Profits Drop at 12 of 15 Top Firms
Last year was a tough one for the nation’s 15 most profitable law firms. Twelve saw declines in profits per partner, and some of them were steep.
Cravath, Swaine and Moore saw a 13 percent drop in revenue and a 24 percent decline in profits per partner. It was worse at Cadwalader, Wickersham & Taft, which saw a 14 percent drop in revenue and a 30 percent drop in partner profits.
The American Lawyer notes the declining profits and says 2009 is expected to be worse. In its view, the elite 15 law firms face an uncertain future. Some of the firms’ financial clients have collapsed, and many others are slashing costs, the story notes. Transactional and financial work is down, and companies hiring the firms for litigation are pushing for lower fees.
“What has the world come to when Cravath, Swaine & Moore has a terrible year?” the American Lawyer asks. “The recent boom that made so many on Wall Street so rich has been revealed for what it was: a shiny but fragile bubble kept aloft in part by false assumptions, wild expectations and, in some cases, fraud.”
In the boom years, from 2003 to 2007, law firms were enjoying huge increases in profits per partner, the story says. They rose 59 percent at Cravath, 61 percent at Sullivan & Cromwell, 82 percent at Debevoise & Plimpton, and 91 percent at Wachtell, Lipton, Rosen & Katz.
The year 2008 put an end to the phenomenal increases. Despite the drops in partner profits last year, the figures are still at a “lofty level” for the elite 15, the story says. For most of the firms, profits per partner were above $2 million in 2008.
But pressure to keep partner profits high could lead to associate layoffs, a move resisted at many of the elite firms, according to the article. Said one management-level partner, “At some point you have to be at the right size relative to your business.”
