Covington & Burling, at the top of The National Law Journal's list of Washington's largest firms for the second consecutive year, added about 15 total lawyers last year in a time when elite firms, especially ones that focus on litigation, find the most ability to expand in Washington.
Call it the muddying of the middle: Legal business around Washington has become increasingly concentrated around the premium, largest law firms as midtiered offices get bogged down, unable to grow or assert themselves in the competitive capital city.
Law firm managers whose firms lead The National Law Journal's Legal Times 150 — our annual survey of head count in the District of Columbia and its Maryland and Virginia suburbs — relied on high-end litigation and regulation work to help them expand last year.
Take Paul Hastings, a $2-million-plus profits per partner firm. It grew its D.C. head count by 4 percent from 2013 to 2014, after clients demanded more white-collar practitioners who could handle litigation in the courts or before federal agencies.
"The more that we do, the more that people are coming to us to do it," said Scott Flicker, a white-collar litigation partner and chairman of Paul Hastings' Washington office. "There is a feedback loop. That's part of the reason why the more successful firms are successful."
On the whole, the largest firms in the region expanded. The top 25 firms in the area ticked up by 4 percent in their combined gross revenues compared to last year's top 25 firms by revenue, according to our D.C. 25 survey of revenue in the Washington metropolitan area.
The total number of lawyers working at the 150 largest firms on the list, 14,235, was flat compared to the previous year.
Covington, at the top of the list, grew head count by 3 percent to 454 lawyers, partly because of its hiring white-collar practitioners, among others, who left the U.S. Department of Justice.In the top five largest firms, a new, non-Washington-founded name broke in.
Morgan, Lewis & Bockius for the first time counted more than 300 lawyers because of a merger last year. The firm's rank as the fourth-largest firm in Washington, with 345 lawyers, upended the so-called Big Four among firms here: Covington, Hogan Lovells, Arnold & Porter and Wilmer Cutler Pickering Hale and Dorr. Wilmer dropped to the fifth slot after an almost 20 percent decline in head count.
Cooley, another firm that embarked on a merger early last year, jumped several spots on our list to crack the top 40.
Outside of whole-firm tie-ups, litigation-focused firms made some of the largest gains, including Boies, Schiller & Flexner; Quinn Emanuel Urquhart & Sullivan; and the plaintiffs firm Cohen Milstein Sellers & Toll.
Not all specialized firms had an easy year, however. Intellectual property shops were among those that suffered the most in size.
Middle-of-the-pack firms — both in size and service — also faced growth limitations because some of their general-service practices weren't as developed as elite Big Law powerhouses.
"The dabblers get washed out, because there's not enough work for the dabblers," said Andrew Sandler, chairman of BuckleySandler, which nearly landed on the D.C. 25 revenue list.
The boutique, which partly spun off from Skadden, Arps, Slate, Meagher & Flom and from a legacy Goodwin Procter group in 2009, had major wins last year after investing several years working for the Navajo Nation and in representing the trustee in IndyMac Bancorp Inc.'s bankruptcy.
The cases propelled its profits per partner to more than $1 million, with most of its yearly revenue reaped in Washington.
"We are at the beginning of a multiyear shakeout because some firms' business models won't work out," Sandler said.
A NEW BIG FOUR AT THE TOP
Wilmer, with 321 total lawyers, dropped down to the fifth largest firm in Washington last year. The decline marked a 20 percent drop in head count compared to the prior year.
Morgan Lewis' merger last year with Bingham McCutchen helped it jump from 13th-largest firm to fourth largest in the city.
Its size increased 40 percent, to 345 lawyers in 2014 from 247 lawyers in 2013. At the same time, Wilmer lost about a fifth of its D.C. force, or 75 lawyers.
Morgan Lewis has seen few partner departures since the merger. Part of that can be attributed to a so-called golden-handcuff policy that would penalize certain partners from leaving within three years of the merger, according to The American Lawyer.
Still, D.C. co-managing partner Elizabeth Baird said the firm's strategy for growth in D.C. wasn't about achieving a certain number. The firm wanted to merge so it would have more practices that would fit its clients' needs, Baird said.
Several of those practices pivoted around Washington and regulation work, a large part of legal business here, in particular, and that propelled the combined office to a large number of lawyers.
Baird said she was "so proud of the fact that we are the biggest office," Baird said. "It's really a badge of honor internally. But it's not part of a strategy."
The growth has paid off, Baird said. She cited a client that needed help on a federal agency's investigation. When the investigation shifted focus, the client kept the job at Morgan Lewis instead of seeking a different firm, she said.
Aside from law, Baird, who came from Bingham, and her co-managing partner, legacy Morgan Lewis office chief Grace Speights, have melded their teams at partner lunches and practice head breakfasts. Bingham, for example, held 16 season tickets for the Washington Nationals baseball team. Those tickets now get split between the two legacy firms' lawyers.
"On a day-to-day basis, our lives are pretty much the same. Part of what has changed is structural. Instead of calling someone in Boston to fix a particular problem, I call someone in Philadelphia," Baird said.
