms are bigger than they were a year ago, and the biggest of them expect to hire nearly as many new associates this year as they did last. Measured in April, the Legal Times 100 survey reflects steady growth over the previous year, especially at the biggest firms. Among the top 10, the most spectacular growth was at D.C.’s Wilmer, Cutler & Pickering — up 20.1 percent — and at D.C.’s Arnold & Porter — up 19.4 percent. Nonetheless, the shift in the economy suggests that firm managers are beginning to look at hiring and retention strategies much differently than they have in the last few years. “I used to be worried that every associate was going to walk out the door to a dot-com,” says Hogan chairman J. Warren Gorrell Jr. “Now people are happy to be in a law firm that’s doing well.” Only two firms among the top 25 showed negative growth in their Washington offices. In the case of D.C.’s Shaw Pittman, intellectual property and other lawyers transferring to the firm’s McLean, Va., office caused the drop. The move helped boost McLean by nearly 40 lawyers, making it the single largest law office in Northern Virginia and pushing it up the ranks to 41st place from 79th last year. But the transfer cut Shaw Pittman’s Washington ranks by about two dozen lawyers and pushed the firm down to eighth place from fifth last year. The other decline, reported by D.C.’s Crowell & Moring, is attributable to partner defections that dropped the firm to 14th place from 11th a year ago, and also knocked Crowell out of its long-held place among the area’s top 20 revenue producers. Crowell has since replenished its ranks and expects to regain its revenue ranking next year, according to managing partner John Macleod. Morgan, Lewis & Bockius, which ranked fourth and grew its 300-lawyer D.C. office by 31, recently announced that it is laying off 15 D.C. associates. Michael Kelly, managing partner of the D.C. office, says that a decision on next year’s new associate hires will be made later in the year. Similarly, in August, Palo Alto, Calif.’s Cooley Godward laid off about a dozen associates in its Reston, Va., office after a rapid expansion: The firm had added 31 lawyers since April 2000. The hiring pushed the firm up to 49th place from 83rd the previous year and to the top of the Northern Virginia list along with Shaw Pittman. One firm disappeared from the ranks altogether. D.C.’s Wilkes Artis, a zoning and land use firm that ranked 60th last year with 68 lawyers, unraveled over a seven-month period starting in August 2000. Today it has just eight lawyers. Beneficiaries of Wilkes Artis’ defections include Holland & Knight, which took in 17 lawyers from the firm, contributing to a 15.8 percent increase in Holland & Knight’s Washington ranks. Other offices that grew by merger over the last year include Chicago’s Sidley Austin Brown & Wood, which grew 23.4 percent by combining the Washington office of Sidley with that of New York’s Brown & Wood. On its own, Sidley ranked 28th last year; the combined office ranks 25th. Houston’s Baker Botts absorbed D.C.’s litigation boutique Miller, Cassidy, Larocca & Lewin and grew by nearly 30 lawyers, pushing Baker up to 44th place from 72nd. Milwaukee’s Foley & Lardner grew by half after merging on Feb. 1 with Chicago’s Hopkins & Sutter, which added 25 lawyers to the Washington office, and D.C.’s Freedman, Levy, Kroll & Simonds, which added 20 lawyers. Foley jumped to 28th place with 139 lawyers, up from 41st place and 92 lawyers last year. The growth at Arnold & Porter and Wilmer Cutler came from aggressive associate hiring plus some lateral pickups. Second-ranked Arnold & Porter continued to close in on D.C.’s Hogan & Hartson. Just a year ago, Hogan had 104 more lawyers than Arnold & Porter. This year Arnold & Porter halved that gap to 50 lawyers. The firm hired 68 new associates this year, about the same number it hired last year, says managing partner James Sandman. According to a Legal Times revenue study this spring, Arnold & Porter topped Hogan & Hartson in revenues last year, knocking the firm out of first place in the D.C. market, a spot Hogan had held for three years. Sandman says that Arnold & Porter has been busy in a number of its practice areas, but singles out the patent practice as particularly busy. The firm has added more than 20 patent lawyers over the last 18 months, plus about 10 lawyers to its intellectual property practice, Sandman says. “Many of our practice areas are reliably active throughout economic cycles,” Sandman says, pointing to litigation in particular. Nevertheless, Sandman expects the firm’s rapid growth to slow, and as a consequence it plans to cut new associate hiring back to 50 or 55 in 2002. “We expect net growth next year, but not at the same pace,” Sandman says. In addition, associate retention has risen with the tightening economy, prompting Sandman and other managing partners to factor in far less attrition when hiring. Hogan still expects to hire about 43 new associates this year, down from the 56 it hired last year. Next year’s hiring hasn’t been decided, Gorrell says. “Our growth has been pretty steady