Top 1L: The secret to estimating law firm revenue streams & more
Elite firm Irell's partner departures, expanding Mayer Brown's hires
Top 1Ls,
Sometimes, it is difficult to face the truth. The truth can be ugly and in some cases, intolerably so. But to make progress, we must understand it well. There may be things you have conveniently denied until this moment, things about you, perhaps about the world. But now that you have critical goals to achieve, it is imperative that you nudge yourself to see things for how they are, without judgment. Then think about what that means for you and your plans.
We hope you enjoy this week’s issue.
This week we focus on what’s happening at two very different law firms and what these events mean for you and your career:
First, we look at the stream of partner departures at Irell & Manella, an IP litigation powerhouse and share tips on navigating the law firm landscape (preview: disregard law firm marketing and their websites and look at the numbers).
Second, we take a look at a niche practice area that has some of the highest happiness ratings in the context of a hiring trend at Mayer Brown, a firm that has been aggressively expanding. We have some suggestions on some factors to think about when you witness firms expanding like this (preview: be optimistic but cautious).
Irell’s partner departures hold a key lesson for you
Amid a strategy change announcement, IP litigation powerhouse Irell & Manella is seeing more partners depart the firm. A leaked memo shows their renewed focus on patent litigation and declares a retreat from other non-core practice areas.
Two private equity M&A partners, Michael Kaplan and Gregory Klein, left for Simpson Thacher and a commercial litigation partner, Harry Mittleman, left for a counsel role at Hueston Hennigan, a firm actually launched by 31 lawyers that left Irell in 2015. This continues a pattern from 2019 when there were various other high profile departures. They included two former managing partners (1, 2) and head of Irell’s white collar practice (who left for Mayer Brown; more on this law firm below). The leaked memo is here.
Why this matters for you
Top 1L readers, despite these departures, you should still view Irell as a top destination for IP litigation.
Irell has low partner-associate leverage ratios (currently, we count 44 partners and 28 associates on Irell’s website) combined with very high revenue per lawyer numbers, exceeding that of some of the very top law firms in the world (see Factoid below). In 2018, according to American Lawyer, Irell had a revenue per lawyer (RPL) of over $1.8 million, more than Simpson Thacher’s RPL of under $1.6 million and Sullivan & Cromwell’s $1.74 million, making Irell one of the highest-grossing law firms on a per lawyer basis. The combination of low partner-associate ratio and high RPL figures usually means associates get to work on more important aspects of more high profile matters.
In fact, due to the stigma associated with the attorney departures above at Irell, there may be unique opportunities this summer for motivated law students and laterals alike to score offers on the IP litigation side at the firm.
Consider more diversified plays
At the same time, these events at Irell do highlight the notorious difficulty faced by law firms with highly uneven revenue generation across practice areas.
Irell has superstar status in IP litigation, led by legendary trial lawyer Morgan Chu, whom many (including us) have tremendous respect for. However, Irell has been struggling to diversify and build out other practice areas over the years. According to a source, there has been tension between rockstar and emerging partners on billing rates, which directly influences firm economics; this is not something unique to Irell but commonly noticed in firms with uneven practice areas. In a short span of five years, Irell & Manella went from having about 200 lawyers to less than 90.
Top 1Ls readers, be cautious when spending time and energy on law firms that do not have strength in a diversified set of practice groups, especially if you aren’t interested in the main lines of business the firm generates revenue from. If you’re going to a networking reception hosted by Irell, you should already be interested in IP litigation. If you plan to bid for Wilson Sonsini’s New York office this summer and you have little interest in tech or life sciences but you want to do M&A, you would be a complete fool.
The simple trick to figuring out law firm revenue streams
So how do you tell where a law firm makes its money? Most Biglaw firm websites will tell you they are fantastic in every practice area under the sun and everybody’s a client. Lawyers are fantastic liers, especially the kind that are technically not blatant lies but in the big scheme of things, certainly are incredibly misleading.
Top 1Ls, know better than to rely on law firm websites.
Unfortunately, third party websites with anecdotal evidence based on anonymous associates’ feedback or those based on peer perception can sometimes be equally misleading. Many of these websites take fees from law firms in return for providing certain marketing favors and might just be constrained from a commercial perspective from getting down and dirty.
