2013 in Review: Three Trends for the AmLaw 200

According to the 2013 LegalView Legal Market Index, and a corresponding article by Aric Press for AmLaw Daily, three major trends emerged in 2013 among the AmLaw 200: (1) the overall corporate spend on legal work declined by 5%, (2) firms in the second hundred gained market share from the first hundred, and (3) firms were able to slightly increase their billing rates after an extended period of little to no rate growth.

LegalView’s survey is based on a legal spend and trends seen among 70 of the AmLaw 200’s major clients, 33 of which are Fortune 1000. The survey is somewhat unique however in that, according to Press, “it is based on actual dollars paid by clients, not on surveys of law firm billings”.

Among the many findings of the survey, which looked at totals from Q1-Q3, the following stood out:

• Total legal spend dropped 2% from $1.89B to $1.85B
• Total hours billed dropped 5% from 6.1M to 5.8M
• Among the top hundred, hours were down 6.4% and fees down 3.5%
• For the second hundred, hours were up 6.2% and fees up 3.3%
• Outside the AmLaw 200, hours were down 5.7% and fees down 2.5%
• Average billable rates increased by 3%
• AmLaw 100 billing rates increased from $466-$480
• AmLaw second hundred billing rates increased from $338-$348
• Outside the AmLaw 200, billing rates increased from $233-$241

To put this in perspective, take a look at the following 2 charts. Here we can clearly see that the AmLaw second 100 gained in market share, while rates across all firm categories increased by 3%.

It would also be interesting to see what the numbers look like in terms of market share once New York firms are factored out of the Top 100. By many accounts, New York firms did quite well in 2013, so the percentages for hours lost and fees collected are likely skewed by being significantly lower among various non-New York AmLaw 200 firms. Even so, the overall percentage of market share is still strongly in favor of the Top 100. Says Press: “The AmLaw 100 accounted for 40.9% of the total spending, a decrease of 0.7%,” while the “AmLaw second hundred increased their share by a full percentage point, taking 11.5% of the $1.8B clients paid.” However, if the demand for legal work and where it is going continues to shift in favor of the AmLaw second hundred, it will be interesting to see how the top 100 and firms outside the 200 respond.

Fewer LSAT Takers and the Effect on Law Schools

To the dismay of many law school deans and admissions counselors, the numbers continue to show that fewer students are taking the LSAT. This year, 33,673 sat for the law school entrance exam, representing an 11% decline from the 37,780 who took the test last year. While this is slightly less than the 16% decline experienced in 2012, this contributes to an overall decline of 45% from 2009 when a record 60,746 sat for the exam.

This marks the fourth straight year of decline, which in a recent article Karen Sloan of the National Law Journal suggests has “intensified worries that a turnaround in the demand for legal education remains out of sight”. Whether that proves to be true remains to be seen. However, what is clear is that law schools are now being met with the reality of smaller student applicant pools. This in turn requires law school deans and other academic leaders to make difficult decisions regarding enrollment and the school’s overall profile.

Imagine the pressure and complex considerations facing law school leadership. To name a few:

• Should we lower our overall admissions standards? Or reduce our class sizes?
• If we lower our standards, how will it affect our rank and our students’ job prospects?
• What are students’ job prospects given the current climate and how can we adapt?
• If we reduce class sizes, how will we make up for the losses in tuition revenue?
• As the landscape shifts, how can we keep our: professors? resources? reputation?

LSAT scores and undergraduate GPAs are both key components of the all-important law school rankings. Thus, schools that elect to weaken admissions standards risk compromising their school’s overall profile and ranking, while schools that reduce class sizes will face difficult budget constraints. According to Sloan, “plenty of schools have done a bit of both.” It will be interesting to see which ways certain law schools lean as the legal landscape continues to shift. In the midst of all the uncertainty, one thing is clear: prospective students are increasingly wary of long-term job prospects in the legal industry.

Which Firms Do GCs Use?