over the last five years,” Gorrell says, adding that he focuses more on overall growth than on the D.C. office. “Washington is still the heart of Hogan’s practice, but I wouldn’t be surprised if in a year or two, we have more lawyers outside of Washington than in Washington,” he says. Hogan has 840 lawyers firmwide. Wilmer Cutler, which added a staggering 88 new associates in 2000, is paring back its hiring this year to the mid-50s. The firm made a calculated decision to go after senior government lawyers leaving the Clinton administration and landed four of the top Justice Department attorneys, including former Solicitor General Seth Waxman. Wilmer also hired Charlene Barshefsky, the former U.S. trade representative, who was wooed by several firms. “They got great people,” says Steve Nelson, managing consultant for law and government affairs at the McCormick Group Inc. in Arlington, Va. “A lot of people wanted Charlene Barshefsky and Seth Waxman, but Wilmer made it work.” Wilmer reports strong growth across the board, especially in litigation and communications. “We are consciously trying to fill out various practice groups,” says Wilmer chairman William Perlstein. Yet Perlstein adds that there is “no question everybody is nervous” about how the souring economy will impact business. Associates are especially nervous, says recruiter Stuart TenHoor at D.C.’s TenHoor & Helffrich. “Right now, when firms do have real needs, it’s very tough to get quality associates because they don’t want to move, even if they’re not that happy,” he says. “We are all sort of in limbo right now.” Nelson agrees. “There is not much lateral hiring going on, and the credential bar has been raised,” he says, adding that “pockets of firms” are still hiring. One of those pockets is Venable. The firm grew 14.3 percent, partly by adding a dozen legislative and regulatory lawyers, some of them from D.C.’s O’Connor and Hannan. The firm is hiring about two dozen new associates this year — the same as last year — and anticipates hiring a similar number next year, according to a firm spokesman. The hirings have pushed Venable into 20th place this year, ahead of its longtime rival Piper Marbury Rudnick & Wolfe, which fell to 22nd place from 18th. Piper was among 25 firms that reported a nearly flat year, seeing a change of three percentage points or less from last year’s figures. In Piper’s case, the firm added two lawyers to its Washington office, for a growth rate of 1.1 percent. The small uptick in Piper’s Washington office is attributable in part to moving lawyers to the firm’s Reston outpost, says Jeffrey Liss, co-managing partner in the District. But most of it is due to cutbacks in new associate and lateral hiring. “With the economy in the situation it is, we saw there would likely be retrenchment, and we cut back,” Liss says. The firm cut last summer’s associate program almost in half, to about 50 associates from more than 90 the summer before. “We have also been very, very cautious with the hiring of laterals because we want to keep hiring out of school.” Echoing the sentiments of several managing partners, Liss says the firm was loath to damage its reputation at law schools by withdrawing offers or abruptly cutting off recruiting efforts. Liss says that Piper hired about 10 new associates in Washington this year, the same number it hired last year. Next year, he estimates, the firm will cut back to seven new hires. “Like everyone else, our business transactional practice has slowed down,” Liss says. At Sughrue, Mion, Zinn, Macpeak & Seas, a D.C.-based patent firm, the problem is not lack of work; it’s lack of associates. Down for the second year in a row despite having more business than it can handle, the firm finds it hard to compete for — and retain — the associates it wants. “We are all basically casting into the same fish tank of young attorneys right out of law school,” says managing partner Neil Siegel. “The work has not slacked off, and we are all very competitive salarywise,” he says. “The real challenge is to differentiate your firm culturally,” Siegel says. “You have to build associate loyalty because they are constantly being beseeched with offers from headhunters.” Two years ago, Sughrue was at its peak with 98 lawyers. This year, it was down 5.6 percent to 84 lawyers. “Certainly the work is there for 90 people and probably 100,” Siegel says. Yet the firm is not willing to compromise on its tradition of eschewing laterals in favor of hiring straight out of law school and training its associates. The competition comes from big general practice firms like Arnold & Porter as well as from other IP boutiques, Siegel says. Like Sughrue, patent boutiques generally showed lackluster growth in the last year. For example, Arlington’s Oblon, Spivak, McClelland, Maier & Neustadt, ranked 54th, was up two lawyers, or 2.7 percent. Alexandria, Va.’s Burns, Doane, Swecker & Mathis, ranked 56th, was flat at 76 lawyers this year and last. The exception was D.C.’s Finnegan, Henderson, Farabow, Garrett & Dunner, which was up 7.1 percent to 197 lawyers and ranked 18th. At that size, Finnegan