Dickstein Shapiro faced its worst year in more than a decade after contingency cases didn’t pull in income and the firm restructured. Gross revenue declined by $51 million, to $207.5 million in 2013, a 19.7 percent drop. Net income fell even further, by almost 35 percent, from $55 million in 2012 to $36 million in 2013. That number is the lowest net income the Washington, D.C., firm has posted since prior to 1998, the first year for which The American Lawyer compiled financial statistics for Second Hundred firms.
“We’ve got a portfolio of contingency cases,” says chairman James Kelly. “The time of investment of those cases and recovery can vary from year to year. Just because you work a case in a particular year doesn’t mean you get paid on a case in a particular year.”
No single contingency case accounted for the declines, Kelly says. In 2013 the firm filed a suit for Freddie Mac against more than a dozen major banks over their alleged manipulation of the LIBOR, which provides benchmarks for interest rates around the world. That case has not been resolved, and the firm has added other clients, including the Federal Deposit Insurance Corp., on the matter.
In early 2013 the U.S. Court of Appeals for the Federal Circuit overturned a $482 million patent infringement award to a radiologist Dickstein represented. The court sided in favor of Johnson & Johnson and subsidiary Cordis Corp., and the U.S. Supreme Court declined to take an appeal of the ruling.
Kelly says contingency cases—he calls them investments—such as these are part of the firm’s core business strategy. Income from these cases can ebb and flow, and historically the firm has seen ups and downs. For example, profits per partner bounced from $650,000 in 2001 to $1.935 million in 2003, then down to $815,000 in 2004.
Dickstein partners understand the risks and rewards, Kelly says. However, the firm cut its head count by 17.5 percent during 2013, to 254, with proportionate cuts among equity partners and nonequity partners. That’s a change from the early 2000s, when the firm had about 300 lawyers each year. “It’s fair to say we restructured our workforce,” Kelly says. “It’s fair to say there’s a variety of factors taken into account.”
A team of five energy and corporate attorneys moved to Crowell & Moring in July 2013. Two insurance partners, John Schryber and Andrew Weiner, went to Reed Smith in October. Two intellectual partners, Keith Sharkin and Clark Lackert, also moved to Reed Smith last year. The firm brought on two lateral partners in 2013: Jason Eig in corporate and finance and Atulya Agarwal in IP.
Even though most financial measures slipped by 15 percent or more, revenue per lawyer declined only 3 percent, to $815,000. The relatively steady number “really demonstrates the strength of our client base,” Kelly says. “That’s what we’ve been pivoting off of.”
Business from Dickstein’s 50 largest clients has almost doubled in the past five years, Kelly says, adding that the firm reviewed its client mix and chose to cater to them. (The firm declined to name its largest clients.) Dickstein intends to focus on such areas such as insurance coverage, government contracts, lobbying and state attorneys general work. “We made a strategic commitment to be a market-leading specialty firm,” Kelly says. “We decided we’re not going to be everything to everyone.”