Washington, D.C., law firms had a relatively strong year in 2018, as the market experienced shifts in demand and felt the effects of the Trump administration’s efforts to shrink the administrative state.
But it was the region’s largest firms that benefited the most, according to early Am Law 100 and 200 financial results.
Wilmer Cutler Pickering Hale and Dorr and Covington & Burling enjoyed the most impressive gains in 2018, while Arnold & Porter Kaye Scholer, Venable and other legacy D.C. Big Law firms saw only modest increases. Wilmer recorded its highest-ever revenue at $1.149 billion, and Covington crossed the $1 billion mark for the first time, representing an 18.1 percent increase year-over-year.
Covington trailed Arnold & Porter in terms of revenue in 2017, but Covington leapfrogged Arnold & Porter by more than $155 million in 2018. Arnold & Porter’s revenue rose 1 percent to $961.2 million. Venable’s revenue improved 5.5 percent to $570.2 million, bolstered by a growing partnership and declining equity partnership.
Among the biggest legacy D.C. firms, the individual lawyers at Covington look to have gained the most ground in 2018, according to ALM data. Covington’s revenue per lawyer spiked 9 percent to $1,096,000, and profits per partner rose 12.4 percent to $1,734,000. Wilmer’s year-over-year growth didn’t match Covington, but the firm posted another record year of revenue per lawyer, at $1,337,000, and profits per partner, at $2,151,000.
Arnold & Porter was among the firms that enjoyed more modest year-over-year gains in comparison. Its revenue per lawyer rose 2.3 percent to $1,024,000, and its profits per partner climbed 4.3 percent to $1,242,000. Firms without a single-tier partnership saw slight gains, too. Venable, with approximately 55 percent of its partnership equitized, saw partner profits rise nearly 3 percent and revenue per lawyer inch upward 2.1 percent.
Lisa Smith, principal of Fairfax Associates’ Washington office, said she thought the performance of the D.C. market in 2018 could best be described as “slow and steady.”
“Firms that rely heavily on enforcement and regulatory action have seen a little bit less demand because there’s been just a little bit less of that depending on what sector they’re in over the last couple of years,” Smith said. “But I think a lot of that’s been replaced by other work.”
The Trump administration’s emphasis on removing regulation guided much of its governance in its first two years, influencing everything from judicial selection to environmental policy. The results of the 2018 midterm elections produced a divided government, which in turn promised more congressional gridlock and governance via regulation. The uptick in congressional investigations from the Democratic-controlled U.S. House of Representatives has served as a welcome development for lawyers and lobbyists alike falling under the new majority’s investigative gaze.
With Washington seesawing from a divided government under President Barack Obama to a divided government under President Donald Trump, legal professionals have begun questioning the relative strength and health of the D.C. market. Wilmer co-chair Bob Novick, however, has said he is mindful of the prospect of an economic slowdown but does not view the D.C. market as uniquely vulnerable.
“I actually think D.C. firms that have our kind of brand are going to thrive in periods of congressional investigations and more regulation,” Novick said. “It’s not D.C. versus New York versus Chicago. It’s how much high-value work will corporate America—will the corporate clients—push into the outside counsel market in a period of downturn? Because that’s where we all live.”
Some firms are actually leaning into the D.C. market to offset challenges elsewhere. After Baltimore-based Miles & Stockbridge saw its Maryland offices raided by a new competitor in the Mid-Atlantic, the firm turned to Washington as the solution to its problems. It’s moving to new offices on Pennsylvania Avenue in D.C. this month and plans to double its Washington footprint soon thereafter. CEO Joe Hovermill said part of what differentiates Miles & Stockbridge from its larger D.C. competitors is its ability to provide the same quality of legal services to a Washington clientele at Baltimore rates.
The performance of the D.C. market could change dramatically in the next few years depending on who occupies the White House after next year’s November elections. With a wide-open Democratic presidential primary field challenging an incumbent Republican who has not hesitated to govern against the grain of party orthodoxy, what comes next is anyone’s guess.
“I do think 2019 is going to be a decent year for the industry; I think 2020 is still maybe a big question mark,” Smith said. “I do think that we won’t have seen anything dramatic where people have double-digit or 20-percent increases in revenue or profits, but I also don’t think we’re going to see dramatic declines. So I think it is going to be more of the slow and steady approach for ’19. 2020 is more of an open question.”