Ever wonder which firms GCs think of and use most often? To follow up on our recent article “Corporate America: Who Represents Who?“, a corresponding NLJ report sheds some additional light by providing an overall ranking of firms among Fortune 100 GCs when surveyed about the firms they use most often. The rankings are certainly not perfect nor are they exhaustive. For example, they do not include metrics such as the number of cases handled, amount of legal spend, length of relationship, etc. However, they do provide a good idea of which firms have strong brand recognition among GCs and corporate execs at some of the world’s strongest companies.

The chart below lists the top 10 firms as ranked in the report, and the rankings were compiled based on how often firms were mentioned by GCs in the areas of contracts, torts, labor, IP, and patents. Not surprisingly, L&E shops did very well, accounting for the top 3 in the overall rankings:

RANK   FIRM                           MENTIONS        PPP                 AMLAW RANK

1          Ogletree Deakins           170                   $535,000           97

2          Littler Mendelson           162                   $500,000           64

3          Jackson Lewis              118                   $605,000           82

4          Morgan Lewis                110                   $1,550,000        12

5          Seyfarth Shaw               86                     $910,000           60

6          Baker Donelson             64                     $490,000           114

7          Morris Nichols               61                     —                      —

T-8        Bryan Cave                   53                     $745,000           55

T-8        McGuireWoods             53                     $945,000           51

T-8        Greenberg Traurig          53                     $1,360,000        11

The only non-AmLaw 200 firm making the top 10 is Delaware-based Morris Nichols, an 83 lawyer shop mentioned in 50 of its 61 instances in the area of patents.

It is also interesting to note the somewhat wide distribution of firms in terms of profits per partner and AmLaw rankings. In fact, 8 of the top 10 boast a PPP below $1,000,000 and an average AmLaw rank of 65. This seems to suggest something almost counterintuitive, though it makes sense considered in light of the post-recession economy—just because a firm is ranked highly or is highly profitable, that does not necessarily translate into recognition or use among Fortune 500 GCs. Accordingly, what it does confirm is the importance of perception in today’s economy—not necessarily in terms of profits or ranking, but in having a reputation of strength in certain areas.

Fortune 500: Who Represents Who?

In a recent National Law Journal survey of Fortune 500 GCs, “Who Represents Corporate America”, we get a decent (though imperfect) snapshot of some of the law firms which GCs themselves rank and view as their top providers. Below is an abbreviated look at 9 companies and their preferred firms:

Wal-Mart: Fortune 500 Rank: #1, 2012 Revenues: $469.16B, Employees: 2,200,000; Contracts: Bryan Cave, Foley, Reed Smith; Labor: Littler Mendelson; Torts: Bradley Arant, Greenberg Traurig, Lewis Brisbois, Marshall Dennehey, Nelson Mullins, Shook Hardy; IP: Buchalter, Davis Wright, Gibson Dunn

ExxonMobil: Fortune 500 Rank: #2, 2012 Revenues: $449.89B, Employees: 88,000; Contracts: Hill Rivkins; Labor: Jackson Lewis, Ogletree Deakins; Torts: McGuireWoods; IP: Kirkland & Ellis

JPMorgan Chase: Fortune 500 Rank: #18, 2012 Revenues: $108.18B, Employees: 258,965; Contracts: Duane Morris, Dykema, McGlinchey Stafford, Morgan Lewis, Ogletree Deakins; Labor: Morgan Lewis, Ogletree Deakins; Torts: Bryan Cave, Carlton Fields, Stites & Harbison; Patents: Covington

Google: Fortune 500 Rank: #55, 2012 Revenues: $52.2B, Employees: 53,861; Torts: Perkins Coie; IP: Mayer Brown, Perkins Coie, Quinn Emanuel; Patent: Bracewell & Giuliani, Fish & Richardson, Greenberg Traurig, K&L Gates, Kilpatrick, Morris Nichols, Potter Anderson, Potter Minton, Richards Layton, Wilson Sonsini

Nike: Fortune 500 Rank: #126, 2012 Revenues: $24.13B, Employees: 44,000; Contracts: Gibson Dunn, King & Spalding; IP: Banner & Witcoff, DLA Piper, Lewis & Roca; Patents: Banner & Witcoff, DLA Piper, Lewis & Roca

