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Managing partners at South Florida law firms express great optimism about their firms’ financial prospects in the coming year but differ sharply in how they see the challenges ahead. And most see a deteriorating political climate for lawyers in Florida. Those were some of the findings of the Daily Business Review‘s first annual survey of South Florida managing partners. More than half the chief executives contacted by the Review predicted that profits per partner at their firms would grow by more than 5 percent in 2004. Just under a third said profits would grow but by less than 5 percent. Sixty percent expected to see the biggest practice growth in litigation, while 15 percent said corporate practice would show the most gains and 4 percent said real estate would. Almost one-quarter of law firm leaders predicted that corporate and financial transaction work would increase significantly, while 61 percent said it would grow moderately. “Litigation is the No. 1 growth area. It’s always recession-proof,” said Peter Prieto, executive partner of the Miami office of Holland & Knight, in an interview. “I see our real estate practice as No. 2. They’ve been going nuts for the past two years and continue to do so.” Robert A. Zinn, managing shareholder of the 160-lawyer Miami office of Akerman Senterfitt, said in an interview that his firm is seeing an uptick in Sarbanes-Oxley corporate compliance work and corporate transactions, and that the public markets are finally “opening up a little.” Leaders of the 59 firms responding to the survey were all over the map in how they described the biggest challenges they face, though many talked about issues associated with rapid growth. “One challenge is that we run into a lot of conflicts,” Zinn said. “Representing as many large companies as we do, it’s sometimes difficult to take on new clients without creating conflict with existing clients.” “Keeping a team together is a challenge for 2005,” said Patricia Lebow, managing partner of Broad and Cassel’s 24-lawyer office in West Palm Beach, in an interview. “To do that, you have to have good partnering, people willing to be flexible, and leaders on the same page. People will follow as long as they’re treated fairly and with respect.” Lebow added that “it’s easy to keep a team together if you overpay people,” but that’s not the way she plans to go. Smaller firms and litigation boutiques face some different issues. “The biggest challenge is picking the right cases,” said Victor M. Diaz Jr., a partner at Podhurst Orseck, a 12-lawyer plaintiff firm in Miami. “We constantly want to improve the quality of cases, getting a higher financial return while staying small.” The Review sent surveys to 200 managing partners throughout South Florida who run firms with at least 10 attorneys. Of those, 59 returned responses. The respondents represented a wide range of firms in terms of size, types of practice, and location. Most of the managing partners who participated in this survey have been at the helm of their firm for more than five years. This was not intended as a scientific study of managing partner attitudes, but it does provide a glimpse into the trends and issues affecting top law firm executives. GETTING BIGGER Law firm leaders in South Florida are definitely planning to expand their businesses. Many of those surveyed anticipate opening offices, making acquisitions, hiring more lawyers and significantly boosting associate pay in the coming year. More than 30 percent, including 59 percent of the largest firms with more than 100 lawyers, said they plan to open new offices. Fifteen percent, including more than a third of the largest firms, are looking to make significant acquisitions. “We’re actively looking on the west coast of the U.S. for opportunities to merge with existing firms and possibly open one office on the west coast,” Holland & Knight’s Prieto said. Akerman’s Zinn said his firm recently acquired an office in Washington, D.C., with six professionals in it, and is looking to hire additional attorneys there to bring it up to between 20 and 25 lawyers. He said his firm’s revenue growth depends on how quickly that office grows, as well as how many attorneys the firm adds in its Florida offices. The D.C. office is Akerman’s first outside of Florida. Bowman Brown, chairman of the executive committee of Miami-based Shutts & Bowen, said his 103-lawyer firm might expand into other markets in Florida, while continuing to build its offices in Tallahassee, Orlando, West Palm Beach, Fort Myers and Miami. Twenty-five percent of firms surveyed, including 42 percent of the largest firms, expect their next group of associates to be bigger than the last group they hired. And 40 percent said they expect to raise overall associates salaries by more than 5 percent in the coming year. Almost 60 percent said they would like to increase the demographic diversity of their lawyers. “We expect a significant