dwarfs its peers and competes for business with firms such as Arnold & Porter. Joel Freed, head of intellectual property and technology litigation at Arnold & Porter, sees three basic factors fueling the growth of the big intellectual property practices at the expense of the small: dissatisfaction, opportunity, and the vulnerability of the smaller shops. He suggests that the pressure on firms like Sughrue is only going to intensify. “There is concern about whether the boutiques are going to be competitive,” says Freed, who moved to Arnold & Porter in January after holding the same job at D.C.’s Howrey & Simon. “I see lots of clients, especially clients like those at Arnold & Porter, who more and more want one-stop shopping.” To accommodate that demand, Freed estimates that Arnold & Porter will add one lawyer per month over the next 12 to 18 months to the firm’s intellectual property and patent practice, which now numbers more than 80 lawyers. “We are getting r�sum�s from everyone,” Freed says. “I want to concentrate on midlevel associates and lateral partners who are the right fit.” WILKES ARTIS: BREAKING AWAY Wilkes Artis celebrated its 75th anniversary this year, but there were barely enough lawyers left to blow out the candles. The real estate firm was one of the D.C. metropolitan area’s 100 biggest law offices last year, with 68 lawyers in six locations. Now it has eight partners in one office in downtown Washington. “If they had a ranking for smallest firms, we would make that,” says Stanley Fineman, attempting to inject some humor into what must have been a painful devolution. Fineman, a 25-year veteran of Wilkes Artis and now its president, attributes the firm’s unraveling to irreconcilable differences over how to position a midsize law firm for the future. “It was really philosophical,” Fineman says. “Some people felt the future lay with bigger firms. I respect their view, and they may be right. It is sort of a given these days that the firms that are going to survive are the biggest and the smallest, if the smallest have specialties,” he says. “There is a lot of pressure on the midsized firms, which is what we were.” Money was not the driving issue, says Fineman. “We were always economically viable. Even to the end we made money.” Wilkes Artis started coming apart in late summer 2000 when about a dozen lawyers left in two groups; one headed for D.C.’s Shaw Pittman, the other for the Washington office of Holland & Knight. Leading the Holland & Knight contingent was Whayne Quin, then-president of Wilkes Artis, who had spent his entire legal career at the firm. Through the fall of 2000 the remaining partners at Wilkes Artis explored merger possibilities with several firms, including Holland & Knight, but nothing gelled. Holland & Knight was one of a handful of firms that had started moving in on Wilkes Artis’ territory — notably, its specialty in District zoning and land use — as the real estate boom spawned lots of legal work in downtown Washington. “In January it looked like the mergers were not really proceeding, so folks went their own ways,” says former Wilkes partner Jonathan Rak, now a partner in the McLean office of Richmond, Va.’s McGuireWoods. Rak, who had been at Wilkes for three years before the split, says the breakup was not amicable, but it wasn’t hostile either. “I’ve read and heard of worse,” he says. For Fineman, it was a tremendous personal loss because some of his closest friends left for other firms. “I didn’t wish for this to happen,” he says. The tiny niche firm he now heads is very successfully handling property tax assessment and condemnation work. “At eight lawyers, we are one of the largest in the country” with that focus, says Fineman, whose former partners refer tax appeal work to him. “I refer clients to him all the time,” says Phil Feola, now a partner at Shaw Pittman. “Stanley Fineman has the pre-eminent real estate tax appeal practice in Washington, Maryland and Virginia,” says Feola, adding, “We didn’t run from Wilkes Artis as much as we ran to Shaw Pittman.” For Robert Harris, who had headed Wilkes Artis’ Bethesda, Md., office and now heads the Bethesda office of Holland & Knight, the decision to move was based on client needs. “I represent a lot of builders and developers, doing zoning and land use work for them. Wilkes Artis did not have a construction law practice, an employment law practice, or a leasing law practice, and my clients regularly use all of those services,” Harris says. “I think they did the right thing and we did the right thing.” Fineman, who refers zoning cases to both Shaw Pittman and Holland & Knight, says the disparate practice specialties that helped drive the firm apart now keep the former partners in touch. “We are on good terms because we don’t compete,” he says. – Claudia MacLachlan NORTHERN VIRGINIA: OUTSIDERS ON TOP One came from across the Potomac and two from across the country, but now Shaw Pittman, Cooley Godward, and Pillsbury Winthrop have the three largest law offices in Northern Virginia. The climb to the top has not been without obstacles. Shaw Pittman, which boosted its Reston office by 70.4 percent to 92 attorneys, and Cooley, which added more than 30 lawyers, originally bulked up to tap new clients in the once-booming technology and telecommunications sectors. But the economic downturn has stunted a lot of the business that originally attracted them. In fact, Palo Alto, Calif.