Apple: Fortune 500 Rank: #6, 2012 Revenues: $156.51B, Employees: 76,100; Labor: Littler Mendelson, Morgan Lewis, Walraven and Westerfeld; Torts: Thompson Coburn; IP: Gibson Dunn, Greenberg Traurig, Mayer Brown; Patent: Fish & Richardson, Gibson Dunn, Greenberg Traurig, Jones Day, Kirkland & Eillis, Lewis & Roca, Potter Anderson, Potter Minton, Ropes & Gray, Weil, Wilmer

Wells Fargo: Fortune 500 Rank: #25, 2012 Revenues: $91.25B, Employees: 269,200; Contracts: Akerman Senterfitt, Baker & Hostetler, Baker Donelson, Bryan Cave, Burr & Forman, Dinsmore & Shohl, Dykema, Faegre, Greenberg Traurig, Holland & Hart, Lane Powell, McGlinchey Stafford, Nelson Mullins, Ogletree Deakins, Plunkett Cooney, Reed Smith, Seyfarth Shaw, Wilson Elser, Womble Carlyle; Labor: Jackson Lewis, Littler Mendelson, Morgan Lewis, Ropers Majeski, Seyfarth Shaw, Walraven and Westerfeld; Torts: Baker Donelson, Bradley Arant, Bryan Cave, Carlton Fields, Kirkland & Ellis, McGlinchey Stafford, McGuireWoods, Nelson Mullins, Reed Smith, Snell & Wilmer; Patent: Kilpatrick

Amazon: Fortune 500 Rank: #49, 2012 Revenues: $61.09B, Employees: 88,400; IP: Davis Wright, Fenwick & West, Greenberg Traurig, Mayer Brown, Perkins Coie; Patent: Alston & Bird, Duane Morris, Fish & Richardson, Fulbright & Jaworski, K&L Gates, Kilpatrick, Lewis & Roca, Morris Nichols, Potter Anderson

Starbucks: Fortune 500 Rank: #208, 2012 Revenues: $13.3B, Employees: 160,000; Contracts: Dinsmore & Shohl; Labor: Epstein Becker; Torts: Perkins Coie, Wilson Elser; IP: Fish & Richardson; Patent: Bracewell & Guiliani, Kilpatrick, Kirkland & Ellis

The 2013 Patent Litigation Survey

Corporate Counsel recently released its 2013 Patent Litigation Survey, a study which ranks firms based on the number of federal district court patent suits handled annually. The biggest takeaway from their findings….the practice area remains hot. According to the October 21 release article by Lisa Shuchman, “The year 2012 saw a little bit of everything: Massive damages awards, increasingly brazen patent assertion entities, and the major patent reform law passed in 2011 beginning to make its mark.”

RANK   FIRM                             2012 RANK    +/- CHANGE        TOTAL CASES

1          Fish & Richardson         1                        0                         220

T-2        Finnegan Henderson      8                      +6                        95

T-2        Kirkland & Ellis              5                      +3                         95

4          Winston & Strawn          9                      +5                         94

T-5        Cooley                          12                     -7                          90

T-5        DLA Piper                     6                      +1                         90

7          Alston & Bird                13                     +6                          88

8          Greenberg Traurig          10                     +2                        86

T-9        Perkins Coie                 7                      -2                          85

T-9        Richards Layton            —                      —                           85

The top 10 was led by Fish & Richardson. Fish handled a whopping 220 total cases, more than double the next closest firms, Finnegan Henderson and Kirkland & Ellis at 95 each. Other firms making repeat appearances in the top 10 include Winston & Strawn, DLA Piper, Greenberg Traurig, and Perkins Coie. Rounding out the top 10 were top 10 newcomers Cooley, Alston & Bird, and Richards Layton.