In our opinion, the best way to ascertain a law firm’s revenue streams from practice groups is to look at the numbers. Specifically, the number of lawyers in each practice group according to NALP Directory. The relative proportions between those numbers across practice groups will show you whether one practice group dominates or whether the firm is fairly diversified in its revenue streams.
For a slightly more realistic effect, you can multiply the number of lawyers in each group by a law firm’s revenue per lawyer figure (you can find this by searching for “[law firm name] law.com” and the first search result should contain it) and you’ll get a ballpark estimate of how much revenue the group may generate.
Mayer Brown’s expansion and your career
Mayer Brown has been making a number of high profile hires. Most recently, the firm has announced Michael Levy has left Paul Hastings to join its partnership ranks in its expanding white collar defense practice. Levy previously served as a federal prosecutor in D.C. And last year, Irell & Manella’s head of white collar defense and former US DOJ prosecutor Jason Linder also joined Mayer Brown, along with Irell partner colleague Glenn Vanzura. In 2018, the chair of Bracewell’s white collar practice, Glen Kopp, and the Chief Compliance Offer for BHP and former partner, Audrey Harris, rejoined the Mayer Brown.
Why this matters for you
Mayer Brown has been growing revenue for seven consecutive years amid its expanding its New York practice alongside international work, as reported by Law.com, which is partly driving the expansion of niche practice areas such as white collar defense.
Top 1Ls, Mayer Brown may be an example of a law firm that’s been able to execute its strategy more successfully than some of its peers.
We suggest keeping tabs on Mayer Brown regardless of your practice group interest, especially if you are interested in working in its New York office. The firm is traditionally strong in Chicago, where it is based, but in 2019 headcount at its New York corporate practice doubled with a number of other high profile hires. According to its chairman, the firm’s financial performance and growth were even across its transactional and litigation practices.
At the same time, we also urge you to look at the steep headcount reduction below at the firm after 2008 in the midst of decreasing revenue. The world of Biglaw can be extremely fickle. Depending on your timing and the firm’s execution, Mayer Brown’s expansion investments may translate into opportunities for some and peril for others, especially if these investment do not yield the revenue they’re expected to yield. We think in the short term there could be a wider range of opportunities at Mayer Brown, provided that there is not another significant financial downturn.
Source: law.com
We note law firms with market-leading expertise in white collar defense include Covington and Williams & Connolly, based on Chambers’ rankings.
Revolving doors
Obviously, there is a pattern of revolving doors between government practice and law firms in white collar defense. If you are able to secure a position in the US Attorney’s Office at the Southern District of New York, for example, there’s more possibility of skipping the grunt work required of a junior associate and joining the Biglaw ranks as a senior attorney.
According to a study, among the 152 prosecutors that served in the criminal division of the US Attorney’s Office in the SDNY in 2001, a whopping 96 of them had joined the private sector by 2010 (76% of them).
Before you get too cynical about these revolving doors, take a look at this Wharton professor’s op-ed in the NYT about why you shouldn’t be.
Happiness rankings
But is associate life in white collar defense that bad? According to a 2016 survey by Chambers, associates in this group came out top on happiness ratings.
But a word of caution on surveys:
Surveys like these aren’t completely meaningless, but you must understand that there can be severe selection bias in who participates. Happy people often don’t fill out happiness surveys; more often than not, it’s the unhappy people that are the quickest to click. In addition, there are huge differences between law firms, because the more interesting and lucrative work goes to the few law firms at the top.
White collar defense is very unique
Despite selection bias, we do think there is some truth to the notion that white collar defense is a very unique practice area. It encompasses one key characteristic not present in other corporate work:
You are serving individuals who personally have a lot at stake.
It might literally be their freedom if they’re facing jail time. It could be their wealth, their reputation or their livelihoods. While you as an attorney would be practicing law in the corporate context, in a corporate law firm, getting paid the same way as everyone else, the governing client dynamics are entirely different.
Your client is likely to be much more responsive to your questions and concerns because the two of you are very much aligned. Your work directly impacts them. He or she is going to be incredibly more grateful when they’re acquitted on account of your help, when compared with, for instance, your funds colleague helps raise $1 billion dollars for a shell entity based in the Cayman Islands. It’s the difference between a thank you email and, perhaps, a big hug with tears of gratitude and relief.