boost in associate hiring this year and next year,” said William R. Scherer Jr., managing partner of the 25-lawyer Conrad & Scherer in Fort Lauderdale. Zinn said he would like to see more diversity among new hires, which is an “important but not the determining factor” in any particular hire. “No, I’m not satisfied with our level of diversity,” he said. “It’s just good business to have a more diverse group of attorneys. Our clients are a diverse group and they expect to see the same level of diversity on our team.” But increasing expenses, particularly soaring employee health care costs, pose an impediment to growth and better financial results. Nearly half the firms surveyed — and two-thirds of the smallest firms, with 10 to 25 lawyers — said their overall firm expenses have risen more than 5 percent in the past year. Thirty percent, including half of the smallest firms, said employee benefit costs and insurance were the biggest factors in the jump in overhead costs. “For us, the greatest challenge has been in the area of employee benefits,” Diaz said. “It’s a constant challenge to maintain the generous benefits we have, given the rising cost of insurance.” Offsetting the jump in expenses, many firms report having increased their billing rates in the past year, with 41 percent saying they boosted rates by more than 5 percent. “We’re in highly specialized areas,” said Shutts & Bowen’s Brown, whose firm raised rates by about 5 percent. “People looking for specific specialized services are less inclined to look at costs.” HOSTILITY TOWARD LAWYERS One of the most striking findings of the survey was the high percentage of law firm leaders who see a deteriorating political environment for lawyers in Florida. Asked how they rated the “legislative/regulatory climate” now compared with five years ago, 52 percent said worse, compared with 5 percent who said better and 43 percent who said about the same. Responses to that question varied depending on whether the firm is a plaintiff shop or a corporate defense firm. But leaders of defense firms also expressed misgivings about the direction of the political winds. “There clearly is simmering hostility against lawyers in this state,” said Dean Colson, managing partner of 15-lawyer Colson Hicks Eidson in Coral Gables, a plaintiff-oriented litigation shop that focuses on aviation liability, commercial litigation and personal injury work. “We’re seeing it in the tort reform areas,” Colson said. “Lawyer abuses get more attention than abuses in other areas, and it’s not fair because lawyers as a profession do more good things than others.” Scherer, whose firm is defense-oriented and does a lot of health care work, complained that the climate is worse because “in every practice area, there are regulatory changes we have to keep abreast of, and a lot of the stuff isn’t lawyer friendly or client friendly. We are getting more and more [state] legislation that has less thought put into it.” In addition, he said, the change from county funding to state funding for the courts, along with the Legislature’s refusal to fund any new judgeships this year, has caused a “tremendous squeeze.” On top of that, Scherer noted that passage of the three medical malpractice-related constitutional amendments on the Nov. 2 ballot would result in huge changes in the regulation of the legal and medical professions. “It’s pretty chaotic, really,” he said. Shutts & Bowen’s Brown framed the problem as a failure to provide more funding for the justice system. “We’d like to see a better budget for the judiciary, to better compensate judges and provide more judges, so justice would be done more quickly and efficiently,” he said. Broad and Cassel’s Lebow lamented the change in the political perception of lawyers. “More and more, lawyers have become the negative folks, the people on the wrong side of the issue,” she said. “We don’t have the ability to be as effective today as in the past.” Nevertheless, law firm leaders were strongly positive about the legal business outlook here. One factor, ironically, is the expectation of voluminous litigation activity in the wake of the four hurricanes of 2004. “I gotta believe that these four hurricanes will bring a lot of interesting legal challenges,” Scherer said. Lebow had a different perspective on the hurricanes from her perch in Palm Beach County, which was hit by Frances and Jeanne. Hurricane Jeanne “will have a negative impact on our firm for 2004,” she said, citing the financial losses suffered by area businesses. On the other hand, she also anticipates increased litigation business related to construction defect and insurance cases. Despite South Florida’s location in Hurricane Alley, law firm leaders have a sense that they are otherwise lucky. “The legal community in South Florida is flourishing,” Diaz said. “As Miami becomes an international trade zone, it will become an international litigation capital as well.”

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