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After a two-year lull in growth at the nation’s 250 largest law firms, the pace is picking back up. According to The National Law Journal‘s 28th annual survey of the nation’s 250 largest law firms, the overall number of attorneys at the largest firms, 116,671, increased by 4.4 percent from the past year, compared with a 1.5 percent growth rate in 2004 and 1.6 percent in 2003. The growth rate was the highest since 2001, when NLJ 250 firms grew by 8.2 percent. The survey measured the growth at the nation’s largest firms between Oct. 1, 2004, and Sept. 30, 2005. The cutoff point to make the NLJ 250 was higher than last year: The firms needed at least 165 attorneys to qualify, compared with 162 last year. Associate growth also bounced back after steadily declining over the past two years. This year, the associate population at the top 250 law firms grew by 4.6 percent, to 58,805. The total number of partners, both equity and nonequity, also continued to rise by the same percentage, to 46,563. “[Overall attorney growth] is a reflection of the business economy,” said Joel Henning, a senior consultant at Hildebrandt International in Chicago. “More activity in the business economy breeds the need for lawyers.” One of the most significant changes in the NLJ 250 came with the merger over the course of several months late in 2004 of Piper Rudnick with Gray Cary Ware & Freidenreich and then with DLA to form DLA Piper Rudnick Gray Cary. As a result, legal behemoth Baker & McKenzie has competition for the title of the nation’s largest law firm. With 3,159 attorneys — only 150 fewer than Baker & McKenzie — DLA Piper emerged as No. 2 on the list, and may have its rival glancing nervously in the rearview mirror. Elsewhere among the top 10 firms, there was little movement. The only firm to drop out of the top 10 was Weil, Gotshal & Manges, going from No. 10 to No. 13. The New York firm lost 63 attorneys over the past year. Besides DLA Piper, the growth leader in the top 10 was Latham & Watkins, which added 300 attorneys to its practice. The firm’s expansion moved it up a spot in the rankings to fifth place, surpassing Skadden, Arps, Slate, Meagher & Flom of New York and Sidley Austin Brown & Wood. The latter two moved down two spots each. Weil Gotshal wasn’t the only top 10 firm to shed attorneys; the others were Mayer, Brown, Rowe & Maw of Chicago, which lost 90 attorneys, and Sidley Austin Brown & Wood, which lost one. Greenberg Traurig gained 198 attorneys, but still maintained the eighth spot on the list. MARRIAGES AND DEATHS The rest of the top 20 firms remained relatively stable. Kirkland & Ellis of Chicago gained 85 attorneys and moved from No. 19 to No. 14. Shearman & Sterling of New York dropped from No. 13 to No. 17, and Hogan & Hartson of Washington from No. 15 to No. 18. Kirkpatrick & Lockhart moved into the No. 19 spot, up from No. 28, following its merger with Nicholson Graham. Several other firms on the survey last year have merged. Pillsbury Winthrop combined with Shaw Pittman; Squire Sanders with Steel Hector & Davis; and Boston’s Ropes & Gray with Fish & Neave. Edwards & Angell merged with Boston’s Palmer & Dodge on Nov. 1, too late to be reflected in our survey. The newly formed firm, Edwards Angell Palmer & Dodge, has 520 attorneys. Mergers will likely continue, Henning said, though at a subdued pace. “I do not think we will ever see consolidation in the legal marketplace like we see in accounting, investment banking and other financial services,” Henning said. “Many of the top-tier firms continue to do extremely well as relatively small and focused firms,” he said. “Lawyers are inherently conservative and, typically today, in most firms partners have the ultimate vote, and are often ultimately reluctant.” Several top firms gained in attorney headcount from the wreckage of such firms as Boston’s Testa, Hurwitz & Thibeault and New York’s Coudert Brothers. Testa Hurwitz dissolved in January. The firm had fallen to No. 150 on last year’s NLJ 250, having lost 54 attorneys, 16 percent of its total. The 150 attorneys still there headed to Goodwin Procter; Proskauer Rose; Bingham McCutchen; and Kirkpatrick & Lockhart Nicholson Graham, among others. The Coudert Brothers breakup in August had more significant reverberations, with more than 600 attorneys internationally scattering to other firms. Dechert acquired Coudert’s Paris office, while Baker & McKenzie obtained its 70-attorney New York office. Most of Coudert’s China practice went to Orrick, Herrington & Sutcliffe. DLA Piper also gained attorneys from Coudert, as did numerous other firms. By contrast, only one large firm failed during the previous survey period. That was Pennie Edmonds; the 190-lawyer intellectual property firm shut its doors at the end of 2003. The use of contract and temporary attorneys grew 11 percent, to 2,432, a significantly lower percentage rate than last year’s 55 percent. Even so, “on a national level we’re seeing more and more law firms utilize project attorneys to augment their staff,” said Charles Volkert, executive director of Robert Half Legal Staffing. “It allows them to keep costs down and take on matters in a way that doesn’t increase their permanent headcount.” Volkert expects the trend will continue. “Many markets are beginning to utilize the trend,” he said. “Two, three, four years ago, it wasn’t as common.” That growth came at the expense of attorneys in the survey’s “other” category, 10,749, which includes of counsel, senior counsel and staff attorneys. Their numbers dropped by 1 percent in the past year, after having grown by 21 percent in 2004. It was the only category in which the overall number of attorneys declined. “Law firms are increasingly sensitive to spending overhead on marginal fee earners,” Henning said. The combined total number of partners at the large firms was up by 4.6 percent, compared with a 4.2 percent growth last year. (Many firms did not distinguish between equity and nonequity partners.) The main growth was among nonequity