-based Cooley shed a dozen lawyers in Northern Virginia in August, as it trimmed more than 80 attorneys firmwide. Today, diversification is on many managing partners’ minds, and having clients spread across a variety of industries has helped insulate some firms from the market shock. “We have a pretty good mix of so-called old-economy and so-called new-economy clients,” says McGuireWoods’ Michael Flemming, managing partner in the McLean office, which grew by seven lawyers since last year and still dropped from the third-largest office in Northern Virginia to sixth. “I think the wide range of clients that we service from this office accounts for the fact that we’ve been able to grow and weather the slowdown.” For both Shaw Pittman and Pillsbury, the growth in Northern Virginia came at the expense of their D.C. offices. Pillsbury, following its merger with Winthrop, Stimson, Putnam & Roberts, shipped its entire D.C.-based patent practice and the majority of its Washington lawyers to Tysons Corner. Shaw Pittman also moved its patent lawyers, as well as a few health and communications practitioners. Firmwide managing partner Paul Mickey Jr. expects that parts of other practices will follow “because their client relationships will be out there.” Flemming sees growth in the communications area as well. McGuireWoods attracted Arter & Hadden telecommunications partner James Troup and two associates to work out of the D.C. and McLean offices. “He has come in and hit the ground running,” says Flemming. “I wouldn’t be at all surprised if in the very near future we had to expand that practice.” But building up complementary practice groups does not indicate a retreat from new-economy clients and emerging companies. Cooley, while planning to expand from its original tech-heavy focus, expects to return to its pre-August numbers. And firms that grew substantially this year see long-term profitability in the Dulles corridor technology market. “What we think is going to happen is that over time this region will continue to expand as we come through this recession,” says Jonathan Aberman, partner in charge of Pillsbury Winthrop’s Reston office. “We think the long-term prospects in this region are tremendous.” Aberman is not alone. Several national firms have built respectable Northern Virginia offices of between 25 and 35 lawyers. Among them: Greenberg Traurig; Akin, Gump, Strauss, Hauer & Feld; Mintz, Levin, Cohn, Ferris, Glovsky and Popeo; and Kilpatrick Stockton. Aberman and Shaw Pittman’s Mickey recognize that the tech landscape is different from two years ago, but see it as no less promising. The venture capital stream is drying up, but mergers and acquisitions work is accelerating. “We have not seen a falloff in the emerging companies work,” says Mickey. “The character of the work has changed somewhat.” Aberman reports that several large companies that originally hired Pillsbury as IP counsel have begun using the office for corporate work. Intellectual property specialists are also handling an increased load of patent litigation. “In a recession, companies try to make more out of what they’ve got,” says Aberman. “One of the ways to do that is to protect IP rights.” Home to the U.S. Patent and Trademark Office, Northern Virginia was populated with patent boutiques long before national or even many Washington firms took notice. These home-grown IP firms have been insulated from the slump in the tech sector. “Companies are realizing the importance and value of patents,” says Marvin Spivak, managing partner of Arlington’s Oblon, Spivak, McClelland, Maier & Neustadt. “The filings are going to keep increasing, and the litigation will increase as a result of that.” While Shaw Pittman, Cooley, and Pillsbury have passed them in numbers, Northern Virginia’s intellectual property boutiques have held steady. Alexandria’s Burns, Doane, Swecker & Mathis topped last year’s Northern Virginia 15 chart with 76 lawyers and, although now the fifth-largest office in the region, still has 76 lawyers. Oblon Spivak picked up two lawyers this year but similarly slid in the chart. Reston’s Greenblum & Bernstein just missed the cut with 35 lawyers. Managing partners at the IP shops say that being outpaced during the recent hiring frenzy does not bother them. Oblon Spivak’s patent filings have increased 50 percent, and litigation has increased dramatically. Burns Doane plans to keep growing, and both firms say they have felt little impact from the growing competition in the Dulles corridor legal market. In fact, they say, the other firms’ move across the river doesn’t change the scene that much. “To the extent that they are competition now, they were competition before,” says Burns Doane partner Matthew Schneider. – Wheatly Aycock SUBURBAN MARYLAND: STEADY AS SHE GOES Through boom and