The firm still maintains two separate offices in the city: the legacy Morgan Lewis space on Pennsylvania Avenue, which they now call "Morgan Lewis East," and the former Bingham location on K Street. Some groups have swapped offices, Baird said.
"If being in two offices was disruptive, being a global firm would make no sense," Baird said.
For the purpose of the LT 150 survey, Morgan Lewis' two office buildings in D.C. were counted as one location. Firms sometimes have multiple buildings in what they deem a location, and, generally, our survey counts offices separately when they appear in different cities.
D.C. 25: REVENUE RANKING
Cooley and Mayer Brown both were new to the list of firms on this year's D.C. 25, which tracks law firms' Washington metro area presence by revenue.
Squire Patton Boggs is identified as "new" because it did not exist the previous year. Its Washington-based legacy firm Patton Boggs, which merged with Squire Sanders last June, had been among the largest 25 firms in the area. Bingham McCutchen dropped off the list because it merged with Morgan Lewis.
Morrison & Foerster, which barely made the D.C. 25 last year as No. 25 with $138.6 million in revenue, didn't grow enough in 2014 and was replaced by Mayer Brown.
The Chicago-founded firm nabbed the 25th spot with $145.5 million in revenue from 153 lawyers in the area.
D.C. partner-in-charge Daniel Masur attributed Mayer Brown's growth to a perfect storm in the city for lateral acquisitions, which in turn can boost revenue for an office.
Several firms, including Squire Patton Boggs, went through mergers that sent several résumés into the market. And many government lawyers have sought homes in private practice as the Obama administration nears its end. When a firm makes some splashy hires, momentum builds, Masur said.
"There are always some number of really talented lawyers on the market, and we're getting to see more of them than we had in the past," Masur said. Mayer Brown hired lateral groups from Baker & McKenzie in immigration law, Kirkland & Ellis in white-collar, and in intellectual property from Steptoe & Johnson LLP in 2014, among others.
"There is a renewed recognition that a global platform is very important to many lawyers in terms of building and expanding their practice," Masur said.
At the moment, clients are seeking out more insight into the government, he added, buoying Washington offices.
Aside from Morgan Lewis, mergers reshaped other firms on our list.
Cooley picked up 12 partners in Washington in a merger with Dow Lohnes in January. The firm notched a 64 percent head count gain in the D.C. office, and the number of lawyers jumped from 72 to 118 in 2014.
Cooley's Reston, Virginia, office did not change in size from the previous year.
The Palo Alto-based firm wanted to expand, but not in the way other firms have with a general-service approach. It sought to dig into its brand around technology and life-sciences industry expertise. Dow Lohnes partners practices fit in naturally, Cooley chief executive officer Joe Conroy said, citing specializations in communications regulatory work and in regulation of for-profit colleges.
"All of the power centers come together there. You couldn't not be in Washington," said Conroy, who is based in New York.
"Ours is a simple business, and it's about human capital. Washington is the site of as much legal talent as anywhere save maybe New York."
Clifford Chance, another firm with double-digit proportionate growth, saw opportunity in adding smaller groups of lawyers from firms in upheaval. The British Magic Circle firm acquired five Washington lawyers, including two partners, in a structured-finance group from Bingham McCutchen last December. In total, it grew by 43 percent to 63 lawyers in D.C. last year.
"I don't know whether we'll grow the same percentage in another year, but we'd certainly like to," said David DiBari, the D.C. managing partner.
IP FIRM HEARTBURN
Some of the biggest declines in the LT 150 hit the intellectual property shops. Of 13 intellectual property specialty firms on our list, six declined in size in the Washington area.
Mike Ray, managing director of Washington IP firm Sterne, Kessler, Goldstein & Fox, said intellectual property firms have often swung through periods of boom and bust. Currently, there's more competition in the marketplace, no significant growth in the number of patents that companies need, and clients who want to pay less for patent work.
Sterne Kessler managed 5 percent growth, with six new attorney positions for a total of 128 in Washington last year, Ray said.
Not all firms were large enough to withstand the downturn, however.
Birch, Stewart, Kolasch & Birch, lost 29 percent of its lawyers from 2013 to 2014, marking the biggest drop in our survey. It went from 58 lawyers in 2013 to 41 lawyers last year, according to NLJ reporting.
"They're asking for a little less work done on a matter, and it can be done with fewer attorneys," said Charles Gorenstein, an executive committee member and partner at Birch Stewart. The belt-tightening has been most evident among the firm's foreign clients, he added.
Birch lost the lawyer positions through attrition, Gorenstein said.
Oliff, another Northern Virginia patent and trademark business, lost almost 20 percent of its lawyers. Its Alexandria office now has 39 lawyers.
Other IP firms facing a slide in total lawyers were Nixon & Vanderhye; Finnegan, Henderson, Farabow, Garrett & Dunner; Fish & Richardson; and Kilpatrick Townsend & Stockton.
Reprinted with permission from the August 3, 2015 edition of The National Law Journal © 2015 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.