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When associate pay skyrocketed two years ago and several South Florida firms made a bid to become national players, some predicted that the big spenders would be hit hard when an economic downturn arrived. In 2001, the long-anticipated slowdown finally arrived. While some of those predictions have come true, growth has remained robust at many firms here. “We have not felt a recession,” says Bowman Brown of Shutts & Bowen. “We have not felt any impact,” says Jose I. Astigarraga, a partner at Astigarraga Davis in Miami, who has staked his firm’s success on recession-resistant practice areas like litigation, arbitration and bankruptcy. “There has been no recessionary impact at our firm,” says Joseph P. Klock Jr., managing partner of Miami-based Steel Hector & Davis. A preliminary review of law firm financial figures gathered by the Daily Business Review for its annual Review 15 ranking of the top-grossing South Florida law firms indicates that some firms grew strongly in 2001 while others were stagnant. Last year, managing partners say, the recessionary hammer hit hardest at larger firms that aggressively expanded and did significant work in practice areas most vulnerable to economic conditions, including mergers and acquisitions, Internet commerce and venture capital. “Firms that expanded dramatically by opening new offices took on an added fixed-cost structure and often overpaid for the new offices and attorneys,” says one South Florida managing partner who didn’t want to be identified. “The consequences are now being felt, because the rapid growth they undertook has stretched resources, which amplified a minor dip in revenue.” Not only that, absorbing dozens of lawyers at a time can damage a firm’s cohesion. “Large mergers — 20 or 40 lawyers at a time — create a situation where no one knows whose culture will survive, and that has been a reason why some firms have struggled,” says Charles C. Papy III, managing partner of the Miami office of Philadelphia-based Duane Morris. But firms that chose not to expand willy-nilly in the red-hot ’90s, did not excessively rely on boom-dependent practice areas like initial public offerings and Internet commerce, and stuck to reliable down-economy practice fields like litigation and bankruptcy did well. Despite a recession that was exacerbated by the Sept. 11 terrorist attacks, 2001 demonstrates that law firms can profit in bad times as well as in good. “We had a phenomenal year,” says Howard Berlin, managing partner of 37-attorney Kluger Peretz Kaplan & Berlin in Miami, whose firm focuses on commercial litigation, bankruptcy, corporate transactional and intellectual property. Berlin says his firm is now looking for more office space and additional attorneys. “Before, our corporate and transactional attorneys were very busy,” says Jay Shapiro, managing partner at Stearns Weaver Miller Weissler Alhadeff & Sitterson in Miami. “Now, our bankruptcy, labor and employment, and litigation attorneys are going gangbusters.” BALANCE IS ALL Shapiro says his firm benefited from having a balance of practice groups that can keep the firm busy in all economic conditions and from not expanding in the 1990s when there was more business than the firm could handle. “We could have become a 300-lawyer firm by now,” he says. “But we decided we’d rather turn down business than have to fire lawyers later.” Tew Cardenas Rebak Kellogg Lehman DeMaria Tague Raymond & Levine in Miami has focused on litigation, bankruptcy, commercial real estate and arbitration. “We do not ride the crest of great economic growth,” says managing partner Thomas R. Lehman. “That’s the province of IPO, corporate and transactional lawyers. But during downswings they often have nothing to do, while during a recession we tend to have much more work.” The result has been a fine year for Tew Cardenas, Lehman says. Similarly, Brown of Shutts & Bowen says that several years ago, his firm identified five practice areas that it anticipated would grow even in poor economic times — labor and employment, commercial litigation, trusts and estates, creditors rights, and financial services. Now, he says, the firm is benefiting from that foresight. ALL IS NOT WELL Yet, all is not well for South Florida law firms. And the biggest example of that has been Florida’s biggest firm, Tampa-based Holland & Knight. In April, Holland confirmed reports of its financial troubles when it laid off 60 lawyers and 170 staffers around the country and froze associate pay while re-evaluating all associate compensation. In addition, other lawyers were told that they would not be dismissed but should begin looking for employment elsewhere. Over the past year, Holland cut partner compensation by about 10 percent, canceled its annual all-lawyers meeting, and took several other cost-cutting measures firmwide. Holland’s story reflects the go-go ’90s, when firms across the country mushroomed from regional entities to national players. In just nine years, Holland grew from 275 to 1,200 attorneys. But, with offices in 32 cities, the firm is now struggling to return to profitability. The Miami office of the world�s largest law firm also reports problems. “We have felt the impact of the recession,” acknowledges Donald J. Hayden, managing partner of the Miami outpost of Baker & McKenzie, which has 3,169 attorneys worldwide and 28 lawyers in Miami. “Most significant has been a slowdown in our e-commerce and venture capital practice groups.” Hayden says Baker did well worldwide in 2001 but still has resorted to various cost-cutting efforts during the economic downturn. For example, the firm limited attendance at its annual partners meeting in Hong Kong and excluded spouses, it deferred salary increases, and it dumped some of the daily partner perks. “The corner office partner is not getting his [fresh] grapefruit juice any more,” Hayden quips. Baker & McKenzie also is scrutinizing prospective clients more closely for their ability to pay on a timely basis and is often asking for larger retainers. But Hayden says one thing he has refused to do is reduce the number of attorneys at the Miami office. “We are not going to cut lawyers, especially associates whom we’ve invested money and training in,” he says. FIRM HOPPING Increasingly, there are two types of firms — those that continued to expand through the recession and those facing flat or declining revenues. That growing gap has contributed to churning of lawyers. Indeed, South Florida is now a hot spot for firm-hopping lawyers. Managing partners say there are more resumes on the street, with lawyers from slumping law offices looking elsewhere and prospering firms continuing to add lawyers. “We are seeing tremendously more resumes,” says Bowman Brown. “There are a lot of resumes from other firms, much more than usual,” agrees John Sumberg, managing partner of Bilzin Sumberg Dunn Baena Price & Axelrod. It wasn’t always that way. Miami attorney Dan Casey remembers when Steven Brill, founder of American Lawyer magazine, stunned a group of summer associates in Miami 15 years ago by predicting in a speech that lawyers someday would switch freely from one law firm to another, just like pro athletes. “At the time, that was an astounding prediction because no one moved to another firm,” says Casey, managing partner of Kirkpatrick & Lockhart in Miami. But last year, Holland & Knight lured the largest number of lateral partners in the nation, while Miami-based Greenberg Traurig led the country in the number of lateral partners who departed, according to American Lawyer magazine. In the past several years, Steel Hector & Davis has lost nearly 50 partners to other firms. In May, Miami-based Adorno & Zeder had to change its name to Adorno & Yoss because name partner Jon Zeder left to join Ferrell Schultz Carter Zumpano & Fertel. This trend that once seemed so startling will only continue, say a number of managing partners, because of the growth gap between firms. Still, one must ask how bad the economic woes of 2001-2002 really were even for the firms whose growth was stagnant. For all of Holland’s problems, early this month the firm announced that it was adding 85 lawyers in Chicago, doubling its presence in the Windy City. And 800-lawyer Greenberg continues to push ahead with its aggressive expansion. “We intend to add lawyers in Los Angeles, Chicago and Atlanta,” says CEO Cesar Alvarez, who also aims to open an office in Tampa. “We will be an 1,000-attorney firm.”

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