Philadelphia-based Drinker Biddle & Reath saw its revenue rise to an all-time high in 2011 after staying nearly flat the year before.
The firm’s gross revenue went up about 2.4 percent from $376 million in 2010 to $385 million in 2011.
Drinker’s executive and managing partner, Andrew C. Kassner, said the firm had a “strong year in what everyone acknowledged was a choppy legal environment.”
According to Kassner, the firm continued its strategy in 2011 of maintaining a balanced practice comprising 50 percent litigation and 50 percent business.
While the firm’s mass tort, life insurance, health law and intellectual property practices were all busy in 2011, the corporate and real estate practices also began to make a comeback, Kassner said.
Meanwhile, the firm’s employee benefits practice has taken off since it added 11 attorneys from 16-lawyer Reish & Reicher in Los Angeles in March of last year. The group joined the firm’s office in Los Angeles’ Century City district and included Reish & Reicher’s entire employee benefits and compensation practice, as well as attorneys who focus on labor and employment, litigation, corporate and estate planning.
Reish & Reicher’s employee benefits practice focused on Employee Retirement Income Security Act work for companies that offer financial services and investments to retirement plans.
Kassner said the group’s integration into Drinker has been a “total success” that has exceeded every expectation the firm had.
Along with revenue, the firm saw its profits per equity partner (PPP) jump about 7.7 percent from $660,000 in 2010 to $711,000 in 2011. Its profit margin went up 2 percentage points from 32 percent in 2010 to 34 percent in 2011.
Drinker’s strategy has always revolved around financial conservatism, and this philosophy has helped it remain profitable without having to make significant rate increases, which clients are becoming increasingly unwilling to accept, Kassner said.
“Clients are saying to firms, ‘We’re not going to fund your inefficiencies,’” Kassner said.
According to Kassner, the firm does not make across-the-board rate increases, but instead makes the decision of whether or not to raise rates on an individual basis according to the value each attorney provides to the clients.
Similarly, the firm continued to operate on a fully merit-based compensation system in 2011, despite other firms returning to the lockstep model, Kassner said.
“You get a raise when you’re giving value to the clients,” Kassner said, describing his firm’s compensation system.
Last year, the firm also continued the training program it began in 2009, in which first-year associates do not bill any time during their first few months with the firm and instead focus on training.
The program originally had first-years working for the first six months of their employment at a $105,000 salary, before raising to market rate, which the firm had determined was $130,000 in Philadelphia.
According to Kassner, the firm streamlined the program in 2011, reducing it to four months and raising the post-training starting salary to $140,000 in Philadelphia.
Kassner said the firm’s hiring partner has received feedback from some law students who said they are turned off by the prospect of starting at a lower-than-market salary. But, according to Kassner, the firm has decided to keep the program because it’s only interested in hiring attorneys who are looking for long-term careers with Drinker.
“It’s been a terrific thing for us,” he said.
The firm also continued its strategy of “sustainable growth” in 2011, according to Kassner.
“The answer to all things is not lateral hiring,” Kassner said, explaining that the firm focuses largely on a combination of recruiting and growing young talent.
The firm did see its overall headcount drop 3.8 percent, from 602 lawyers in 2010 to 579 lawyers in 2011, but Kassner attributed this decrease to a combination of retirements and attorneys leaving for other opportunities, including going in-house with clients, as the job market began to open up.
According to the survey it filled out for The Legal’s affiliate The American Lawyer , the firm’s equity partnership tier rose 0.5 percent from 185 lawyers in 2010 to 186 lawyers in 2011, while what the firm refers to as its “limited equity” partnership tier grew 7 percent from 71 to 76.
But Kassner said Wednesday that the firm converted nine of those limited equity partners to full equity partners just after the Dec. 31 cutoff for reporting its numbers to The American Lawyer .
The growth in revenue and decrease in headcount caused the firm’s revenue per lawyer (RPL) in 2011 to go up by 6.6 percent, from $625,000 to $666,000.
According to Kassner, the firm has been focused recently on growing its Los Angeles office, which has gone from a handful of lawyers when it opened in 2009 to 30 lawyers today, as well as its New York City office.
The firm moved from Lower Manhattan to Midtown Manhattan last August and already has a “space problem,” having grown to around 20 lawyers, according to Kassner.
Kassner said the firm has been able to establish a presence in those two notoriously difficult-to-crack legal markets by approaching them with a concrete plan of action from the beginning.
“Firms that go into those markets without a specific plan take anyone who comes through the door first because they have space and they want to fill it,” Kassner said. “We knew what we wanted to do.”
For example, the firm hired Clay J. Pierce as a partner in its commercial litigation practice group in New York last year in part because he already had a relationship with one of Drinker’s clients.
“We actually asked the client what they thought about it” before hiring Pierce, Kassner said.
Looking ahead, Kassner said he envisions the firm continuing to grow its existing offices in the Mid-Atlantic region, as well as in Washington, D.C., Chicago and Los Angeles.
But Kassner added that the firm is not opposed to considering new locations. For example, he said, the firm has discussed opening in the Silicon Valley if the right IP-related opportunity were to present itself.
As for the immediate future, Kassner said he believes the firm will see the continued recovery of its transactional and real estate practices.
Kassner also said he sees unlimited potential for the firm in ERISA law, which is fertile ground for legal work because of its highly regulated nature and political undertones.
According to Kassner, the firm is now able to compete “nationally and with pretty much anyone” for ERISA work.
This report is part of The Legal Intelligencer’s early coverage of the 2011 financial results of local firms as part of the Am Law 100 and Second Hundred reports. Full results for The Am Law 100 will be published in The American Lawyer and online in May. The Am Law Second Hundred will be published in June. View our interactive chart, which will be updated as additional law firm financial data is reported.