partners — 10,314, or 9.2 percent — compared with a 3.9 percent increase in the equity partnership ranks, which totaled 30,278. Nonequity partnership growth was steady compared with 2004 and down only slightly from 2003, when the rate was 10.5 percent. “[The increase in nonequity partners] is clearly a trend,” said Henning. “It’s because as a general matter, law firms make more money on income partners than on associates or equity partners. They’re profitable.” Moreover, “there has generally been a growing reluctance to add equity partners from the income partner ranks unless they’re superstars,” Henning said. “Law firms are rightly beginning to realize that true owners should have an owner mentality and be able to make significant contributions to the enterprise, typically of bringing in lots of revenue.” BIGGEST GAINERS Twelve firms were new to the NLJ 250 this year. Three — Kennedy Covington Lobdell & Hickman of Charlotte, N.C.; Knobbe Martens Olson & Bear of Irvine, Calif.; and Luce, Forward, Hamilton & Scripps of San Diego — reappeared on the list after a year’s absence. Four separate mergers involving eight firms on last year’s list made room for newcomers — as did the disappearance of Coudert Brothers and Testa Hurwitz. New York’s Thacher Proffitt & Wood experienced the largest expansion of any firm on the NLJ 250, growing by 31 percent with the addition of 65 attorneys. “It’s a tremendous growth, and it’s really happened without us planning it,” said managing partner Paul Tvetenstrand. “It’s been very organic. We’ve been hiring to meet the needs of the firm.” The firm hired three lateral partners in the past year, and each brought associates along. It also hired 27 first-year associates, plus 40 lateral associates. Tvetenstrand said that the hires have been across the board at the firm’s five offices. “It’s a young partnership,” he said. “And the vast majority of the partners are under 50. It’s a group of people in the upper arcs of their career.” As the young partners at Thacher generate more business, the firm continues to seek more associates and look for lateral hires, Tvetenstrand said. “We want to keep growing,” he said. “And we are looking to hire more people. … By the end of next year, we should be over 300 [attorneys].” The firm expects to bring in summer classes of around 30 to 35 associates and to hire 10 to 20 new associates per year. “We are in no talks to merge, but we get approached periodically — maybe once a month. But we have no interest.” The merger of Pillsbury Winthrop and Shaw Pittman produced the next biggest surge in growth, a 30 percent increase. As a result, Pillsbury jumped from No. 44 on the list to No. 27. Kirkpatrick & Lockhart Nicholson Graham and Ropes & Gray experienced significant growth due to their mergers. The former added 210 attorneys, growing by 26.2 percent; the latter bolstered its staff by 24.3 percent in adding 140 members. New York-based Wilson, Elser, Moskowitz, Edelman & Dicker grew by 25 percent in adding 164 attorneys. BIGGEST DECLINES Dallas-based Jenkens & Gilchrist experienced the most severe decrease in size, at 38.6 percent, by losing 177 attorneys. Next closest was Michael Best & Friedrich, which shrank by 17.7 percent. Day, Berry & Howard of Hartford, Conn.; Shughart Thomson & Kilroy of Kansas City, Mo.; and Simpson Thacher & Bartlett of New York shrank by just more than 10 percent each. Jenkens & Gilchrist’s woes began several years ago when the firm became the subject of litigation due to its promotion of tax shelters that later attracted unwelcome attention from the Internal Revenue Service. The firm wrote letters assuring accounting firms of the legality of their tax shelter products. “The future of the firm wasn’t totally free from doubt,” acknowledged Jenkens & Gilchrist Chairman Thomas Cantrill. “There was massive potential liability, and there was an uncertainty that we would be litigating a number of cases which would make it difficult to survive.” Jenkens made it through the disaster, but not unscathed. The 103-attorney New York office had begun searching for an escape route during the firm’s legal troubles. In March, the office was acquired by Atlanta’s Troutman Sanders. “They got very enamored with another opportunity,” Cantrill said of the New York partners. “We fixed the problem, but the horse had already left the stable.” Numerous other attorneys left the firm during the past year — presumably, he said, because of the firm’s legal situation. A group of about 15 intellectual property attorneys left for a different reason: Jenkens had undertaken to represent a technology company client alleging a patent violation, and the defense-oriented IP group feared that case would cause conflicts with its existing clients. Now, Cantrill said, the firm is focused on regaining its former status. “We’ve been working on a longer-range plan,” Cantrill said. “We would like to continue to expand our operations, to grow back some of our lawyers that we’ve lost.” Jenkens has implemented a new marketing campaign to improve the firm’s image. “We’re looking at the prospects of strengthening our current offices, and expanding into new geographical areas,” Cantrill said. “We’re going to be careful with that — we’ve had a lot of experience now about with what works and what doesn’t.” The firm is open to a merger, but is not in serious talks at the moment. “We’re always opportunistic,” Cantrill said. “We always want to talk to anyone that could make sense [to merge with]. Overtures are made frequently to us and by us about the possibility of a combination. We do research on a number of firms fairly frequently.” As for the future, Cantrill is hopeful. “The firm has recovered from [its legal troubles] very nicely,” Cantrill said. “We’re much more tranquil, much more stable. But certainly we’re not happy to have lost all the partners we did.” Related chart and other information: Chart: NLJ 250 (Free registration required) Which Law Firms Made the List and Which Are Off? NLJ 250 Methodology

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