Among all 71 firms making the list, defendant side cases made up the majority of the representation. There were 3,119 cases total, with a split of 74% on the defendant-side and 26% on the plaintiff-side. The only firms among the 71 ranked that more often represented plaintiffs include Niro Haller, McKool Smith, Haynes and Boone, McCarter & English, Blank Rome, Fitzpatrick Cella, Morris Manning, Cantor Colburn, Kirton McConkie, Oblon, and Moore & Van Allen.

How the Recession Hit the Global 100

In a September 30 American Lawyer article, Richard Lloyd looks at the effects and trends that the recession has had on the world’s top law firms over the past 5 years.

Lloyd began by looking back at this past year, with the year-to-year change from 2011 to 2012. A number of different trends are apparent. For the sector as a whole, total revenues grew to $85 billion in 2012, an increase of 3.79% or $3.1 billion. However, this represented a slowdown in growth relative to the 6.8% increase in revenues for 2011. Total lawyers also grew to 108,378, an increase of 3.8% or approximately 4,000 lawyers. Productivity stalled, as average revenue per lawyer (a measure of the legal industry’s overall health) stayed flat at $784,297 for 2012 versus $784,419 for 2011. DLA Piper replaced Baker & McKenzie as the world’s highest-grossing firm with an increase of 8.6% to $2.44 billion in revenues.

Looking at this year relative to the recession as a whole, 4 British firms made the top 10 list this year as highest-grossing, including Clifford Chance, Freshfields, Linklaters, and Allen & Overy. However, each firm lost significant ground to its US and Australian counterparts, a theme for many British firms which by the numbers were hardest hit by the recession. On the other hand, American and Aussie firms seem to be faring better. Lloyd attributes the success (since 2008) of a “core group” of US firms like Quinn Emanuel, Kirkland Ellis, and Gibson Dunn to the depth of the American litigation market as well as the improving US economy. Similarly, Australia has benefited during the recession from its proximity and relation to the growing Asian market. In the same vein, Lloyd also pointed towards what he anticipates to be significant growth of Chinese firms over the next 5 years.

The longer the recession has lasted, many firms have sought one or multiple international expansions. This has particularly been the case with British firms such as Norton Rose, Hogan Lovells, Clyde & Co., Allen & Overy, and others. While this may be somewhat counterintuitive given how hard the recession hit the UK, it also makes sense in that firm leadership has sought to balance ill effects of the recession with opportunities for strategic growth. Lloyd interviewed Norton Rose’s CEO Peter Martyr, who phrased the reasoning behind such thinking well: “The more recessions you go through, the more you realize that you need to focus on two things—survival and taking advantage of opportunities as they emerge.”

The question is—how effective have international growth strategies been? On the surface, UK firms have benefited in terms of gross revenues (i.e. Norton Rose has seen an increase from $582.5 million in 2008 to $1.33 billion in 2012). However, in most cases, and as many US firms are quick to point out, this growth has not translated into increased profitability due to a significantly weaker British pound, among other factors.

Other ways UK firms and others have dealt with the recession has been with a concerted effort to clearly define and focus on their strengths. Clyde & Co. is a great example, as it has become a world leader in insurance, and similarly Bird & Bird has done the same in technology, media, and telecom.

No matter the case, Lloyd says it is clear that “no managing partner can sit idly by and let his or her firm’s PPP lag far behind its rivals. Change may be happening at an unprecedented level among the world’s largest firms, as strategic opportunities emerge and clients demand more return on their legal budgets, but partners still expect some payoff from their investments—wherever they are in the world.”

Midlevel Associate Survey Shows Gender Differences, Fewer Hours

The American Lawyer recently released results from their annual survey of AmLaw 200 third, fourth, and fifth year associates. In the survey, respondents were asked various questions related to their overall satisfaction along with three open-ended questions: Tell the managing partner one thing. What would you change about your firm? What most surprised you about working at your current firm? Among the nearly 6,000 AmLaw 200 midlevels surveyed, three main themes appeared.

First, the survey suggests that associates are generally more satisfied than they were a year ago. Scores were higher in each of the categories ranked by the survey, including interest in the work, compensation, training, partner/associate relations, billable hours, etc.

