After three years of flat to negative growth, 2011 was the year that the nation’s 250 largest law firms started getting bigger again.

Headcount among NLJ 250 firms was up a collective 2,132 lawyers, about the size of a Latham & Watkins. That represented growth of 1.7 percent — in line with the average increase during the past 10 years, but well below the 4 to 5 percent growth rate of the 2005-08 go-go years. Growth was far from universal in 2011 — while 118 firms on the list added lawyers, 109 shrank and eight were flat. (The remaining 15 were not on the list last year.)

Growth was robust among firms focused on labor and employment and on international work. Yet despite the big years enjoyed by the technology and energy industries, growth at firms traditionally associated with that work was modest or, in a few cases, even down.

Ward Bower, a law firm management consultant with Altman Weil Inc., said most of the firms that made the difficult choice to downsize early in the recession are now looking to grow again. “The firms that hunkered down started dusting off their strategic plan and implementing it a little earlier than others,” he said. “And I hope next year we would see the vast majority of firms in growth mode.”

By one measure Bower’s thesis makes sense: Eight of the 10 law firms identified by National Law Journal affiliate The American Lawyer in March 2009 as doing the highest percentage of layoffs — Orrick, Herrington & Sutcliffe; Cooley; Latham; McDermott Will & Emery; Wilson Sonsini Goodrich & Rosati; Goodwin Procter; Proskauer Rose; and White & Case — added a total of 279 lawyers last year. The two exceptions were O’Melveny & Myers (down 118) and Bryan Cave (down 24).

“The surprising part is why aren’t more firms growing,” said consultant Peter Zeughauser of the Zeughauser Group. “The reason is some firms are trying to slowly reduce growth or even shrink in order to increase average billable hours and revenues per lawyer.”

Zeughauser is less sanguine than Bower about the outlook for 2012. “I think 2012 is going to be like the second half of last year,” he said, forecasting “mixed results with some firms struggling.”

BIGGEST GAINS AND LOSSES

The three firms with the largest gains accounted for nearly half the overall growth. Squire, Sanders & Dempsey, which combined with U.K.-based Ham­monds on Jan. 1, 2011, added 446 lawyers, while DLA Piper, which completed its integration with Australia’s DLA Phillips Fox in May, saw a net increase of 398. Quinn Emanuel Urquhart & Sulli­van was next on the list, adding 190 lawyers — boosting firm headcount a whopping 42 percent — without any flashy mergers, though the firm did open offices in Washington and Moscow in 2011. (Read more on Quinn’s growth.)

The biggest numerical declines came at Mayer Brown (minus 122, or 7 percent) and O’Melveny & Myers (minus 118, or 13 percent). O’Melveny, which elevated Bradley Butwin to the firm chairmanship a year ahead of schedule in January, has seen some 100 partners leave the firm during the past five years. Mayer Brown Chairman Bert Krueger told The American Lawyer last month that his firm’s reductions were the result of lawyers serving out their notice periods from layoffs made prior to 2011, and natural attrition in the face of decreased hiring activity.

At firms that specialize in labor and employment law, headcount growth was uniformly strong. Littler Mendelson added 96 attorneys, boosting its lawyer headcount 13 percent. Ogletree, Deakins, Nash, Smoak & Stewart added 69, about 15 percent. Jackson Lewis and Fisher & Phillips also added lawyers.

Ogletree managing shareholder Kim Ebert said the firm has been growing for a decade, but 2011′s headcount increases came without the addition of any new offices. Instead, growth was driven by clients looking for “off the shelf” services like audits and training, in part to help insulate themselves from more aggressive investigations and enforcement by the National Labor Relations Board, the Equal Employment Opportunity Commission and other federal agencies. In addition, cost-wary clients were quick to settle almost any matter a few years ago, “and that paradigm I think shifted in 2011.”

Ebert said the firm is looking to add another 100 lawyers in 2012, with particular emphasis on New York and California.

GOING GLOBAL

The three U.S.-based firms with arguably the strongest brands for international practice — Baker & McKenzie, DLA Piper and White & Case — added a collective 557 lawyers in 2011, or about 6 percent in aggregate. “Globalization is the defining business trend of our lifetime,” said DLA co-chairman J. Terence O’Malley. “As industries globalize, the clients have wanted to reduce the number of outside legal providers they use in order to have better control over their legal work and get integrated, coherent advice.”

