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Revenues Increase 9.5%
At Top U.S. Law Firms

June 29, 2004; Page C3

It pays to be a partner.

America's richest law firms got even richer last year and a lot of that wealth lined the pockets of equity partners, according to American Lawyer's annual ranking of the nation's 100 top-grossing firms.

Gross revenues rose 9.5% to $41.7 billion, boosted by litigation, the return of corporate work, increased billing rates and tighter cost management. Four law firms had revenues above $1 billion, up from two firms the previous year, the survey said. Joining Skadden, Arps, Slate, Meagher & Flom and Baker & McKenzie were Jones Day, which picked up revenue when it acquired London's Gouldens law firm, and Los Angeles' Latham & Watkins.

See a table0 of the top 10 law firms ranked by 2003 profits per equity partner.


Venerable law firm Wachtell, Lipton, Rosen & Katz once again topped the list with average profits per partner of $2.58 million. Other New York firms, helped by the Wall Street recovery, dominated -- claiming 13 of the top 15 spots.

Strong revenue growth translated to a 9.8% increase in average profit per equity partner to $930,700, according to the survey, which is expected to be released today. Nonequity partners made an average $357,597 per partner, the survey found.

The disparity between equity and nonequity partners can be wide. For example, Boston-based Bingham McCutchen's 100 equity partners averaged $1.06 million in profits, compared with $430,000 for its 150 nonequity partners, according to the survey.

Bingham spokesman Hank Shafran said the firm has a one-tier partnership structure with a wide range of compensation. "For the purposes of reporting data to American Lawyer it looks as if we have a two-tiered system" because he said they're supplying information to match criteria sought by the magazine.

"It's a great time to be an equity partner in a law firm, but it's getting harder and harder, it appears, to achieve that status," said Aric Press, editor in chief of American Lawyer. The number of equity partners grew 3.9% in 2003, compared with a 10.8% increase in nonequity partners, the survey said.

American Lawyer defines equity partners as partners who receive no more than half their compensation on a fixed-income basis, such as a salary. Some firms define the partnership structure differently or disagree with the methodology and its findings.

While equity partners still outnumber their nonequity counterparts by about 3-1, the two-tiered partnership structure isn't abating. Last year 23 firms covered by the survey had one partnership tier, compared with 55 in 1994.

While the reasoning behind the two-tiered structure varies by law firm, many use the nonequity partner as a way to advance associates who aren't ready for the responsibilities that go with equity partners, who generally have voting rights, contribute equity to the firm and take on greater responsibilities and liabilities. Nonequity-partner status is also a way to reward lawyers who aren't big rainmakers or retain younger partners without diluting profits for the firm's top lawyers.

Cost management has been the mantra of law firms over the past several years as they continue to run the firms more like corporations. Last week, Clifford Chance closed its San Francisco and Los Angeles offices after the partners there failed to hit profit targets.

This corporate approach has helped firms weather the market downturn. Unlike the early 1990s when layoffs were rampant, during the latest downturn, law firms limited the number of associates they hired or shifted lawyers into other practice areas. As a result, they're slowly beginning to increase their ranks with the market upturn. Total head count rose 3.4%, the survey said.

It Pays to Be a Partner

Top 10 law firms ranked by 2003 profits per equity partner

Wachtell, Lipton $2.60 11.5% 171 78
Cahill Gordon* 2.4 30.4 242 61
Cravath 2.1 6.1 439 77
Simpson Thacher 1.94 5.1 637 145
Dickstein Shapiro* 1.94 58.6 299 90
Davis Polk 1.93 8.5 581 146
Kirkland & Ellis* 1.9 5.6 854 157
Sullivan & Cromwell 1.9 10.5 647 152
Paul, Weiss 1.84 5.7 466 101
Milbank, Tweed* 1.82 2 453 103

*Company has more than one partnership tier
Source: The American Lawyer