Second, as a corresponding Vivia Chen article suggests, the survey shows substantial differences between male and female associates in their outlooks on their firms and careers:

• Male associates are generally more satisfied, have a stronger desire to make partner, rate firms higher on diversity and family friendliness, are generally more concerned about pay, and indicate higher satisfaction with level of responsibility, client contact, and the firm’s retention efforts.
• Female associates are more concerned about work-life balance and time outside of the office, are more willing to take a pay cut for decreased amount of hours, are skeptical about whether they will be promoted, and are hesitant that there is an unspoken penalty for motherhood.
• Few male or female associates see themselves as equity partners in 5 years, though more men do than women; more men also believe they will make partner (income or equity) than do women.
• Most associates are married – 88% of female associates, and 84% of male associates.
• More male associates have children – 40% of male associates, and 26% of female associates.

Finally, as Robin Sparkman highlights in a follow-up article, both male and female associates express increasing worry over a continuing decline in billable hours. There seems to be a general level of concern over the amount of work being generated, within practice areas and firms as a whole. As put by Robin Sparkman in a September 25 article for the American Lawyer, “For recession-scarred young people, it’s understandable that they are concerned about having too much downtime. Not only is there the short-term risk of a lower bonus, there’s also the more existential questions about whether their practice area will get busier soon, whether the lack of work will derail them from a partner track, and whether the slowdown they are seeing reflects more macroeconomic concerns about the firm’s financial health.”

Overall, the message from midlevel associates is mixed. While the survey reflects what Sparkman calls the “perennial complaints” of associates (lack of transparency about financials, compensation, and path to partnership), it also appears that job satisfaction is generally improving across the board. Notwithstanding this general improvement in associate outlook, however, there now appear to be concerning differences between male and female outlooks on the future as well as an evident unease over a lack of work, both of which firms may well need to address.

The 2013 Associate Survey

In follow up to our July article on Vault’s Top 25 Associate Quality of Life Rankings, the American Lawyer has now come out with their 2013 Associate Survey. Paul Hastings notched the victory (for a second straight year) with an overall rank of the #1 firm for associates to work. The remainder of the top 10 shook out as follows:

RANK   FIRM                          2012 RANK     +/- CHANGE      RESPONSE RATE

1          Paul Hastings               2                      +1                     94%

2          Nutter McClennen         1                      -1                      67%

3          Robinson Bradshaw      12                     +9                    71%

4          Foley Hoag                    8                      +4                    37%

5          Patterson Belknap         20                     +15                  35%

6          Goulston & Storrs          4                      -2                     77%

7          Cozen O’Connor            5                      -2                     75%

8          Gunderson Dettmer       18                     +10                  45%

9          O’Melveny                      16                     +7                    87%

10         Morgan Lewis                35                     +25                  55%

The rankings were computed based on overall responses in the following areas: how interesting the work is, how satisfying the work is, benefits and compensation, associate relations, partner-associate relations, training and guidance, openness re: finances, communication re: partnership, realistic billable hours, attitude toward pro bono, likelihood of staying two years, and overall rating as a place to work.

Firms named in the top 10 both by Vault and by American Lawyer include: Paul Hastings, Boston-based Foley Hoag, and New York-based Patterson Belknap. Firms ranked in American Lawyer’s Top 10 for each of the past two years include: Paul Hastings, Nutter McClennen, Foley Hoag, Goulston & Storrs, and Cozen O’Connor.

Should Law Firms Test for Talent?

Most companies invest significant time and resources in testing, developing, and coaching their staff. This affords employees in all departments, including in-house counsels, the opportunity to grow personally and professionally. This allows for a better understanding of individual strengths, weaknesses, tension points, and opportunities for growth. It also helps cultivate a stronger culture—as in many cases this allows for tangible sense of mutual investment and commitment.