bust, one thing seems to remain constant in the D.C. legal market: the state of the practice in suburban Maryland. Year in and year out, the same few firms remain among the largest in Montgomery and Prince George’s counties, and the firms grow only incrementally. While the modest beginning of an incursion from national firms is apparent, the big players remain local, and say their strength is rooted deep in the community. The biggest firm is Shulman, Rogers, Gandal, Pordy & Ecker of Rockville, with 72 lawyers, followed by Linowes & Blocher of Silver Spring, with 53 lawyers. No other firm has as many as 40 lawyers. Partners at the region’s largest law offices say a key to their stability is their locally oriented practices — land use, litigation in state courts, and small business representation are staples of nearly all of the top firms. They are not competing with the big national firms with offices in D.C. and Northern Virginia, either in terms of the business they seek or the salaries they pay, and they are happy where they are. “The largest law firms in D.C. or Baltimore are driven more by the fact that they have a substantial amount of business from other offices or businesses outside our area,” says Charles Wilson III, the managing partner at 15-lawyer McCarthy Wilson & Etheridge of Rockville. “We don’t have a lot of firms whose sole business is generated by another office in Chicago, N.Y., or Paris.” Others point out that the driving economic forces in the area — with the exception of the growing biotechnology corridor — have remained pretty steady. Robert Brewer Jr., a partner at 38-attorney Lerch, Early & Brewer in Bethesda, reels off the names of several key institutions, all of which have been around for a while and are locally based: Chevy Chase Bank, Clark Construction Group Inc., the Marriott Corp., Discovery Communications Inc., and area hospitals. Nonetheless, Lerch Early and other firms are seeing some work from the biotech boom. Brewer has been tapped by Alan Mark of Paley, Rothman, Goldstein, Rosenberg & Cooper to help handle land use work for Human Genome Sciences, which has turned to Piper Marbury Rudnick & Wolfe for the sexier patent and licensing work. “Our work for HGS is not entirely competitive with their primary outside counsel,” says Brewer. “The handful of [suburban Maryland] firms that are of some size have recognized the opportunity to represent these companies on what we do best, which is everything but what those larger firms do.” Steve Nelson, managing consultant for law and government affairs at the McCormick Group Inc. in Arlington, says the biotechnology industry is becoming a major business target for firms near and far. He explains that there is opportunity for an “inventive firm, whether a suburban Maryland firm or somebody from the outside, to take advantage of the biotech companies.” Indeed, there are some definite shifts taking place. “The Maryland market is not as stable as it looks,” says David Pordy, managing partner of Shulman Rogers. “There is actually lots of movement when you look at the dynamics of the past two years.” Last year, a longtime player on the scene, Wilkes Artis, all but disintegrated, with a handful of its former lawyers changing the sign on their Bethesda office to read Holland & Knight. Then there is San Francisco-based Heller, Ehrman, White & McAuliffe, which is the first and so far only national firm to plant a flag in the region specifically to target the biotech sector. Heller opened its office in Gaithersburg in February 2000. Pordy says that the competition for associates has also changed in recent times, as the spike in associate salaries paid by large firms has been followed by a sharp downturn in corporate work. Pordy says that while D.C. firms may offer more money to their new associates, many young lawyers look to Maryland firms for more job security and a better chance of moving up quickly. “Those candidates from downtown firms were finding that their prospects of becoming partner are remote at best,” he says. “Some of them considered it a better opportunity to become a partner here rather than in D.C.” Linowes and Blocher managing partner Andrew Goldstein says that the big salaries across the District line remain a challenge for smaller firms, however. “I think the biggest restraint for a firm is keeping our good associates,” says Goldstein. “We can’t be dollar for dollar with these firms.” But Maryland firms seem to retain their local flavor and offer associates a few perks that the big firms can’t guarantee. Glenn Cooper, managing partner of Paley Rothman — which picked up several lawyers when it merged with Eig & Schwartz earlier this year — says that lawyers who work in Maryland law firms want something different from what they would get in a big D.C. firm. “These are very skilled people who want a different kind of lifestyle,” says Cooper, who is also president of the Montgomery County Bar Association. “They can put in a full day of work and still make it to their kids’ soccer games.” – Jennifer Liebman and Anne Stopper

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