With profits per partner of $2.9 million last year, Kasowitz Benson was the most successful firm by that measure among The Am Law 200. More successful than Wachtell, Lipton, Rosen & Katz ($2.6 million PPP); more than twice as profitable as Willkie Farr & Gallagher ($1.4 million PPP); and seven times as profitable as Preston Gates & Ellis ($415,000 PPP), the 100th member of The Am Law 100.
The Second Hundred historically has been a place for smaller firms in major markets (New York’s Kelley Drye & Warren) or larger firms in smaller markets (Indianapolis’ Barnes & Thornburg). It has not been a parking place for the most profitable firms. Until now.
In last year’s report, we found that a handful of Am Law 200 firms were beginning to nip at The Am Law 100 with their revenue per lawyer rankings. Now that’s happening with profits per partner. Along with Kasowitz Benson, six other members of the Second Hundred recorded profits per partner greater than $1 million in 2003, the year covered by our Am Law 200 report. Four other firms had profits per partner between $900,000 and $1 million. In four prior years, only one firm broke the $1 million threshold.
The Second Hundred may have come a long way. But they still have a ways to go. In the First Hundred, 32 firms report profits per partner of $1 million or more, with the average coming in at $931,000, towering over the Second Hundred’s $591,000 average. Still, the success of the Second Hundred’s Magnificent Seven ought to force a few of their larger peers to look over their shoulders and take notes. Our million-dollar babies have a few things in common. They are located on the East and West coasts. And they’re young. They belong to the Wilson Sonsini, rather than the Cravath, generation. Only two of the seven firms, Irell & Manella and Kramer Levin Naftalis & Frankel, were Am Law 200 firms five years ago.
They earned their ticket to the top in a few different ways. Specializing helped. Three firms in this millionaires club, Armonk, N.Y.’s Boies, Schiller & Flexner; Kasowitz Benson; and Los Angeles’ Quinn Emanuel Urquhart Oliver & Hedges are litigation shops. Kasowitz Benson handles mostly defense-side work, including toxic tort cases, but also occasionally represents plaintiffs in large class actions. Boies Schiller, of course, was founded by legendary litigator David Boies, and has recently handled work for embattled cable operator Adelphia Communications Corp. and Tyco International Ltd. Like Kasowitz Benson, the firm also represents plaintiffs in class action work. Boies Schiller does have a small corporate department, with fewer than 20 attorneys — or less than 10 percent of its total attorney count — headed by Boies’ son, Christopher.
Quinn Emanuel, with 200 lawyers, started out in 1986 as a general commercial litigation shop, but its workload is now heavily weighted toward intellectual property litigation, says managing partner John Quinn. Quinn Emanuel has handled worked for Mattel Inc., Avery Dennison Corp., and the Academy of Motion Picture Arts and Sciences.
Patterson Belknap was the only Second Hundred firm on The American Lawyer’s ranking of A-List Law firms last year [September 2003]. (The A-List ranks firms based on their revenue per lawyer, hours devoted to pro bono, and surveys on associate satisfaction and diversity.)
Like many of the most profitable firms, Patterson Belknap has only one partnership tier. Many firms try to boost their per-partner profits by creating multiple partner tiers, excluding all but the inner circle from sharing in the profits. But some of the most profitable firms tend not to rely on this trick. Four of the seven firms on the millionaires list have one-tier partnerships. Boies Schiller; Kramer Levin; and Jeffer Mangels are the exceptions.
Firm leaders say a pure equity partnership can foster cohesiveness — a selling point for associates and lateral partners. “Even with all the increasing pressure on the business side, that is one thing we are very loath to change,” says Irell’s Siegel.