DLA now counts 750 lawyers in the Asia-Pacific region, plus another 450 on the West Coast of the United States, which among other things uniquely positions the firm to represent technology companies, O’Malley said.

DLA laid off about 100 associates in 2009, and O’Malley agreed with the thesis that those cuts, while painful, prepared the firm for its more recent growth. “There’s no doubt that firms that recognize when they’re entering a challenging period and make the adjustments early…come out of the problem faster and stronger,” he said. “We are mindful that the economy is unpredictable, but we expect to have another year of growth in 2012 and we’re off to a good start.”

International work is also driving rapid growth at a firm not previously known for it. Curtis, Mallet-Prevost, Colt & Mosle swelled its ranks by 66 attorneys, or 27 percent, to 310. Firm Chairman George Kahale III said the firm is looking to grow to around 400 to 500 attorneys without sacrificing profitability. International arbitration looks like one of the keys to that puzzle — the firm ranked No. 5 on The American Lawyer‘s 2011 ranking of international arbitrations handled, up from No. 17 in 2009. Within that space, the firm has carved a niche representing sovereign states in disputes with investors. “Over the last 10 to 15 years, international arbitration has become the preferred mode of dispute resolution around the world,” Kahale said. A lot of the investor-state disputes involve the oil industry, he added, “which is another area of strength of ours.”

Curtis Mallet-Prevost’s 2011 growth came primarily in Europe, the Middle East and central Asia, Kahale said, and in 2012 the firm has already opened an office in Kuwait and added a seven-lawyer international trade group from the Washington office of Winston & Strawn. “We’re not going to go to 500 in 2012,” Kahale said, “but I do see us making another jump” similar to 2011′s.

REGIONAL FIRMS

An international footprint wasn’t essential to showing growth in 2011. Indianapolis-based Barnes & Thornburg, which grew headcount by 19 lawyers, or 4 percent, was one of several Midwest-based firms to show solid growth last year. “We were growing at a time when other law firms weren’t,” said firm managing partner Alan Levin, adding that the firm’s competitive rate structure is attractive to both clients and lateral hires. The firm opened a Los Angeles office in February 2011 with five partners from Akin Gump Strauss Hauer & Feld, and it now stands at 21 attorneys. Intellectual property litigation and employment law were strong in 2011, while corporate is “starting to bounce back.”

Although the energy industry continued to boom in 2011, the big Texas-based firms with widely recognized brands in the energy sector saw only modest growth or even slight contraction in headcount. Vinson & Elkins added eight lawyers, while Baker Botts was flat, Locke Lord subtracted five, and Fulbright & Jaworski was down 33.

Part of the phenomenon may be that as the Texas firms expand across the United States and internationally, out-of-town firms are moving into the market and recruiting local talent. Latham & Watkins; Simpson Thacher & Bartlett; and Cadwalader, Wickersham & Taft are among the blue-chip firms opening in Houston since 2010.

“A lot of these colonizing firms are coming in, and they’re all trying to go after work that is not infinite,” said Stephen Mims, executive director at Texas recruiting shop Prescott Legal Search.

Mims said the Texas firms have done a good job of institutionalizing their clients, and Thomas Leatherbury, hiring partner at Vinson & Elkins, said the competition cuts both ways — Vinson can attract New York lawyers by matching their compensation levels while offering a much lower cost of living in Texas.

Locke Lord, meanwhile, planted its flag internationally in 2011, opening offices in Hong Kong and London. The firm just added 10 lawyers to the latter office from Salans last month. “We believe London as well as Asia are critical to our clients,” said Locke Lord Chairwoman Jerry Clements, adding that the firm showed its commitment to the Salans team by putting one of its lawyers on the firm’s executive committee immediately.

As for the local market, “Texas is a tough market to break into for firms that haven’t been here,” she said. “But I do recognize there are many firms coming to town trying to cherry-pick top rainmakers. We’re always aware that the wolf is barking at the door, so to speak.”

Scott Graham can be contacted at sgraham@alm.com.

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