Surprisingly, a recent article for the American Lawyer by Aric Press describes an interesting finding related to law firm testing—the majority of AmLaw 200 firms do not do much at all in the way of testing, training, or coaching their attorneys. In fact, Press believes law firms have a great deal to learn from their clients in terms of recruiting and developing their valuable assets. Press notes this “seems odd” given that “firms now hire fewer associates” which means their margin for error has gotten significantly smaller.

There are a few law firms that utilize predictive testing, including Dechert and McKenna Long & Aldridge. However, as Press notes, these firms seem to be few and far between. Most firms tend to take a strong and negative perspective towards predictive testing. The question is, what explains this? Are firms right in not doing so, or should they reverse course to become more like their clients?

One explanation cited by many is the imperfect nature of talent testing. As one expert Press interviewed suggests, most psychological and emotional intelligence tests are capable of accounting for “roughly half” of a person’s behaviors. In this sense it becomes a glass half-empty, glass-half full debate as some tend to insist that 50/50 is unfavorable, while others believe it is better to know something than nothing.

Generally the tests indicate lawyers on the whole have “high skepticism, need for autonomy, abstract reasoning skills, and urgency, but low sociability and resilience”. However, as Press notes, the predictive value and benefit for law firms “comes with the exploration of the other traits. What’s your particular mix of aggressiveness, creativity, ego-drive, empathy, gregariousness, and the rest? And how do your values—tradition, pragmatism, achievement, etc.—align with your personality traits and your emotional intelligence scores?” Such information, if revealed, can be useful in determining things like fit, compatibility, and role.

Examples of tests that are frequently used by companies across sectors include the Caliper test (attitude questions and number pattern problems), Myers-Briggs (personality, thinker vs. feeler, etc.), and the Troutwine Athletic Profile (traits, used by NFL Teams in judging talent at the Draft Combine). Similarly, a recent book by Tom Rath, StrengthsFinder, published in conjunction with Clifton and Gallup hones in on the concept of strengths. Rath’s firm belief is that more important than improving one’s weaknesses is the idea of playing to and structuring around one’s strengths.

It remains to be seen whether law firms will make use of talent testing and coaching. The question in the meantime seems to be, why not?

 

Vault’s Associate Quality of Life Rankings

The recent release of Vault’s Top 25 Firms for Associates has named Paul Hastings as the new overall #1. The survey jumps Paul Hastings ahead of DC-based Williams & Connolly, which held the top spot last year. The remainder of the top 10, along with individual category winners and other notables are listed in the chart below:

RANK   FIRM                            CATEGORY WINS

1          Paul Hastings                 Overall Ranking; Hours

2          Ropes & Gray                 —

3          Williams & Connolly        Satisfaction; Culture; Work; Outlook; Relations; Hiring

4          Irell & Manella                 —

5          Gibson Dunn                  —

6          Foley Hoag                     —

7          Patton Boggs                  Pro Bono

8          Patterson Belknap           —

9          Fish & Richardson           —

10         Baker Donelson             Transparency

—          Quarles & Brady             Informal Training, Mentoring & Sponsorship

—          Wachtell                         Compensation

As you can see, even though Williams & Connolly fell from the top spot, the firm is still clearly doing right by its associates. It finished as the category winner in a whopping seven categories: satisfaction, culture, work, career outlook, business outlook associate/partner relations, hiring.

In a recent blog article for The Careerist by Vivian Chen, Chen spoke with Vault’s director of research, Vera Djordjevich, about the findings. Says Djordjevich, “I think there can be a perception that the firms that have the biggest and best-known names are great for an attorney’s resume but not the most pleasant workplaces, and our quality of life rankings demonstrate that isn’t necessarily the case…a lot of firms have it all—great reputation, quality work, congenial atmosphere, and partners who take associate development seriously.”

Chen goes on to note that Wachtell’s #1 ranking in pay is no surprise given profits per partner of $4,975,000. Interestingly, Quinn Emanuel is nowhere to be found in the top 25, which is somewhat shocking given similar sky high profits per partner of $4,435,000. Chen also gave special recognition to New York-based Patterson Belknap’s for their appearance in the top 10 at #8. Not bad in the city that never sleeps—their associates seem to be sleeping just fine.